Tuesday, December 8, 2015

Groping in the Dark

For the last couple weeks, I’ve been reading a book called The Horse, The Wheel and Language by David W Anthony. Once upon a time, there was no such thing as England and France, no such thing as the Roman Empire, and not even the ancient Greeks we know so well (or should know so well, if we paid attention in school). All of these people spring from a common source, or so the theory goes, a source they have in common with Iran and at least some people in India. This source is a group called the Proto-Indo-Europeans. These people were linked by language, and the book argues that they originated on the steppes north of the Black and Caspian Seas, gradually spreading west and south. Now, at this point, you’re praying that I’m getting to a point, and fortunately I am.

These Proto-Indo-Europeans I’m talking about, and most of the peoples living around them, had not yet invented writing, so everything we know about them we know because we dug it up and studied it. These people lived in and around the era called the “New Stone Age”, around 5000 to 3000 BC. Archaeologists have a tough time reconstructing these societies. For one thing, all they have to work with are shards of old pottery and other old artifacts of stone, bone and antler, the position of people in burials (unless the culture cremated its dead, in which case they don’t even have bodies to work with), and sometimes the foundations of the buildings. Try reconstructing the existence of rap music from the ash trays discarded during the early 1980’s. Not only difficult, but impossible.

It’s made more difficult, though, by the fact that you have to create wide, sweeping guesses about a people that might be completely negated when the next grave is dug up, or when somebody figures out how to track human movements thousands of years ago based on genetic evidence that we couldn’t read even twenty years ago.

Economists and researchers have a similar problem. Much of what we do is take disparate statistics – the number of jobs created (and what kinds of jobs were created), the amount of money spent, the number of visitors to Las Vegas, the vacancy of commercial buildings – and try to weave them into a meaningful narrative. The narrative has to be meaningful, because it must be utilitarian. Business people don’t read our reports out of a general interest in the history of commercial real estate, but because they want to use this information to become more prosperous. The problem is that those numbers we base our narratives on are often late, and sometimes change after we have already used them to weave a narrative.

If you visit the Bureau of Economic Analysis and look at a recent report on gross domestic product, you will note that it is titled something like “Gross Domestic Product: First Quarter 2015 (Advance Estimate)”. It is an estimate, in advance of the actual numbers. The actual numbers won’t be known for another quarter or two, which means to tell you what is happening now (which is what you want to know), we have to base our narrative on numbers that are, frankly, incorrect. They will change. We know they will change. Each year, the Bureau of Labor Statistics revises, sometimes dramatically, the job numbers of the previous year … the job numbers people like me have been talking about and using in our indexes and formulas to help you guess what is going to happen in the future. It may not be a matter of deducing how people lived based on a scrap of 6,000 year old pottery, but it is tricky and it all leads to this point: Take everything an economist tells you with a grain of salt. Economics is called the dismal science, but when economists tell you what is happening now, or what will happen soon, they are practicing not the dismal science, but the dismal art.

And now I have to get back to telling you what is going to happen in 2016, provided I can find my deck of tarot cards.


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