How to Decide

You have 24 days

[Seventh in a series. The beginning is here]

Remembering last week

Recall last time we introduced this item:

The red line is a Demand curve (even though it is a straight line, we still call it a curve). It represents the general tradeoff that you can sell more of something if you lower the price. It is extremely simple. For the price needed to achieve a given quantity of sales, just subtract that quantity from 10 and read the answer on the vertical axis. Widgets priced at $8 will find two buyers; If you want to sell six Widgets you need to reduce the price to $4.

Life, as you may have noticed, is really not that simple. Here is another alternative. Below, the demand curve is actually curved. The equation (on the right) that makes that line is more complex. But it is still simple in a general sense. Want to know the price required to sell 4 Widgets? Try it. Take 4 to the 0.8 power and divide what you get into 15.1572 and the answer (read off the vertical axis where Quantity = 4 intercepts the blue demand curve) is a price of $5 each.

Nobody manufactures four of something to sell them at $5 each. More likely you make 400,000 to sell at $50 each of whatever it is. Adding zeros does not change the wisdom and generality of the math. The convexity of the curve just means that, unlike our simple, linear, red line, the quantity demanded does not change in direct proportion to the price. This is reality.

The abstraction

Now, let’s dispense with quantities and prices and Widgets. Let’s think of ideas as commodities. Let’s imagine (because it is true!) our lives involve making decisions in the context of a tradeoff between accuracy and simplicity. So, accuracy incurs the cost of complexity; and simplicity comes with the cost of error.

H. L. Mencken said

“For every complex problem, there is a solution that is clear, simple, and wrong.”

But we must live with people of all types and they all vote. Now, for a generalization to keep things manageable. We imagine there are two kinds of people: Those who cherish “simple” who might be put in a basket labeled “D” for “Deplorables.” Then, we have those who embrace complexity in the pursuit of more precise outcomes. Some might refer to this crowd as elite snobs, labeled “S.” Here is how it might look graphically

The problem is that every few years we have a vote. This quaint custom sends a signal to politicos about how well (?) they are doing their job. See the green dot in the plot above? In order to elect a majority, the two mobs must agree to meet at some point. No one knows where that green dot really is and there are an infinite number of possible locations. We will just pick one for next November 5.

With no markings on the x and y axes we cannot tell whether this result was from pulling the D crowd down or pushing the S crowd up, or some combination of them both. At this stage we don’t care. It is the abstraction that counts. Suffice it to say that the equations required to solve this problem in practice are phenomenally complex, so complex that no one can solve them, no matter how big their computer. The variables include how old people are, who they slept with recently and how much it cost, whether their children take drugs and bribes, the number of times they mangle the local language in front of a microphone, and – if there is any time left – the condition of the economy.

But, everything we have done above is still HUGELY simpler than how we ended last week:

So what, if anything, have we learned? The world is incredibly complex? Yep. But mostly, we have derived another Theory of Politics. The way to get elected is to keep the population frightened. Can’t use a phony plague this time. No one is falling for that again. But the risk that your savings, investment, lifestyle and personal financial security is at risk is daunting. So, you set out to politicize and destroy the education system so there are no voters who can comprehend the sentence you have just read. Then, take to the air and the internet with a grab bag of sound bites and have fun!!

[Next time: Winding it all up and waiting for the CRASH!!! God, I love this job…]