Innumerate or Illiterate?
Jeremy Grantham:
For dealing with the modern world, we are not, however, particularly well-equipped. We don’t seem to deal well with long horizon issues and deferring gratification. Because we could not store food for over 99% of our species’ career and were totally concerned with staying alive this year and this week, this is not surprising.
We are also innumerate. Our typical math skills seem quite undeveloped relative to our nuanced language skills. Again, communication was life and death, math was not.
Have you not admired, as I have, the incredible average skill and, perhaps more importantly, the high minimum skill shown by our species in driving through heavy traffic? At what other activity does almost everyone perform so well? Just imagine what driving would be like if those driving skills, which reflect the requirements of our distant past, were replaced by our average math skills!
We see people who should know better and evidently do know math saying things that make no sense, like this: “the Fed’s real failure has been doing too little, not too much.” So is the problem innumeracy? Is it simply ideology? Perhaps.
However, we sometimes wonder if there’s something else at work as well. Our personal experience is that, despite all the history and economics we had learned in college, we were illiterate until we leaned accounting. T accounts, cash versus accrual, the interplay of the income statement, balance sheet and sources and uses, these simple things define a language that makes the world of commerce intelligible. We suspect that almost all politicians, economists, reporters and media commentators are unable to speak the language that makes the worlds of commerce and government finance comprehensible.