Uncertain Realities

Humans’ understanding of nature went through a dramatic shift last century.  It started around the time when the likes of German physicists Max Planck and Albert Einstein astounded the world with ideas like radiation quanta and the theory of relativity.  Around the same time, Werner Heisenberg introduced the uncertainty principle which suggests nothing has a definite position, trajectory, or momentum.  Instead, he now described the physical world in terms of probability.

Like the task of pinning down the location, direction of travel, or the velocity rate of change of a subatomic particle simultaneously, fully understanding the state of the American economy is impossible.  Instead, models are used, hoping the behaviors of all the variables align with some preconceived understanding of reality.  What happens when new variables show up?  A global pandemic and government/central bank responses are now part of the equation, and it is unknown how they will ultimately influence outcomes. 

Probabilities might be shifting in places.  We see it in labor for instance.  Something is causing fewer Americans to participate in the workforce.  After a period of modest upticks starting in October 2015, it plummeted in March 2020 as the economy was shuttered.  Despite several months of job gains and an unemployment rate which is near the lows reached prior to the pandemic, our economy is employing over three million fewer people, and the participation rate is at levels similar to the late 1970s when women were just starting to join the workforce more fully.

Economic reality went through a tremendous shift last century.  It started in a mostly industrial state, where bricks and mortar were the fundamental building blocks of society.  In the latter half of the 20^th century (on the shoulders of great thinkers), our world turned to new building blocks: semiconductor chips and software.  It more fully transitioned from a Newtonian reality to that of quantum as microchips were stuffed with more and more circuits.  Now different shifts are taking place, some of which aren’t even fully identified, let alone understood.  Just how long these will resonate through our economy is uncertain, but it might be decades as people attempt to understand their trajectory and pin down what is important to them.