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Opinion
Barry Ritholtz

Why Models Can Never Get Things Quite Right

Their downfall is the assumption that the future will be like the past.

This was predictable.

This was predictable.

Photographer: Nathan Howard/Bloomberg

The economy is frozen because of the coronavirus. In all likelihood, it can't fully reopen until we have proper testing and tracing, an effective vaccine or treatment, or population-wide immunity, none of which may ever happen. The total number of infections and deaths we expect this year and next is still a guess. Epidemiologists have modeled various probabilities, with a wide range of possible outcomes.

Yet, we have placed a great deal of faith in those models and many others because so much of our lives is guided by them. We don't live in objective reality; in truth, we function in a model of our own construction. Our brains generate mental outlines, continually filling in missing information to form a picture that we can discern and identify. It is an evolutionary trait that has allowed us to thrive in a world where for a very long time we were as much prey as hunter.