"If she had said yes things
would have certainly been different" - my dear readers I caught your attention, didn't I? Well what
can I say sentence like these really act like a bait to fish in public these days
as attention deficit is running wild. Anyway without digressing further into my personal romantic escaped which I may
tell you totally sucks, lets jump into the subject of today's
disquisition. Look at the first question
again, i can guarantee that almost everyone of us sometimes or other have pondered
a hypothetical world that differs from
reality that we live in. Call it wishful thinking, fantasy , cynicism whatever
you may as I welcome you to the world of "Counterfactuals".
Counterfactuals are in
general a hypothetical scenario that
would have occurred had certain conditions prevailing at the given time were
different. Now why is this important? It is important because it is the main
foundation on the basis of which we carry out any debate that can range from
policy prescription to economic decision to personal choices. Determining the counterfactuals is essential
as it helps to identify whether the decision we made had actual impact on the
outcome or not, especially for assessing the situation that involves the pre-post scenario. For instance let's say
local government has introduced a scheme or awareness program for promoting
girl education. Now let's say after the intervention literacy rate among girls
ticked up. Now as usual politicians will tout the achievement and general
public will also buy into it. But while comparing the scenario before
intervention and after intervention we miss-out one crucial counterfactual and
that is what would have happened if there were no intervention? Would the
literacy rate have remained same or would it have been different? What would be
your answer? Take a break have a Kitkat and think again for second. In general people would opine that without intervention the
situation would have been same as before. But here is the catch, on doing so we
may have overlooked the fact that perhaps the girl's literacy rate was already
rising in the first place, that is even before
intervention started. If so then it simply implies that policy intervention had
no effect what so ever instead it simply reinforced the eventual outcome.
The best example of not
considering counterfactuals comes from Fredric Bastiat under celebrated
phenomena that all Austrian School economist love to cite called "Broken
Glass Fallacy". According to which once a ruffian kid broke the window of
a baker with a brickbat. The crowd gathered and at first wanted to punish the
kid. But a wise guy argued, since the kid broke the window now glazier will get
the job to repair it. The money he earned will be then spent for cobbler to
mend his shoe. The cobbler will then buy meat from the butcher who in turn will
buy a bread from baker. So the same money that would have remained idle with
baker would now circulate and make every one better off by increased wealth. In
surface this appears too good to be true, but if you look at the undercurrent
you'll find that had the glass window not been broken in the first place then
baker might have put it in bank which would have lent out to others, thus stream rolling all the asserted economic
activities. So you see breaking things to create wealth is not a good idea at
all. Otherwise we should simply bomb our cities so that there will be more
demand for repairs and unemployment goes down. Sounds stupid isn't it.
The question now arise is why
counterfactuals invariably appears in worldly affair? Perhaps the answer is in
quantum physics according to which world we live in happens because of chance.
Out of infinite possibility as a result of particle wave duality there is only
one reality in which we live. So there are always several possibilities and
only one outcome. One may downplay impact of counterfactual like great Morpheus
did in Matrix Reloaded "what happened, happened and couldn't have happened
any other way" ( aside: isn't it ironic that the both Matrix sequel sucked
big time and couldn't have happened any other way"). But when our
decisions are forward looking that notion of ignoring counterfactuals will be a
Pollyanna thinking.
Now at this point you must be
thinking if counterfactuals are
something that haven't occurred at all then how to determine their effect in
first place? How to properly quantify them ? Is there any standard tools to
measure it? unfortunately the answer is no. Especially in research methodology
there is something called Randomized Control Trial that segregates the control
and intervention variable to produce ceteris paribus condition so as to isolate
the effect of intervention only . But again choice of control variable itself
is presumptuous putting dent to entire argument. Meanwhile perusal of any
standard text book on Capital Budgeting provides you with tool such as Decision
tree, What If and Scenario Analysis. These are all based on Bayesian Analysis
and Prior Probabilities which entails degree of risk under certain apriori
conditions. But they again miserably fail to account for counterfactuals as it
is less about risk and more of the
domain of uncertainty. Besides this of
course in economics there are some concepts called Opportunity cost and Excess
Profit that do give some hope. but alas, how far do they gauge in actuality is
in itself a counterfactual.
So what else then. Some might say-
"Hey let's build Ultracomputers that can crunch Yottabyte of data ( mind
you that will make a Big Data a girly number) and sort out all the possible
outcomes from all the possible counterfactuals". Tempting as it may sound but it is not tenable either. The
reason is something called Church Turing Thesis which says only those
mathematical problem that can be solved by Turing machine is computable. But as
counterfactuals generate infinite possibility it cannot be solved by Turing
machine and hence is not computable at all. So no matter how fast or how large
machine you built still the solutions will elude you. Of course there is
possibility of it being solved using Hypercomputers but till this date as
Mathematician Martin Davis asserted, it is still a technological myth akin to elephant graveyard. Therefore
with utter disappointment we have to throw towel and say we give up. There is
no way we can determine all possible outcome and determine the correct path. So
whatever happens, happens for good. Kind of solace isn't it? Reminds me of
grape was sour adage.
Anyway to sum up if tomorrow
someone asks you why are you still single or why you are so indecisive in your
career, job or personal life. Just tell them you are weighing in on Counterfactuals. And if they give you puzzled look just suggest them to read
this essay. I will definitely owe you one.
