Debt and Analogy

December 19th, 2011 by Steve Gillman Leave a reply »

I was forwarded the following email, and I liked it. It shows how a good analogy can make something very clear. It also can be used as an example of why making things clear is not always the same as understanding them more deeply. I’ll explain in a moment, but let’s look at the email first:

Reasons for the US government debt downgrade:

• Tax revenue: $2,170,000,000,000
• Budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• Debt: $14,271,000,000,000
• Recent budget cuts: $ 38,500,000,000

Remove eight zeros and pretend it’s a household debt and budget:

• Family income for the year: $21,700
• Amount the family spent: $38,200
• New debt on the credit cards: $16,500
• Total credit card debt: $142,710
• Total budget cuts: $385

This is a dramatic way to present the current state of affairs in Washington. But although the analogy makes it seem very clear, it also over-simplifies in some ways. For example, if we were to follow the logic suggested here, the government should just declare bankruptcy and stop paying on the debt. Certainly a family making $21,700 has no way to pay for routine necessities and to pay down a debt of $142,710 (interest alone would eat up all income at credit card rates). But I doubt the originator or sender of this email meant to suggest the US government stop paying debts.

I really liked this one, and I will always use analogies myself to make things easier to “understand.” But I will also try to keep those quotation mark around the work “understand,”–at least in my mind–because we never completely grasp anything in life, and our desire to do so is often weaker than our desire to simplify.

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