Macro vs. Micro
how the world operates and why nobody can see it
by Blonde Ulv
There are a few terms every single person who has ever taken an economics course have heard. Supply and demand, money, trade, exchange, goods and services, etc. Two that are touched upon but usually not emphasized for the layman are the concepts of the macro and the micro. There are whole courses dedicated to the application of these two words and most economists who continue studying end up preferring one or the other and can specialize towards them. The nuances of these terms are not what we are after in this article, but the fundamental difference of what they represent. In fact, in my observation, it is one of the key demarcations between sets of minds, not dissimilar to Rhetoric vs Dialectic.
Micro is the immediate, the small. In economics, it might refer to a single business, or small group of businesses. Macro is the totality, the big. In economics, it might refer to an industry, an economy, or sets of economies. Micro is small, macro is big. It might be easier to think about in terms outside economics. Your personal garden and its fruits is the micro when talking about gardens. The set of all gardens in your neighborhood or city would refer to the macro concerning gardens.
The point is this: the micro and the macro are not the same. They can’t be analyzed the same. And treating them as the same is folly. Here is an example most can understand: When negotiating a mortgage rate, or when refinancing, the financiers look to the going rate which is what is currently being offered for the field. The individual character of the lendee is only relevant insofar as determining if the lender is worried about receiving payment from them or not. Very, very little goes into the rate beyond what all the other rates are currently trading and if their income can budget towards that amount.
Another, more primal example. When walking down the street at night, and a hooded figure with dark skin is walking towards you, what is your first reaction? If it is to put a significant amount of space between the two of you, congratulations, you instinctively grasp statistics. Or at least your core gut does. You didn’t know he was a cumme laude graduate from a technical university with a mathematics degree headed back home to his wife and three kids after a workout at the gym. But your instincts know he is part of a group that likes to get lively around nighttime for no discernible reason at all, often to the detriment of whatever unfortunate person has grabbed his attention.
This is the macro. It is statistics. It is seeing the forest for the trees. The Law of Big Numbers. In this area, you never know which pieces of the set will act, but you always know that a predictable amount of the pieces will act. And often, exactly how they will too.
This points to a fundamental law of the realm: with large enough sets, any given group behavior can be predicted.
The coolest thing is that this applies to practically everything. Tracking an individual bee go about his business in a hive looks like madness, but watch the entire hive and coherency exists.
Chemists are not concerned with the movement of a singular atom or where it will be at any given time, but the billions of them will be where they are supposed to be, on aggregate.
Seasons exist. The Farmer’s Almanac lays out the larger climate patterns.
Farmers plant 10,000 seeds absolutely unaware of which individual ones will take hold and which will not, but their end yield is predictable.
Take a guy and have him ask out 100 girls. You never know which will go on a date, but you can guarantee he will get a few.
It’s a perspective-shattering realization when fully grasped. Our world is a pattern-based realm. It is not random. And it hardly ever cares about the individual, instead about the group. This is why predictions can be made accurately. If you understand the macro, you know the outcome.
Take the Federal Reserve. Knowing that every Federal Reserve note printed is due back to the printer with interest is just recognizing that there is a basic mathematical formula showing that the amount of “dollars” in existence will always be less than the amount owed back. Knowing this one macro pattern allows you to recognize that the system is a Ponzi scheme and is mathematically guaranteed to extract wealth to the point no one owns anything outside of the owners of the printer. Knowing exactly when it breaks, or the specifics on how it all plays out are unknown, but that it will break is the key. You don’t need to know the movement of every single piece of paper, just the broader pattern at play.
Now why can’t most people see the macro? The answer is pretty obvious, the hyper majority of people are too solipsistic or narcissistic in nature and so lack the ability to pull away from their own heads. Even those gifted with empathy often struggle to pull themselves out of their immediate vicinity of those surrounding them and evaluate the broader strategic picture. Essentially, most people’s views not only do not, but can not, extend far enough.
The world is probabilistic, not binary. Many multiples of variables come into play, and their interactions are often messy. They don’t often produce easily digestible results, but that does not mean it is fundamentally unknowable, but that often the answer lies in the macro. Recognizing that most people will never and are fundamentally unable to see it brings a large amount of peace when trying to deal with these types of interactions and subjects.
Having the ability to pull yourself out of your micro situation and look at the broader macro pattern is also an extremely useful tool for navigating the world. It removes the personal, the hot emotions, and levels out to a more stoic view in that one is playing a small part in a much larger grand pattern that will not be altered by individual actions. It allows one to adhere to what the pattern unfolding is. If you know the enemy is numbered in the thousands and is marching through the mountains, you will not stop the march, but you can get out of its way.
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