Trump’s tariffs would worsen the China shock experienced by the rest of us

livemint.com:

Subscribe to enjoy similar stories. Imagine we are on a game show where we’re given a choice of picking any one of three doors. Behind one door is a car, while the others hide one goat each.

We pick a door, say No. 1, and the host, who knows what’s behind the doors, opens another door, say No. 3, revealing a goat.

He then asks, “Do you want to switch to door No. 2?" Is it to our advantage to switch from door No. 1 to No.

2? In academia, this is called the Monty Hall problem. While thousands of Ph.D. scholars had initially argued that there is no advantage in switching doors, probability theory and computer simulations demonstrate the opposite.

Since there are three doors, initially, our odds of selecting the car are 33.3% or one-third, while the odds of it being behind one of the other two doors are 66.7% or two-thirds. Once the game-show host reveals a goat behind one unselected door, we find ourselves dealing with a question of conditional probability. So the likelihood of the car being behind door No.

2, given that No. 3 only has a goat, goes up to 66.7% or two-thirds. Sticking to the original choice would have ignored new information and led us to lose.

This highlights the importance of adapting decisions to fresh evidence—a critical skill in systems thinking. Such failures to adapt resonate strongly with the mistakes that policymakers have historically made in ignoring systemic complexity. A striking historical example is the Smoot-Hawley Tariff Act of 1930, implemented during the early part of the Great Depression in America to shield US farmers from foreign competition.