Indicators, and Knowing Where to Look
The final piece to my series on economic concepts relevant to our present day. Today we’re looking at indicators.
Indicators are best thought of as tools to gauge our understanding of something. They’re also widely applicable. For instance, while studying various economic indicators I couldn’t help but see parallels between types of indicators and the NFL Draft.
Keeping the dry material to a minimum, when you’re analyzing the state of the economy (expansion, recession, etc.) you may analyze several indicators. These could include manufacturing orders, new unemployment claims, and personal income among numerous other variables. All of these indicators can be sorted into three categories: leading, coincident, and lagging indicators.
Leading indicators are just that, they lead in the sense that changes in occur before changes in the broader market. Coincident indicators change concurrently with the market, and lagging indicators lag behind changes in the market. Now how does this apply to the NFL Draft?
Depending on how you chose to follow the draft, there were different speeds of information available. The method most people followed along with the draft, on television, was actually similar to a lagging indicator. I suppose there were even more lagging indicators, you could have read about the results in the newspaper, but the television coverage was lagging.
A coincident indicator would be a team executive making a draft pick in real-time because it’s coinciding with the actual draft selection. Most importantly, a widely available leading indicator was Twitter. Think about that. If you didn’t care much for the pageantry of the draft on television, it would be more practical to get draft updates on Twitter. Even during the days leading up to the draft there were be dozens of insiders aggregating information from their sources. They would then go on to post real-time updates during the draft.
How about a more practical application than the NFL Draft, especially since that took place months ago. How about the global pandemic? The same leading indicator was there, Twitter. It’s something I wrote about a couple of months ago. The sentiment that this pandemic wasn’t a black swan event was widely disseminated on Twitter back in January.
Experts who were untethered by the government or large institutions were among the people freely spreading this information on how to prepare and the consequences we might face. A coincident indicator, on the other hand, was be government response. The saying goes that it’s much easier to turn a speedboat than a large ship, and larger entities like the government face more regulation and scrutiny.
The lagging indicator during this pandemic has been the mainstream media. Not only were institutions like the WHO late to report the finding that we should all be wearing masks, but the media would then be lagging behind even further.
This categorization of indicators doesn’t just apply to large-scale matters. We as individuals can benefit from examining matters uniquely pertaining to ourselves. Take staying hydrated as an example. What are different indicators you could look at to know when you should drink water? You can go by remembering the time you last had water (leading), or when you feel thirsty (coincident), or by when you start suffering symptoms of dehydration (lagging).