‘What is going on here?’ This is the question at the heart of Kay and King’s Radical Uncertainty – a question the authors suggest we should all be asking much more often.
In this large and wide-ranging book, John Kay (economist and founding Dean of Oxford University’s Said Business school) and Mervyn King (economist and former Governor of the Bank of England) set out to distinguish between risk and uncertainty. They argue that this distinction once understood by economists on all sides of the political spectrum – they refer in particular to the writings of Keynes and Frank Knight, the father of the Chicago School – has been forgotten to the danger and detriment of good decision making.
‘the world is inherently uncertain and to pretend otherwise is to create risk, not to minimise it.’
Risk is likened by the authors to a puzzle. It can be solved by existing information ordered in the right way. Uncertainty is like a mystery – we are missing information and in particular we are beyond the limits of statistical reasoning. The authors argue that most of the big world decisions we currently face – whether in business, epidemiology or politics – are radically uncertain. We are operating in conditions of mystery where our knowledge is imperfect and variables are constantly changing. Climate, economic and social systems are not linear. They are subject not just to multiple variables and action, but also to what people think. Our failure to understand this context – radical uncertainty – and in particular our attempts to model our way through using data and statistics are at the root of poor decision making and much of our current woe.
These once orthodox economists ruthlessly take apart economic models which they describe as ‘parables’, ‘believing them to represent reality has led macroeconomics astray’. In particular they critique a ‘relatively recent’ over reliance on probability models, when probabilities can in reality seldom be known. Withering critiques are made of ‘futile’ strategy away days, most of behavioural economics, a large swathe of number-based policy making processes, ‘the number is not the policy’ and risk registers, ‘long lists, received in silence and signed off’. They take a swipe at journalists who ‘don’t send the car’ (for the interview) if a nuanced argument to a complex problem is suggested, Treasury mandarins who try to add more complexity to their failing models (as opposed to standing back and asking ‘what is going on here’) and CEOs such as the Goldman Sachs’ executives whose models categorise events as ‘inordinately improbable’ even as they unfold around them.
A reliance on data driven modelling leads large organisations in particular to make decisions ‘on the basis of what is easiest to justify rather than what is the right thing to do’. Whilst Kay and King do not specifically refer to British social institutions this critique sadly brought to mind many large third and public sector organisations whose management and focus on risk has visibly been all too often at the expense of doing the right thing and addressing the causes of our vulnerability. I think in particular of children’s care (where in the case of complex families troubles the context is always one of uncertainty) and care for the elderly.
‘when the anecdotes and the data disagree, the anecdotes are usually right’
The authors argue that we need to turn to story-telling, what they call the ‘Narrative Paradigm’. Story telling helps us to marshal the information we do have and to make sense of a complex and confusing world that continues to change. Too often dismissed by the statisticians as anecdote or ‘bias’ Kay and King argue that in fact stories are a powerful way to work out ‘what is going on here’. The story making process is collaborative – stories are shared, they are a sort of team work – and good decisions are made in a social context, with others who bring diverse experience.
‘the prospect of new experiences – can be a source of joy, rather than despair
Many if not most people I work with experience radical uncertainty in the day to day – something policy makers have only recently become aware of and I have written about here. The traditional response – once this precarity is finally recognised – is to try and make further static adjustments to inflexible systems – add a bit to this benefit, a marginal adjustment to this service – rather than to think differently about flux and uncertainty and what is really needed.
‘uncertainty as delight’
I was drawn therefore to the authors’ discussion of uncertainty as delight: ‘the prospect of new experiences – a source of joy rather than despair’. The authors understand that it is not just nations that need an overarching narrative, communities and individuals need it too. They point as an example to the ‘secure reference narrative’ in Denmark – no fear of crippling medical bills, or dramatic losses of income if a job is lost – enables people to embrace risk, to try new things. Uncertainty becomes like the feeling we have when we discover something new on holiday.
As someone who has spent years trying to convince officials in the Treasury and elsewhere to ask different questions, to listen to stories and to work in new ways, I found this book compelling. I have written in Radical Help – borrowing on the work of Eddie Obeng – of how change requires methods that understand we are working in the fog (the mystery); of the need to constantly adjust our idea of what the problem is (‘what is going on here’) and how a widely shared story – such as the Wigan Deal or Barrow’s New Constellation – is the necessary starting point for any systemic change. I have long argued for the power of stories – for baggy, winding stories – where the differences between us are encompassed not smoothed out – as the starting point for good policy and I believe an embrace of this book would be a critical starting point for any real commitment to a generative economics of place.
There was however one thing about this book that irritated me beyond measure – not a single woman economist is referenced in the stories or the copious index. ‘Not many economists are women’, they note at one point reminding me of an interview with a mandarin I once read in the FT where, as a justification for the absence of women in key appointments, he explained that ‘not many of the chaps we know are women’. This gender bias limits arguments that could have been made and in particular many of the practical applications that the authors could have suggested.
Seven years ago, in the Chessboard and the Web, Anne-Marie Slaughter set out how many of the approaches Kay and King advocate could become new policy tools but no reference is made (although curiously the authors do cite a powerful Princeton commencement address). Carlota Perez’s work on historical narrative and its importance in understanding finance, industry and institutional development and decision making is not mentioned. Kate Raworth’s redrawing of many of the models the authors critique is passed over in silence. The work of Diane Elson and the Women’s Budget Group in the UK and Heather Boushey in the US would deepen the connections between household narratives and policy making, but is not mentioned. The work of Mariana Mazzucato would enable the authors to link their arguments to questions emerging from the current pandemic. I could go on.
But, when two establishment economists such as Kay and King recommend ditching the statistical models in favour of narrative, when they emphasise the role of our humanity in good decision making, it’s definitely a moment. Something is going on here.