I’m at the #undaunted conference today – https://www.eventbrite.co.uk/e/how-successful-leaders-face-wicked-challenges-avoid-predictable-surprises-tickets-89753510165 / https://159927be-a39d-4fcd-8591-21ed0d80d52b.filesusr.com/ugd/62df63_e8d641e8d07249e7a9a3b0d0c94a33e2.pdf (I’m attending because of some speakers I wanted to see, and the potential of there being a challenge to assumptions about ‘VUCA’ness and responses thereto).
John Kay is popping in to do a talk at lunch, which led me to this nice story (perhaps a myth) below – and the responses linked under. ‘Radical uncertainty’ is a new and clearer, interesting framing to me. I bet there’s a lot about it on lesswrong.com. It seems to me to be valuable at the level of thinking – perhaps leading directly to metarationality – and dangerous if it leads you to empty scepticism…
(Plus, I have an intuitive dislike of the idea of Ramsey being fundamentally wrong)
Embrace radical uncertainty
Between 1920 and 1950, a debate took place which defined the future of economics in the second half of the 20th century. On one side were John Maynard Keynes and Frank Knight; on the other, Frank Ramsey and Jimmie Savage.
Knight and Keynes believed in the ubiquity of “radical uncertainty”. Not only did we not know what was going to happen, we had a very limited ability to even describe the things that might happen. They distinguished risk, which could be described with the aid of probabilities, from real uncertainty—which could not. In Knight’s world, such uncertainties gave rise to the profit opportunities which were the dynamic of a capitalist economy. Keynes saw these uncertainties as at the root of the inevitable instability in such economies.
Their opponents insisted instead that all uncertainties could be described probabilistically. And their opponents won, not least because their probabilistic world was convenient: it could be described axiomatically and mathematically.
It is difficult to exaggerate the practical consequence of the outcome of that technical argument. To acknowledge the role of radical uncertainty is to knock away the foundations of finance theory and much modern macroeconomics. But the reigning consensus is beset with glaring weaknesses. Keynes and Knight were right, and their opponents wrong. And recognition of that is a necessary preliminary to the rebuilding of a more relevant economic theory.
John Kay and Mervyn King are writing a book on “radical uncertainty” to be published in 2019. Find out what another 12 leading economists think are the greatest challenges facing the discipline here.
Another John Kay piece:
However, this piece does problematise the base position – “Keynes Presented No Concept of ‘radical Uncertainty’ in the General Theory or in Any Other Published Work in His Lifetime”
W00t! OK, there is a lot on lesswrong (nothing on ribbonfarm) – and what is more, it’s from my hero David Chapman:
I’ll just say two things about this:
- the skill and practice of metarationality is holding radical uncertainty true while deciding how to act
- we have to apply radical uncertainty to itself