Age of uncertainty: the fatal flaw with trying to predict the future

Essay by Margaret Hefferna: “Famed for the beauty of his economic models, the Nobel Prize-winning economist Paul Krugman once reflected that “there’s a pretty good case to be made that the stuff that I stressed in the models is a less important story than the things I left out because I couldn’t model them”.

It’s a casually explosive comment, because we use models all the time. Designed to reduce the world’s complexity to a manageable state, business models, economic models, scientific models are tools with which we test out our hypotheses and decisions.

But their simplification and utility is a trap. Because they must leave out so much – otherwise the model would be unwieldy – we’re vulnerable when we mistake them for reality.

Still, the rhetorical power of models is persistent, because they imbue statements about the future with the aura of inevitability. In an age of uncertainty, they seem to promise certainty.

Nor are they as objective as their numbers imply. Chair of the US Federal Reserve, Alan Greenspan, acknowledged as much. When testifying before Congress about why he had failed to predict the 2008 banking crisis, he called his conceptual model an ideology. “Everyone has one”, he said. “You have to. To exist, you need an ideology”.

His own ideology had assumed unregulated markets to be the safest, something he now saw as “a flaw”. But that flaw – and the economic crisis that followed – inadvertently demonstrated just how easily models give authority to bias and belief.

Taking history as a model presents similar dangers. The belief that history repeats itself is widespread, though rarely shared by professional historians. Mostly, it is our own history that we see being repeated – not anyone else’s.

When the Arab Spring unfolded, the Russians saw Russian history, with the politician Dmitry Medvedev fearing that, like the fall of the Berlin Wall, these demonstrations would prove destabilising for Russia.

Meanwhile, President Obama likened uprisings in Tunisia and Egypt to the Boston Tea Party and the beginning of America’s war for independence, drawing comparison too with the civil rights protest of Rosa Parks. Such analogies blinded both leaders to the dangerous contingencies and complexities of unfolding events….(More)”.