Public ideas
How we make decisions in the face of radical uncertainty
Joe Walker has brought our attention to a one-hour lecture by David Tuckett at Bielefeld University: How people make decisions in the face of radical uncertainty.
These are situations where data is incomplete, where options are ambiguous, and outcomes are unpredictable. Most teaching of decision-making is based on situations of predictable probability, such as gambling models, where the probabilities and payoffs are known. Sometimes we can draw on historical time series to make reasonable estimates of probability: for example by counting how often the Reserve Bank has raised interest rates when the CPI has risen by X percent we can assign odds to the Bank’s next decision.
But most decisions we make personally and in our professional lives do not conform to such models. We cannot be guided by a neat decision tree with specified payoffs and probabilities.
Will I apply for a job in another state? Will we have another child?
Policymakers have to deal with wretchedly uncertain decisions: how to mitigate the local effects of climate change, how to respond to a pandemic that has just broken out.
Tuckett takes into account what he calls conviction narrative theory. He goes beyond normal behavioural economics. Behavioural economics is based on human errors resulting from miscalculations and failures to take available information into account – or, colloquially, why we do dumb stuff, like play poker machines, use Afterpay, and buy expensive add-on insurance. But in situations of uncertainty we don’t have the information to make a “rational” approach.
In fact, while behavioural economics finds that our reptilian brain leads us astray in situations where we could be making rational decisions, Tuckett suggests our brain is well evolved to dealing with new situations where we cannot draw on statistical data.
Hard data and hard realities about food
Urbanization is a world-wide phenomenon, driven in part by population change, and in part by a drift of rural people to cities. Much of that drift results from the decline of traditional farming, and its replacement with more capital-intensive broadacre agriculture.
As a reaction to this development many people, particularly people in rich countries, regret the passing of the small farm. Somehow an industrial-scale feedlot churning through 5000 cattle a year lacks the romance of a patchwork of cute small farms. In fact does one even call these massive establishments “farms”?
In a review of a book, Saying no to a farm free future by Chris Smaje, George Monbiot takes issue with what he sees as nostalgia for unproductive and high-cost farming. The world needs food – plentiful food and affordable food. Monbiot celebrates the rise of large-scale and low-cost agriculture, and provides numbers to show how this development has reduced starvation and made food more affordable for poor people. When people spend less time scraping to feed their families they can turn to other things, such as assuring that their daughters can get an education.
Monbiot’s review – The cruel fantasies of well-fed people – comes across as a volley in a duel between Smaje and himself. But it is a reminder of the importance of food security, and a challenge to those who romanticize traditional farming systems and are distressed that some of the food in their supermarkets has travelled halfway across the planet.