Models Versus Events: When the World Refuses to Compute

Models Versus Events: When the World Refuses to Compute

The calculating exactness of practical life which has resulted from the money economy, corresponds to the ideal of natural science, namely that of transforming the world into an arithmetical problem and of fixing every one of its parts in mathematical formula.

Georg Simmel

The model, be it one of business, economics, the social or natural sciences, mitigates against varying levels of uncertainty, as a tool for designing, predicting and ultimately controlling all manner of events in the world. The model is an abstraction formed out of the particulars of past experience, even though it may be used to predict a future occurrence, and as such remains, ‘after the event’. The techniques and practices of the model are by their very nature pre-determined sets of actions, which in turn offer potential solutions for problems that are ring-fenced in advance. In the specific ‘real world’ circumstances of its application, the model may be tweaked, its limits tested, and parameters adjusted, but the fundamental principle remains the same, that of applying a set of rules and procedures in order to bring about a particular outcome. Above all, the apparent impartiality of the model is seductive because it enables individuals, organisations and governments to plan ahead and devise strategies based on the ‘what if scenario?’ of the simulation. Problems arise however when life refuses to succumb to the model, which over time and through repeated use can become radically out of step with the particulars of ever-changing events on the ground. In the real world, all uses of knowledge are socially and politically motivated, and the apparent objectivity of those who crunch the numbers is now in the process of being historically exposed as synonymous with the ‘calculating exactness’ or not, of the capitalist; as Brecht writes in his The Threepenny Opera (1928) ‘what is the robbery of a bank compared to the founding of a new bank’.

The 2008 financial crisis has given popular currency to the failure of ‘tried and tested’ economic models, which in a broader sense is a symptom of the breakdown of more than a century of instrumental rationality, the ‘living by numbers’ described above by Georg Simmel. Adam Curtis’ 2011 documentary All Watched Over by Machines of Loving Grace, is a poetic indictment of the model’s inherent flaws, the result of our irrational and impossible desire to know everything; reason turns out to be faulty, it often malfunctions and should be regarded with caution, even as it continues to churn out ‘credible solutions’. As governments opt for either Keynesian or Monetarist macroeconomic models, there is a sense in which top down policies are failing to keep up with political events. When the world refuses to compute, the ‘invisible hand of the market’ is seen to be precisely that, as one need only visit Zero Hedge to understand the massive discrepancy between the reporting of the financial crisis in the mainstream media, the actions of professional traders, and the state of contemporary global markets. The situation on the ground has moved beyond the parameters of existing models and into the territory of the unknown, where events become much harder to predict.

When we are faced with unpredictable events strange and interesting alliances are formed, as seen on the BBC’s politics webpage, which recently cited Nassim Nicholas Taleb, author of The Black Swan and Antifragile as ‘Downing Street’s Favourite Adviser’. It is perhaps not surprising that David Cameron, the son of a stockbroker, should turn to an individual who initially made his fortune on the stock market as a hedge fund manager. What is more surprising are the Conservative Government’s claims that their policies reflect the concerns of Taleb’s influential analysis of randomness, which agues that highly unpredictable ‘black swan’ events cannot be foreseen by statistical models, but only induced from complex states of affairs. Taleb’s ‘black swan robust’ society would be one that advocates a type of ‘stochastic tinkering’, in other words, a more intuitive policy model of socio-economic experimentation based on a bottom up model of collecting data about the particulars of the situation ‘on the ground’. Taleb’s ideas are informed by a critique of Plato’s Theory of Forms, which he says results in the imposition of top down theoretical models, whose tendency toward abstraction leads to a disconnect between the models or map of reality, and its dynamic, unpredictable nature. ‘Living by numbers’ can only work effectively if we avoid reducing the world to the virtual reality of the ‘mathematical formula’, the richness and complexity of life being the only one available.

Governments on the other hand deal in macroeconomic models, and the current one is surely no exception, because the ‘calculating exactness of practical life’ was made possible by the historical exercise of nation building, based on centralised fiscal controls and top down, ‘one size fits all’, policies for vastly different social geographies. The re-introduction of monetarist economic policies by the current Conservative Government may be the only short-term option, but it will be interesting to see how Taleb’s approach could inform a grass roots agenda that actually emerges from below. At the level of socio-economic needs the economic network might replace the fiscal model, as ‘stochastic tinkering’ experiments with the interconnected and complex dynamics between economics, culture and society, as a basis for making the numbers serve the real contingencies of life in the everyday world of work. Although we may be facing decades of low economic growth there are emerging paradigms for coping with the transition toward a more balanced, sustainable economy, where the numbers do begin to add up again, such as Tim Jackson’s Prosperity Without Growth, based on the author’s role as Economics Commissioner for the Sustainable Development Commission. Sustainability is a political enterprise that requires a degree of social consensus, so while events overturn models at a rate of knots, it becomes a matter of urgency that the desire for change be channelled into the right places, not in accordance with theoretical models but in alliance with the particulars of lived experience. When the world refuses to compute a rare opportunity emerges for a meaningful social transformation, but if the opportunity is lost we will be facing not black but red swans, and the outcome will be far from predictable.