Radical uncertainty: decision-making for an unknowable future
John Kay and Mervyn King
Uncertainty pervades the big decisions we all make in our lives. How much should we pay into our pensions each month? Should we take regular exercise? Expand the business? Change our strategy? Enter a trade agreement? Take an expensive holiday?
Humans are successful because we have adapted to an environment that we understand only imperfectly. We do not know what the future will hold, but we must make decisions anyway. So, we crave certainties which cannot exist and invent knowledge we cannot have.
In their new book, John Kay and Mervyn King draw on biography, history, mathematics, economics and philosophy to highlight the most successful – and most short-sighted – methods of dealing with an unknowable future. Ultimately, the authors argue, the prevalent method of our age falls short, giving us a false understanding of our power to make predictions, leading to many of the problems we experience today.
Mervyn King was Governor of the Bank of England from 2003 to 2013 and is currently Professor of Economics and Law at New York University and School Professor of Economics at the London School of Economics. Lord King was made a life peer in 2013 and appointed by the Queen a Knight of the Garter in 2014. He is the author of The End of Alchemy.
John Kay is a Fellow of St John’s College, Oxford and has held professorial appointments at the University of Oxford, London Business School and the London School of Economics. He is a director of several public companies and for many years contributed a weekly column to the Financial Times.
He chaired the UK government review of equity markets which reported in 2012 recommending substantial reforms. He is the author of many books including Other People’s Money, The Truth about Markets, The Long and the Short of It and Obliquity.
"John Kay and Mervyn King want more people to grasp the old distinction between uncertainty and risk, forgotten by a later generation of economists."