For and against uncertainty

I listened to an excellent paper from Amos Witztum as part of this conference at Copenhagen Business School in January (where I also gave a paper), in which he described modern liberalism as a form of anti-tragedy. Greek tragedy, as any fan of The Wire also knows, involves characters straining in vain to resist their fate. They face dilemmas and choices, but ultimately these all result in the same outcome. Modern liberalism, especially in the form of Enlightenment, abandons this fatalism. But I think the point Witztum was making was that liberalism doesn't replace tragic fatalism with some form of heroic rationalism, as if we become masters of our own destiny. It replaces fatalism with uncertainty.

This interpretation of liberalism-as-uncertainty is shared by Friedrich Hayek, for whom freedom was found in ignorance regarding the future. Hayek's ambition for neoliberalism was to restore a form of government that made no predictions or guarantees regarding future economic outcomes. His opponent, of course, was not the Greek God but the socialist planner, who insisted that things turn out according to his bureaucratic dictat. Though as countless anecdotes about Soviet productivity rising by "20%" in a year or crops being planted only alongside the railway lines which Mao was due to travel down, socialism was less beset by the fatalism of tragedy, and more by the raised eyebrow of comedy. The person who is certain what's going to happen, and is almost certainly wrong, is another important figure when considering the politics of uncertainty.

There's a bastardised (aka Policy Exchange) version of Austrian economics, which says that the UK government can restore growth by getting out of the way. But Hayek's lesson is not that small government will 'deliver' better outcomes; it's that government should abandon any scientific concern with outcomes altogether. That is scarcely an option available to a modern politician. As I argued here, George Osborne's policies have a comedic air about them, resting on bold claims about the future that nobody seriously believes, possibly not even him. The Office for Budgetary Responsibility is being dragged into this comedy, performing its 'independent objectivity' with a smirk forming around its lips. Martin Amis could write a sequel to his critique of socialist irony, subtitled Laughter and the 2011 Growth Forecast.

Whether or not anybody today is really a whole-hearted Hayekian, this nevertheless poses an interesting question: how much uncertainty do we want in our economy and society? The term 'uncertainty' is sometimes misunderstood, thanks to mis-readings of Frank Knight. Many people, including economists, are prone to say that there are two types of situation, those which involve risk (and can be subject to probabilistic calculation) and those which involve uncertainty (and can not be subject to such calculation). This is entirely wrong. Knight's argument was that all situations involve uncertainty, as an existential fact of human life. But we have various pragmatic responses to it, including the construction of risk models, which succeed to varying degrees. Other pragmatic responses to uncertainty involve seeking to actively reduce it, through forms of concerted action and co-operation. For instance, the nudgers have discovered that if you get an offender or truant to sign a piece of paper promising to improve their behaviour, they are more likely to do so; uncertainty has been reduced.

'Actually existing' neoliberalism of 1979-2008 was organised around two contradictory positions on uncertainty. On the one hand, competition was to be unleashed and manufactured, for the sound Hayekian reason that this would produce uncertain outcomes. This treated uncertainty as something that was valuable in and of itself. On the other hand, risk modelling, audit and managerial expertise was honed in order to reduce uncertainty, in the interests of corporations, finance and other elites. In between these two, at the conflicted heart of the neoliberal project, lay the problem of corporate governance elicited by the separation of ownership and control of firms. It is no surprise that the project eventually combusted thanks to 'agency' problems.

Social democrats, communitarians and Keynesians have often criticised neoliberalism for valorising uncertainty, making stable families and communities harder to sustain. The privatisation of pensions, for example, means that we have no confident knowledge of our retirement income. But it is surely wrong to argue that ordinary people necessarily want uncertainty to be reduced. Our obsession with sport, gambling, talent shows - admittedly all riffs on a Hayekian vision of competition - demonstrate how much we thirst for the unknown outcome. This is despite the fact that rapid and unexpected changes of income/status can be as disruptive on the way up as on the way down. I, for one, refuse to accept that we automatically want a society in which uncertainty is kept to a minimum. It seems sociologically and politically naive. It misses the significance of 1968. Worst of all, it shows scant understanding of cricket as a source of romanticism and politics.

What is far more significant to the current moral crisis of neoliberalism is not that ordinary lives are mired in uncertainty, but that elite lives and institutions are not. While elites and managers spoke of innovation, competitiveness and constant 'ever-faster change', it seems that they were partly doing so in order to exempt themselves from so much uncertainty. The rhetoric was Austrian and liberal, but the behaviour was quasi-socialist in its extreme effort to dictate outcomes. The significance of so many recent books about inequality in the West is not simply in the levels of inequality that they identify (though that clearly matters) but in the patterns, repetitions and rationales that they identify in how inequality comes about. The dice are loaded. It's not that life is unfair, which is something that most adults should be able to handle; it's that it's unfair in unfair ways. Liberalism, whether of a Rawlsian or a Hayekian variety, is something we might be able to stomach, if things really were left to chance (be it via the veil of ignorance or market spontaneity) but the dominant view, post-2008, is that they're not.

In considering a future and better economic policy paradigm, we need to consider the political status of uncertainty. Possibly we need to find appropriate spheres for liberal, tragic and comic perspectives on the future, and not confuse the three. Uncertainty won't disappear, but it will be distributed in certain ways. The ability to calculate the future is unevenly distributed, as Koray Caliskan's Market Threads illuminates. And the ability to control the future is also unevenly distributed. Some people would dearly love more uncertainty in their lives; others would dearly love less. Maybe a good life is one in which the individual takes some responsibility for the outcome, but not complete responsibility. Equally, an honest politician is one who claims some responsibility for policy successes and failures, but not all.

Comments

[Account Deleted]

Excellent and thought-provoking. Is there an inverse relationship between wealth and uncertainty, so that increasing wealth at one end of the scale necessarily requires increasing uncertainty at the other end? This week's budget would appear to support the idea.

As both wealth and uncertainty (i.e. inequality) grow, does this increase the attraction of an authoritarian/fascistic alternative - i.e. one that reconciles great wealth for some with greater certainty for the majority?

Perhaps the long-view criticism of George Osborne will be that that he was reckless and irresponsible.

[William]

It's certainly the case that wealth brings greater certainty regarding the future - should one want it. Individuals with large amounts of capital can erradicate certain contingencies, or moderate their effects. But then they may also have to spend large amounts of money in casinos and elsewhere in order to re-discover some uncertainty. And the inverse is also true: poverty must be stressful and tiring partly because it introduces constant contingency that needs managing.

There may be something similar that could be said about firms. Apple's capitalisation doesn't guarantee that its innovations will succeed, but it gives it the time and space to deal with the contingencies associated with R&D.

Re authoritarian solutions, clearly there is something in what you say. If you read Agamben's State of Exception, he makes the point that radical politicisation (such as Fascism) has often thrived as a result of monetary crises in the past. Evidently this was true of Weimar Germany and Hitler. The money economy comes to appear entirely chaotic and untrustworthy, which political leadership offers the ultimate alternative to.