There has been much discussion over the past few months over whether high levels of debt cause low growth (the “austerian” camp, eg Britain, Canada and Germany within the G7) or whether instead low growth causes high levels of debt to accumulate (the “Keynesian” camp, to which Japan appears to be providing leadership currently). There has been relatively little discussion about the possibility that neither is the case.

We are compulsive pattern spotters. That explains to a large extent our dominance as a species, and completely explains the dominant position that mathematics and its applications holds in our culture.

I was reminded most stirringly of this a few years ago, on a lunch break. The Ikon Gallery in Birmingham was hosting an exhibition by Japanese sound artist Yukio Fujimoto called The Tower of Time. However, instead of siting it at their gallery space in Brindley Place, it had instead been staged at Perrott’s Folly, just around the corner from my office at the time.

Yukio Fujimoto. The Tower of Time
Installation view – Perrott’s Folly, Birmingham, UK 2009  Photo: Stuart Whipps

Perrott’s Folly was built in 1758 by John Perrott. It is a building 94 feet high, with one room on each of its six octagonal floors, and no obvious purpose (hence “folly”). It may have been somewhere to spy on his wife from, while she was alive or dead, or it may have been a gambling den for him and his mates. Or it may have been something else entirely. I think we are unlikely to ever know for sure.

After a brief introduction on the ground floor, I climbed the stairs to the first floor to find one little black square alarm clock with a red second hand ticking in the middle of the wooden floor. The next floor had ten such clocks, in a row. The next 100, in a square, the fifth floor had 1,000.

A curious thing happened to me as I moved up the tower. The clocks’ mechanisms appeared to alter with altitude. I put it that way as an example of an obviously false causality, ie that the height above sea level in some way affected how the clocks worked (and before I get complaints, I mean effects that could be detected within a matter of a few tens of feet and with no measuring equipment other than my eyes and ears). Because what I saw did change. I looked at one clock and I could see that the battery was powering the gear mechanism that kept the second hand, minute hand and hour hand in their required relative motion. I looked at ten clocks in a row and I could see the same, although I also noticed the second hands were not all at the same point along the row and that there was an order in which each piece of red plastic reached the top before beginning the next circuit. I found myself having to watch the clocks for several minutes to see the pattern confirmed. But was this “pattern” anything which had any meaning, or was it just a way for my brain to store the images it was collecting in an easily fileable format?

When I moved to 100 clocks, the relevance of the gear mechanism became secondary. I could “see” lines of second hands moving together in the way that lines of plants in a cornfield move with the breeze. This, combined with the swooshing of 100 clocks (as the ticking of each individual clock combined to make a different noise – this change in sound was I believe the artist’s main reason for constructing the installation in the first place), made me need to check several times that one of the strange pointed windows in the tower had not been opened and let in a stray breeze. At 1,000 clocks it was just pure cornfield, the individual clocks now as hard to imagine as it had been to imagine anything else four floors below.

I can “see” that the “wind” is blowing a pattern through the second hands of the clocks and yet I “know” that this is not happening. Now transfer that wind I can see to a situation where I do not readily have a theory for what is happening to individual elements within a system. Suddenly what anyone with eyes can see becomes so much more powerful than what we might know. Returning to the austerity debate for instance, perhaps the individual growth clocks have no relationship with the patterns of debt I can see being blown through them. Perhaps if I just arranged the clocks differently I would see the wind blowing from a different direction. Perhaps the clocks and the wind have nothing to do with each other outside my head, despite the “evidence” of my eyes.

Why does it matter? Because if we cannot prevent ourselves from seeing patterns and then extending them via models where we have to make some things depend on other things, even in the face of weak and conflicting evidence, then we need to know this about ourselves. Because if giving a person the wrong map is worse than not giving him one at all, our natural instinct to construct these maps is likely to keep getting us into trouble.

 

“IMF slashes UK growth forecast”. Does this sound familiar? It should. Every 9 or 10 months the headline seems to return to the newspapers in an almost identical form. September 2011, July 2012 and now “IMF slashes” is back this month. This occurs every time the IMF’s world economic output report (full reports every April, updates every October) happens to adjust down one of its predictions for UK growth.The latest is entitled Hopes, Realities, and Risks and is notable for its Oxford comma.

According to Stephanie Flanders, the BBC Economics Editor, the IMF rarely gives direct advice on the back of these reports, preferring to give discreet prompts. However this time the report says about the UK: “Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lacklustre private demand.”

Olivier Blanchard, the IMF’s chief economist, even singled out the UK in response to a question while launching the latest report: “There are a few countries where there is enough fiscal space to go further – one example is the UK. In the face of weak demand it is really time to consider an adjustment to the initial fiscal consolidation plans.”

So there you are, we are all doomed unless we change policy. You would imagine that an institution would have a fairly solid track record of understanding countries’ economies and making reasonably accurate predictions on the back of this expert knowledge for it to feel able to lecture us all quite so authoritatively. Unfortunately, they don’t.

As you can see, compared to the stacks of predictions the IMF have given us over the last 4 years on growth in world output alone, the actual growth figures are unfortunately fairly clearly outliers. The one thing we can take from the latest report with any confidence is that the current projections for 2013, 2014 and 2018 will not only be wrong, but probably by miles.

So it would be very difficult to justify a change in economic policy on the basis of a world economic output report. Which is a pity, because I agree that many of us will be doomed to a life of fewer opportunities and less economic independence if the current contractionary policies continue, scrabbling around for our share of a crumbling welfare state while the few of us already immunised from society by money feel very little pain at all. For a proper description of why austerity is a very bad idea, read Paul Krugman’s End This Depression Now or read his blog. Read the account of the Great Capitol Hill Baby Sitting Co-op crisis on page 26, which originally appeared in a 1977 article by Joan and Richard Sweeney. The means for ending the double dip, soon to be triple dip and probably ultimately corrugated recession are in our hands and have been known about for decades. Your spending is my income, and my spending is your income, so we need to stop contracting our economy.

And we also need to stop reading IMF reports.

 

Brian Aldiss told me a story the other week (at the Birmingham Science Fiction Group, where he is an honorary president) about Margaret Thatcher and her attitude towards science fiction. Kingsley Amis had been invited to a party at Downing Street and had decided to take along an inscribed copy of his latest book Russian Hide and Seek. Mrs Thatcher, a little suspicious about what she was being handed, had apparently asked what it was about.

Amis had explained that it was set in the future when the UK had been under Russian occupation for 50 years.

“Can’t you do any better than that?” the Prime Minister is reported to have said. “Get yourself another crystal ball.”

Aldiss recounted this story as he felt it illustrated how Mrs Thatcher totally misunderstood what science fiction was about. It was not about prediction of the future, but for people who “liked the disorientation” (the essence of science fiction in Aldiss’s view) of portraying an unfamiliar landscape and trying to work out what would hold true under different circumstances.

It seems to me that this is also what being an actuary is about. Actuaries are not about prediction either, but they are prepared to embrace the disorientation of asking what ifs and exploring maybes, and, by so doing, try to quantify what different currently unfamiliar landscapes might look like.

Science fiction has many forms but two main camps politically: the camp which believes a more enlightened form of society is possible (although what that means might vary considerably between different campers); and the camp which doesn’t but instead believes that all we can hope to do is survive a remorseless universe governed by nothing more than the laws of physics and evolutionary biology.

I think actuaries may have leaned more towards the second of these world views, particularly in fulfilling their statutory roles in recent years. We have worked within the remorseless universe of regulators and assumed that increasingly complex systems will make us safer in a Darwinian financial world. However the group think this has inevitably promoted has made us all less safe. As a result, we have heard many voices in the discussions about the financial crisis, including many what ifs and maybes, but few of these voices have been actuaries’. To quote Bob Godfrey (admittedly he was talking about animation at the time), the professionals are in a rut and the amateurs aren’t good enough.

Actuaries need to put themselves about as much as the amateurs do. Sometimes that will be uncomfortable. Sometimes we may look a little foolish for a while. But in my view it is the only way we are going to contribute meaningfully to the construction of a better society. And we might even produce some decent science fiction in the process.