John Kay at Policy Exchange, 27 March 2012

 

http://www.policyexchange.org.uk/events/past-events/item/professor-john-kay?category_id=37

 

General lessons from his Tube map story of how not to get from Paddington to Lancaster Gate

 

Models are indispensable to managing complex worlds but actually the right model is specific to a particular problem. How do we know whether we are using the right model for a particular problem or not?

 

The right choice of model requires a much wider knowledge of situations and experience in using that and different models which can only be acquired by experience, involves the exercise of judgement and there is never any objective means of determining whether you have the right model for a particular problem or not.

 

Models, like maps, are essentially simplifications. That is the central characteristic of a model. A map, like a model, only works by being a simplification, but a simplification is problem-specific and knowing what simplification you want to use is a matter of judgement and experience and has no single right answer. We need to learn that, about the way we think about models and the way we use models.

 

The TfL website is giving the correct answer to an only slightly badly formulated question. And that means to get the right answer we need to get the question right, and that may often be rather difficult.

 

On Benjamin Franklin and what John Kay calls “Franklin’s Gambit”:

 

“So convenient a thing is it to be a reasonable creature, since it enables one to find or make a reason for everything one has in mind to do”.  

 

We recognise in the impact assessments, the performance appraisals, the risk assessments, the regular play of Franklin’s Gambit, the activity in which the formal procedure is used as an ex-post rationalisation of a decision which has already been made on quite different grounds.

 

 

“[M]odels people use … to predict events … pose the question: “How would we make our decision if we had complete knowledge of the world?”… [including] relevant information on matters such as costs, benefits, and consequences. But little of this knowledge exists. So you make the missing data up….  The future is assumed to be essentially like the present, with differences mainly derived from mechanical projection of current developments. Uncertainty is ignored, or dealt with in unsatisfactory ways… We do great damage by claiming to know things that are not known… and by attaching a veneer of rationality to decisions that have in fact been made on other, rarely articulated, grounds."

 

Professor John Kay: Obliquity, long-term planning and why the wise man knows the limits of his knowledge

Tuesday, 27 March 2012

 

Synopsis

“[M]odels people use … to predict events … pose the question: “How would we make our decision if we had complete knowledge of the world?”… [including] relevant information on matters such as costs, benefits, and consequences. But little of this knowledge exists. So you make the missing data up….  The future is assumed to be essentially like the present, with differences mainly derived from mechanical projection of current developments. Uncertainty is ignored, or dealt with in unsatisfactory ways… We do great damage by claiming to know things that are not known… and by attaching a veneer of rationality to decisions that have in fact been made on other, rarely articulated, grounds."

John Kay, FT, 29 November 2011

John Kay is one of Britain’s leading economists.  He is currently chairing the Review of UK Equity Markets and Long-Term Decision-Making, which will report to the Secretary of State for Business in July.  John contributes a weekly column to The Financial Times, and is the author of many books, including The Truth about Markets (2003) and Obliquity (2010). 

In Obliquity, John Kay argues many goals are more likely to be achieved when pursued indirectly. Over a number of years, he has pursued this and related themes about uncertainty, the need for modesty in our ability to predict and plan for the future, and the importance of markets as processes of discovery.  At this event, John Kay will explore these issues, and answer questions.

This event is relevant to a range of current policy debates, where government departments are undertaking far-reaching plans and interventions on the basis of their models of the long-term future, including in energy and transport:

 

·         Models based on assumptions decades ahead about future energy technologies, their costs and fossil fuel prices are being used to justify increasing central planning in the electricity sector

 

·         The economic case for HS2 predicts postcode by postcode which station in London passengers will use in 2043 to begin their journey