If we put up with a fundamental flaw in the foundations of our society, this must find its expression reflected in our knowledge. This in turn, would render us all vulnerable to danger. The fall-out from the Icelandic volcano illustrates my point.
Computer models used by the UK Meteorological Office projected the flow of the ash which resulted in a shut down of air traffic over Europe’s skies. Now, it turns out, the model was a construct of mathematicians disconnected from reality.
Five years ago the Bank of England invited the Met Office to participate in a joint exercise in modelling the real world. We now see how both the financial and weather forecasters don’t know what they are doing.
The Perversion of Knowledge
The money-and-met men are trying to evaluate uncertainty with models that base their projections of the future on assumptions that are detached from reality. The cosy precision of arithmetic cannot deliver realistic forecasts if the assumptions of the modellers are biased by ideology.
Economists who were supposed to ensure stability in the financial sector were shocked when the banks seized up in 2008. They didn’t see it coming because their world-view – the prism in their minds – filters out relevant pieces of knowledge.
Result: not the confession that they got it wrong, more that their tools were not up to the job. That’s why Bank of England Governor Mervyn King slags off economics as something less than a science. “We must not pretend to know more than we do, and we must avoid the delusion of spurious precision,” he said in a recent speech.
The Realities of Real Estate
Could it be that people like King are part of a process that suppresses knowledge that we do have to avoid the precision that economics could offer in the hands of people connected to the real world?
Take the case of the chaos in the global economy. This originated in property markets in 2007 – and yet, almost no analysis has been devoted to the economics of real estate. Odd omission in the inquests into the worst downturn since the depression of the 1930s? Or logical, given what we know about how governments strain themselves to subsidise the ownership of land?
Mervyn King co-authored a book on taxation with John Kay, in which they concluded that the rent we pay for the use of land is a trivial sum. So trivial, in fact, that we should not bother to consider this share of GDP as a serious option for funding public services.
Too Hot to Handle?
Kay agrees with King that we should not rely on economics as a problem-solving tool. He announced in his Financial Times column (April 14): “Economics may be dismal, but it is not a science”. This is an inversion of reality. The experts who shape public opinion and government policies delude themselves about a realm of knowledge that is within our grasp, but which they intentionally relegate beyond their models. It was this thinking that allowed our economies to crash in 2008. And it is the same kind of thinking that closed the skies over Europe.
Scientists are using such dodgy modelling methodologies to calculate the threats to global climate from greenhouse gases. Could their doomsday predictions be as flawed as the forecasts that are used to shape economic policy?
In many disciplines, we are seeing the retreat from science to séance. Many realities are too hot to handle for the guardians of our minds. The world gets ever more dangerous, and most of the threats are man-made.
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