On being afflicted with ludicrous politicians
NEWS FROM UNCIBAL
It is the wind that is capricious; the measurement does not make mistakes.
-Stafford Beer
Yesterday the Grand High Shamaness of 11 Downing Street, Rachel Reeves, stepped up in front of Parliament to deliver an important rain dance. And she came equipped with her favourite totem of divination – something that she refers to cryptically as the ‘O-B-R’.
‘I can confirm that I have restored full headroom against the “Stability Rule”,’ she declared, referring to her ‘rule’ that the UK should have a balanced budget by FY2029-30. We are ‘moving from a deficit of £36.1bn in 2025-26 and £13.4bn in 2026-27,’ she continued, ‘to a surplus of £6.0bn in 2027-28, £7.1bn in 2028-29 and a surplus of £9.9bn in 2029-30.’
She then consulted once more with the ‘O-B-R’ before announcing some other important facts about the future. Her ‘Investment Rule’, meaning that net fiscal debt should be less at the end of a particular ‘forecast period’ (i.e., five years) than at the start, has been, she said, ‘met two years early’. (It would normally be a sign of incipient mental disorder for a person to use the past tense to describe something that is supposed to happen in two-three years’ time.) Net financial debt, she clarified, will be ‘82.9% of GDP in 2025-26 and 83.5% in 2026-27 before falling from 83.4% in 2027-28, to 83.2% in 2028-29 and 82.7% in 2029-30.’
So there you have it. Everything is alright, then. In fact, since we now know the future, we might as well just have a General Election tomorrow and vote Labour back in.
This is all completely absurd, for reasons which I think are obvious. (I will bet a bottle of Glen Scotia Victoriana against anyone foolish enough to take me on that the OBR’s forecasts for the deficit and financial debt in 2026-27, 2027-28, 2028-29 and 2029-30 will be different at the Budget in six months’ time.) But it says something important about our political class that they think it is a worthwhile endeavour to even go through the motions of producing this nonsense. This is that they are stuck in what Nassim Taleb usefully called the ‘ludic’ domain, and they fail to understand they are in fact in the realm of the ‘ecological’. What does this mean?
In Fooled by Randomness and The Black Swan, Taleb describes a common trap which people fall into when they are in charge of a large organisation or investment portfolio; they think themselves to be in a situation in which they understand all of the rules, and in which those rules always apply as they ought to. They imagine their context, that is, to be ‘ludic’ – akin to a game. And they correspondingly fail to realise that their context is frequently actually characterised by extreme, unforeseeable events: they are not playing a game at all, but are engaged in real, ‘ecological’, life.
Taleb then describes for us some examples of this problem, my favourite being that of the Mirage casino in Las Vegas. Casinos think of themselves as being very much embedded within the realm of the ludic: they know all the angles; they have all the tricks; they can calculate all the odds; they know how to make money; the house always wins. The owners of the Mirage imagined themselves therefore to be in a situation in which they could control all risk – their only potential losses, they thought, could come in the form of cheating or theft, and they could prevent that with surveillance, alarms, sophisticated training for dealers, and so on.
They were, therefore, totally unprepared for a series of three cataclysms and one-near cataclysm which struck in close succession. First, one of their star entertainers, Roy Horn, was mauled by one of his performing tigers during a show – with the result that the casino had to cancel their marquee attraction, with associated (uninsured) costs of $100 million. Next, it was discovered that an employee had inexplicably failed to file an essential tax document with the IRS for many successive tax years and the casino was liable to pay a huge (although undisclosed) fine as a consequence. And then the owner of the casino’s daughter was kidnapped, with the result that he was forced to use the casino’s cash reserves – breaking Nevada law – to pay her ransom. The additional near-cataclysm was a foiled plot by a disgruntled former employee who had been injured performing his duties and was offered what he considered to be a derisory settlement. He attempted to dynamite the basement pillars of the building and thereby demolish it in revenge but was, luckily, stopped.
The casino, in other words, thought itself to be in a stable environment in which it was secure against conceivable losses. It thought it knew where its risks lay and it considered itself to have insulated itself against them. Its operators did not realise that they were in an environment in which the potential existed for unconceivable losses to arise, from sources of unknowable and hence entirely unpredictable risk. They thought there were in the ludic sphere; they were actually in the ecological.
Almost all modern politicians suffer from the ludic malaise. The most striking illustration from recent years was of course the lockdown era, when politicians around the world fantasised that they could both forecast and control the spread of a virus through the population while blithely ignoring a vast array of other sources of risk (to children’s education, to cancer diagnoses, to the economy, to mental health, and so on). Nobody in the political class thought about the consequences of Working From Home becoming normalised or school absence becoming de-stigmatised and the problems that these phenomena would cause five years down the line, for instance – because they were the equivalents of Roy Horn’s rogue tiger; they were risks that just weren’t accounted for by the rubric of the game that was being played. And nobody thought through what future risks might be associated with the crossing of the Rubicon of lockdown itself and the changed relationship between State and society that would flow from that policy – because, again, it just too big, complex and diffuse a source of risk to compute ‘ludically’.
One could go on and on discussing lockdown as a case study. But perhaps the most curious example of the ludic fallacy in action is Project Cybersyn, the attempt during Salvador Allende’s presidency of Chile to run the Chilean ‘social economy’ by computers. The core of the conceit was that the so-called socialist calculation problem (i.e. that socialism is impossible because it lacks a way to operationalise the supply-and-demand function through a true price system) could be remedied if only the necessary calculations to ensure that supply met demand could be performed quickly enough.
Here is Stafford Beer, the British chief architect of Project Cybersyn, describing its operations in a speech given at Valladolid University in Spain in the early 2000s:
[A]ll the measures were made in real-time. No management information could be more than 24 hours out of date at any level, from the President down to the most local places. At each level there was disseminated regulation. All the measurements related to flowlines inside the Viable System Model, at each appropriate level of recursion. So by converting all measurements into uniform indices, and then filtering them continuously using Bayesian statistical theory, massive amounts of data could be processed, and presented daily to the appropriate level of management in the form of information…We do not want to engulf management with trivia; we want to isolate incipient dangers on which management can instantly act.
In other words, if you just produce ‘massive amounts of data’ and process it properly so as to get a real-time picture of the economy at any given moment, you can identify problems (the stereotypical East German toilet paper factory that is producing far in excess of demand, next door to a shoe factory that is producing far too little) the moment they arise and immediately do the necessary tinkering. And you can thereby make socialism actually work.
Beer was absolutely convinced of the efficacy of this system because he thought he had seen it work in real life – in October 1972, when a plot was carried out by small businesses in Chile (allegedly in cahoots with the CIA) to blockade supplies of necessaries such as food, cigarettes and petrol and thereby produce shortages to discredit Allende’s government. Beer describes the crisis being averted through a rudimentary form of networked computing: ‘Eight teams were self-organised, and within 24 hours messages were flowing, non-stop, round-the-clock, at the rate of 2000 Telexes a day.’ This allowed government ministers to get on top of the problem by getting a clear picture of what was happening from minute to minute and thereby remedy the shortages as they arose.
What Beer doesn’t mention, of course, is that no amount of Telexes or networked computers could have predicted or prevented the coup d’état which took place less than a year later and which saw Allende killed and Project Cybersyn mothballed. All of the Bayesian statistical theory and Viable System Models in the world would have been useless in preventing that event because it came from a source of risk that was not modelled – or really modellable. Project Cybersyn may have worked in a ludic iteration of the social economy (though I have my doubts). But in any event economies are not games. They are part of something bigger – the ‘economy’ is embedded in society – and that ‘something bigger’ contains tigers, kidnappers, rogue generals, and other sources of risk that simply cannot be known in advance.
The spectacle of Rachel Reeves spouting her statistics about the future is therefore a bleak one. It is indicative that, in their own way, our current crop of politicians are not altogether different to Stafford Beer – convinced that an economy is something that can be managed, modelled, and manipulated, and blind to potentially cataclysmic risk as a consequence. To Beer’s credit he never personally fell into the trap of making predictions or forecasts, and it was an important design principle of Project Cybersyn that it was a project of real-time measurement, not modelling or forecasting. But the principle is the same: a belief that it is possible at any given moment to grasp all that it is necessary to know and to have the confidence to manage ‘incipient dangers’ accordingly.
It is mildly terrifying that our political leaders should think in this foolish and reductive way. Reeves might have paused yesterday to reflect that in the last five years, if one includes lockdowns, the British economy has been through almost annual huge and unpredictable shocks: the lockdowns themselves in 2020 and 2021, the inflationary period of 2021-22, the Russian invasion of Ukraine in 2022, the Liz Truss ‘mini-budget’ (whatever its cause) later the same year, the buffeting of October 7th 2023 and the spreading of the conflict to the Red Sea, and the recent turmoil in the stock markets as a result of Trump’s tariffs.
And she might then have paused to reflect that if the next four years are half as eventful as the previous five (and there is no reason to think they will not be more so) then any forecast made today of where the economy will be in March 2026 is simply not worth the paper it is written on. Moreover, the making of such forecasts is in itself actively damaging, because it lulls decision-makers into imagining – like Mirage casino – that they have a handle on potential risk when in fact they have anything but. The appropriate approach to adopt in relation to future uncertainty is therefore one of prudence, not modelling. One insulates oneself against risk by protecting one’s assets insofar as it is possible to do so – and one helps the economy to grow by freeing it up. And it is those things that Reeves should be focusing on – not the imaginary meeting of targets years in advance of the fact.
But we all of course know why the rain dances will go on regardless: the illusion of certainty is felt simply to sell better than the truth, which is that nobody really knows what the future has in store and we should prepare accordingly. It suits Reeves’s purposes to be able to claim that her fiscal rules are ‘being met’ despite the fact that they literally cannot be met until we know what the state of play is in 2030; it makes her look as though she can exercise some level of control. In this sense the psychology is simple to understand. But it doesn’t make the truth any more appetising: our leaders are, in an almost literal sense, ludicrous. They are playing games. They imagine they can control the future when they can barely act in the present. But tigers wait to pounce from unexpected quarters.
This article (If You Want to Make God Laugh, Show Him Your Plan for Growth) was created and published by News from Uncibal and is republished here under “Fair Use”
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