Towards a new narrative

Sing for our time too, or what Homer can teach us about complexity

by Patrick Love, OECD Public Affairs and Communications Directorate

The September 2016 Workshop on Complexity and Policy organised by the OECD New Approaches to Economic Challenges (NAEC) team along with the European Commission and the Institute for New Economic Thinking (INET) included a discussion about how you build a narrative around complexity. As one participant pointed out, “complexity economics” isn’t the most thrilling of titles, except (maybe) to complexity economists. But “narrative” was one of the keywords of the discussions, along with “navigating” complexity. If you add to this Lex Hoogduin’s plea for modesty in his article on Insights and during the debate, I think we could learn something from an expert on narrative, navigation, and modesty: Homer.

The Iliad and Odyssey start with similar requests to the Muse to tell the tale of the hero, but with one striking exception. In The Iliad, she is asked to tell of the anger of Achilles, and the epic that follows is a more or less chronological account of ten days at the end of the Trojan War. In The Odyssey on the other hand, the poet suggests that the goddess start the tale wherever she thinks is best. One reason could be that, in our terms, The Iliad is a linear account, where one event causes and leads to the next, while The Odyssey is complex, jumping all over the place in space and time, with events far apart influencing each other, often in unintended ways.

Where you start a complex narrative determines what you describe and to some extent how you describe it. If, for example, you start your explanation of the financial crisis with the collapse of Lehmann Brothers, you will tell the story one way. If you start a few years earlier with market deregulation, the story will be different. Go back to the end of unlimited liability of stakeholders and yet another plot and set of characters become possible. Wherever you started, you would tell the true story, but not the only story. So in telling a complex story, you have to first decide what you want the audience to remember, and then decide what combination of the limitless elements available would best allow them to understand the issues and agree with a course of action.

Another lesson we can learn from Homer is that in a non-complex telling, there can be a “God’s-eye view” of the narrative, as when Achilles contemplates the shield made for him by the god Hephaestus. In The Odyssey, the narrator doesn’t have this knowledge, and is in fact part of the story himself, influencing its outcome. Eric Beinhocker of INET, who co-organised the NAEC Complexity workshop, relates this to Gödel’s incompleteness theorems, arguing that it may be impossible for an agent embodied within the system to access information an agent outside the system with a God’s-eye view would have.

Once you have decided what you want to say and selected what you are going to use to say it, there remains the question of how to say it. Policy experts, like experts in other fields, often defend their poor communication by explaining that the subject is complicated and shouldn’t be dumbed down. Here’s an extract from Einstein’s critique of Newtonian cosmology in Relativity: The Special and General Theory: “If we ponder over the question as to how the universe, considered as a whole, is to be regarded, the first answer that suggests itself to us is surely this: As regards space (and time) the universe is infinite. There are stars everywhere, so that the density of matter, although very variable in detail, is nevertheless on the average everywhere the same. In other words: However far we might travel through space, we should find everywhere an attenuated swarm of fixed stars of approximately the same kind and density.”

Practically any adult or young person who can read can understand Einstein’s point, however complicated the subject. Here by way of contrast is the OECD explaining a fundamental concept in economics: “…the relative cost differences that define comparative advantage, and are the source of trade, disappear once one reaches equilibrium with free trade. That is, the two countries in the trading equilibrium in Figure 1.2 are both operating at points on their PPFs where the slope is equal to the common world relative price. Thus comparative advantage cannot be observed, in a free trade equilibrium, from relative marginal costs.” Can you tell from this if we’re for or against free trade?

It’s striking that in so many domains, the greatest experts are the greatest advocates for simplicity. David Hilbert set the agenda for 20^th century mathematics at the 1900 International Congress of Mathematicians in Paris in a paper on 23 unsolved problems. Hilbert supported the view that: “A mathematical theory is not to be considered complete until you have made it so clear that you can explain it to the first man whom you meet on the street”. Maths genius Alan Turing was even more provocative, claiming that “No mathematical method can be useful for any problem if it involves much calculation.” (Turing wrote a paper on computability without using any equations, basing his explanation on puzzles sold in toyshops.)

We can learn a final lesson from Homer in the character of his heroes. Achilles is arrogant, immature, impulsive, self-centred (“the best of the Achaeans”, making you wonder what the rest of them were like). He’s strong and is good at killing people but ends up dead. Ulysses is clever and is good at persuading people. He is modest and he listens to advice. He worries about others. And he navigates his way back to Ithaca and Penelope. In a complex world, today or as described by Homer, you will achieve more through strategy and resourcefulness than by brute force. The poet doesn’t just ask the goddess to “start from where you will”, he asks her to “sing for our time too”.

A new narrative for a complex age

by Eric Beinhocker, Executive Director, The Institute for New Economic Thinking at the Oxford Martin School

If 2008 was the year of the financial crash, 2016 was the year of the political crash. In that year we witnessed the collapse of the last of the four major economic-political ideologies that dominated the 20^th century: nationalism; Keynesian pragmatism; socialism; and neoliberalism. In the 1970s and 80s the centre right in many countries abandoned Keynesianism and adopted neoliberalism. In the 1980s and 90s the centre left followed, largely abandoning democratic socialism and adopting a softer version of neoliberalism.

For a few decades we thought the end of history had arrived and political battles in most OECD countries were between centre-right and centre-left parties arguing in a narrow political spectrum, but largely agreeing on issues such as free trade, the benefits of immigration, the need for flexible efficient markets, and the positive role of global finance. This consensus was reinforced by international institutions such as the IMF, World Bank, and OECD, and the Davos political and business elite.

In 2008 that consensus was rocked, last year it crumbled. Some will cling on to the idea that the consensus can be revived. They will say we just need to defend it more vigorously, the facts will eventually prevail, the populist wave is exaggerated, it’s really just about immigration, Brexit will be a compromise, Clinton won more votes than Trump, and so on. But this is wishful thinking. Large swathes of the electorate have lost faith in the neoliberal consensus, the political parties that backed it, and the institutions that promoted it. This has created an ideological vacuum being filled by bad old ideas, most notably a revival of nationalism in the US and a number of European countries, as well as a revival of the hard socialist left in some countries.

History tells us that populist waves can lead to disaster or to reform. Disaster is certainly a realistic scenario now with potential for an unravelling of international co-operation, geopolitical conflict, and very bad economic policy. But we can also look back in history and see how, for example, in the US at the beginning of the 20^th century Teddy Roosevelt harnessed populist discontent to create a period of major reform and progress.

So how might we tilt the odds from disaster to reform? First, listen. The populist movements do contain some racists, xenophobes, genuinely crazy people, and others whom we should absolutely condemn. But they also contain many normal people who are fed up with a system that doesn’t work for them. People who have seen their living standards stagnate or decline, who live precarious lives one paycheque at a time, who think their children will do worse than they have. And their issues aren’t just economic, they are also social and psychological. They have lost dignity and respect, and crave a sense of identity and belonging.

They feel – rightly or wrongly – that they played by the rules, but others in society haven’t, and those others have been rewarded. They also feel that their political leaders and institutions are profoundly out of touch, untrustworthy, and self-serving. And finally they feel at the mercy of big impersonal forces – globalisation, technology change, rootless banks and large faceless corporations. The most effective populist slogan has been “take back control”.

After we listen we then have to give new answers. New narratives and policies about how people’s lives can be made better and more secure, how they can fairly share in their nation’s prosperity, how they can have more control over their lives, how they can live with dignity and respect, how everyone will play by the same rules and the social contract will be restored, how openness and international co-operation benefits them not just an elite, and how governments, corporations and banks will serve their interests, and not the other way around.

This is why we need new economic thinking. This is why the NAEC initiative is so important. The OECD has been taking economic inequality and stagnation seriously for longer than most, and has some of the best data and analysis of these issues around. It has done leading work on alternative metrics other than GDP to give insight into how people are really doing, on well-being. It is working hard to articulate new models of growth that are inclusive and environmentally sustainable. It has leading initiatives on education, health, cities, productivity, trade, and numerous other topics that are critical to a new narrative.

But there are gaps too. Rational economic models are of little help on these issues, and a deeper understanding of psychology, sociology, political science, anthropology, and history is required. Likewise, communications is critical – thick reports are important for government ministries, but stories, narratives, visuals, and memes are needed to shift the media and public thinking.

So what might such a new narrative look like? My hope is that even in this post-truth age it will be based on the best facts and science available. I believe it will contain four stories:

• A new story of growth.

• A new story of inclusion.

• A new social contract.

• A new idealism.

This last point doesn’t get discussed enough. Periods of progress are usually characterised by idealism, common projects we can all aspire to. Populism is a zero-sum mentality – the populist leader will help me get more of a fixed pie. Idealism is a positive-sum mentality – we can do great things together. Idealism is the most powerful antidote to populism.

Economics has painted itself as a detached amoral science, but humans are moral creatures. We must bring morality back into the centre of economics in order for people to relate to and trust it. Some might question whether this is territory the OECD should get into. But the OECD was founded “to improve the economic and social well-being of people around the world” and provide a forum for governments to “seek solutions to common problems.” These issues will dramatically impact the well-being of people around the world for decades to come and are certainly a common problem.

So my hope is that the OECD will continue to play a leadership role, through NAEC and its other initiatives, on new economic thinking, not just in a narrow technical sense, but in the broad sense of helping forge a new vision that puts people back at the centre of our economy. We are truly at a fluid point in history. It could be a great step backwards or a great step forwards. We must all push forwards together.

Telling the whole truth in a post-truth environment

by Gabriela Ramos, OECD Chief of Staff and Sherpa to the G20

In 2016, surprisingly for many, Oxford Dictionaries chose as their Word of the Year “post-truth”, an adjective defined as: “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. This runs contrary to the main tenet of the OECD, the “house of best practices” whose works and analysis depend on high quality statistics and solid empirical evidence. So how did we get here, and what does it means for our democracies?

As the OECD’s G20 Sherpa, I witnessed the evolution of what was originally a financial crisis into an economic crisis, and more recently, after eight years of low growth and very slow recovery, into a political crisis defined by the lack of trust of people in the institutions that we built over so many decades. It is also clear that the values of openness, mutual assistance, and international integration on which the OECD was founded are being questioned.

One reason for this is that while we have told “the truth and nothing but the truth”, we have not told “the whole truth”. Like people gradually enclosing themselves in media silos and social networks that only give them news and views they are comfortable with, we have been happy to rely on economic models that work with comfortingly quantitative facts on GDP, income per capita, trade flows, resource allocation, productivity, and the like. These standard economic models did not anticipate the level of discontent that was created by the skewed outcomes that they were delivering, and that have prevailed for so many years.

Our “truths” did not capture very relevant dimensions that inform people’s decisions (including recent political decisions), and particularly those that are intangible or non-measurable concepts. This is why such important issues as justice, trust or social cohesion were just ignored in the models. Indeed, neoliberal economics taught us that people are rational, and that they will always take the best decisions according to the information they have to maximise utility. And that accumulation of rational decisions will deliver the best outcome on the aggregates. In this model there is no room for emotions or for concepts like fairness or resentment.

Populism, the backlash against globalisation, call it what you will, recognises these emotions. We should do so too, especially since we actually have the data and facts that gave rise to these feelings in the first place. I am referring to the increased inequalities of income and outcomes that almost all the OECD economies experienced even before the crisis and that the crisis made worse.

If we go beyond averages and GDP per capita and look at the distributional impact of our economic decisions for instance, the picture is devastating. Up to 40% of people in the lowest tenth of the income distribution in OECD countries (and 60% in my own country, Mexico) have not seen their situation improve in the last decades. On top of that, lower income groups accumulate disadvantages, as their initial condition does not allow them to access quality education and health care or fulfilling jobs, while their children are facing a sombre future with less chance of improving their lot. At the OECD we have confirmed this. Our data show that if you are born into a family whose parents did not reach higher education, you have four times less chance of reaching middle school. You may encounter more health problems, and have less fulfilling jobs and lower wages. You are trapped in a vicious circle of deprivation.

Even the loosely-defined middle classes in OECD countries are fearful for their future and that of their children. They too feel betrayed and are angry that despite working hard, saving and doing everything else that was supposed to guarantee a good life, they see the fruits of success being captured by a tiny elite while they are left behind. No wonder they are attracted to solutions that resonate with their emotions and seem to give them some hope.

What should an organisation like the OECD, committed to evidence-based policy advice, do in this context? First, we must speak out when there is a deliberate misrepresentation of the facts and realities. Even if the people delivering these lies are not aware of it, it does not discharge them from the responsibility to check the evidence. Presenting a view that is based on lies by omission or on purpose should be recognised as such and not go unchallenged in the “post-truth” environment.

Second, instead of defending our selection of facts, recognise that they were also biased, and that in many instances they represented preconceived notions of how the economy functions that have been proven wrong. To rebuild trust in the facts we produce to explain social and economic phenomena, we must ensure that they really represent the whole reality and provide workable solutions. We may need to start, as the Chief Statistician of the OECD has said, “to measure what we treasure and not treasure what we measure”.

Most of all we need to understand that economic challenges are not just economic. That is why the OECD’s New Approaches to Economic Challenges (NAEC) initiative promotes a multi-dimensional view of people’s well-being, with tangible and intangible elements (including emotions and perceptions) all worthy of consideration. The NAEC agenda is ambitious, calling for a new growth narrative that recognises the complexity of human behaviour and institutions, and calls on sociology, psychology, biology, history, and other disciplines to help write this narrative and build better models to inform economic decisions.

We thought there was only one truth, and we promoted it without considering that it may have had faults. We defined reality in certain ways and ignored critics to the models. We strongly, and mistakenly, believed markets were the whole answer.

I think that as economists and policy makers, we should remember that in The Wealth of Nations, Adam Smith was drawing conclusions from not just the methodology, but also the ethics and psychology he explored in The Theory of Moral Sentiments. We may need to enrich our models to ensure that the outcomes respond to people expectations, and help us to recover the most important ingredient in our societies, which is trust.