The Age of Uncertainty

CAPITALISM VS. CORPORATISM
Edmund S. Phelps
ABSTRACT: There are, at present, at least two basic forms of market economy: one that tends to be open to innovative ideas; the other that tends to be more oriented to social services. The normative significance of these two “models” of market society—roughly speaking, the American and the Continental models—can best be appreciated by noticing that in the first model, entrepreneurship, and participation in the economy more generally, can be a major source of satisfaction for the entrepreneurs and employees, independently of their financial compensation. In the second model, the economy is primarily a means to the end of the goods it produces. Although the second type may be as suited to producing goods as the first type, it has fallen short—for reasons that economists now understand—in generating employee engagement and the satisfactions of exploration and self-realization.

AFRICANS LIKE MARKETS; WHY DON'T THEY FAVOR CAPITALISM?
Jeffrey Herbst
ABSTRACT: The recent study of African politics suggests that while African voters tend to be ambivalently positive about democratic reforms, they are even less supportive of market reforms. African states have, if anything, been ahead of their publics in instituting economic reforms. But African leaders have failed to explain or defend these policies to their electorates. This may reflect their own ambivalence—at best—about capitalism.

THE ILLUSION OF REGULATORY COMPETENCE 
Slavisa Tasic
ABSTRACT: The illusion of explanatory depth, which has been identified by cognitive psychologists, may play a prominent role in encouraging regulatory action. This special type of overconfidence would logically lead regulators to believe that they are aware of the relevant causes and consequences of the activities they might regulate, and of the unintended side effects of the regulatory actions they are contemplating. So, as with other cognitive biases, the illusion of explanatory depth is likely to lead to mistakes. And unlike the biases that have been the focus of so much behavioral economics, the illusion of explanatory depth is uniquely resistant to correction by those who are aware of it as a general problem and rigorously attempt to keep it under control.

FREEDOM FOR THE FUTURE: THE INDEPENDENT VALUE OF FREEDOM IN LIGHT OF UNCERTAINTY 
S. Phineas Upham
ABSTRACT: Both classical and modern liberals tend to treat freedom of choice as if it is intrinsically valuable—regardless of what is chosen. They fear that treating freedom as, instead, instrumental only to good choices might open the door to paternalism if a polity were to decide that people were making bad choices. A middle course would be to treat freedom as independently valuable. On the one hand, the independent value of freedom does not treat all choices as good as long as they are freely made. On the other hand, it does not reduce the value of freedom to the known, or predictable, good ends to which a free action may be conducive. Following from Hayek's acknowledgement that we are often ignorant of what the future may hold, freedom may have value because it will allow us to make decisions whose positive consequences cannot now be predicted.

COPING WITH THE BLACK SWAN: THE UNSETTLING WORLD OF NASSIM TALEB 
Mark Blyth
ABSTRACT: Nassim Taleb rightly points out that although people may acknowledge in the abstract that the world is uncertain, they still behave as if a large enough sample size is all that is needed to predict, and model, the future. He also rightly notes that ever-increasing quantities of information are relevant only in simple situations, such as in predicting the range of human height, but are misleading in more random arenas, such as financial markets. However, while Taleb decries the use of narratives for falsely forcing the facts to fit a given story, we need narratives in order to make sense of a complex world. Further, Taleb fails to take sufficient heed of the fact that human narratives themselves become objects that act on subjects in an ever-increasing web of complexity.

HISTORY IS NOT HISTORICISM 
Gene Callahan
ABSTRACT: Nassim Taleb's dismissal of history as based on the “narrative fallacy”—which reads our present knowledge of past events into our reconstruction of the past—is based on a fundamental misconception of what historians actually do. Historians do not, as Taleb presumes, try to infer general, predictive laws from “hard” facts, as do natural scientists; instead their aim is to discover the causes of unique historical facts among antecedent facts. This is no different, in principle, from “narrating” the cause of a supernova by referring to physical causes. The construction of universal historical laws would admittedly be a fool's errand, but that is not the task historians—as opposed to historicists—actually set for themselves.

BLACK SWANS IN POLITICS 
Robert Jervis
ABSTRACT: We like to believe that our world is regular, that we can predict it fairly well, and that we can control the risks we run. Nassim Taleb argues that we are fooling ourselves and that the course of history is driven by rare and extreme events, which he calls Black Swans. There is much to this, but scholars—at least in political science—are less oblivious to the problem than he believes. More thought needs to be given to hard issues of whether key events were anticipated, whether there were functional substitutes for events that are seen as turning points, the role of beliefs and expectations in Black Swans, and the dynamics that might explain unpredictability.

DISSECTING THE BLACK SWAN 
Jochen Runde
ABSTRACT: What constitutes a Black Swan? And under what conditions may a Black Swan be expected to arise? As Nassim Taleb describes it, a Black Swan is an event that displays three key properties, the two most important of which are that: (1) it is not even imagined as a possibility prior to its occurrence; and (2) it is in some way significant in its impact. It follows that whether or not an event counts as a Black Swan depends on the subjective imaginings of contemporaneous observers and their (usually implicit) criteria regarding what counts as a “significant impact.” Since there is nothing in determinism that precludes (1) and (2), Black Swans may occur even in a perfectly deterministic world. Nevertheless, if the world is indeed characterised by randomness, free will, emergence, and the like, then it is arguably more likely to throw forth events that display the above-mentioned properties. The same goes for various specific features of an increasingly interconnected global economy, which allowed Taleb (paradoxically) to forecast what was, for most of us at least, the great Black Swan of 2008.