Irrational Economist_ Making Decisions in a Dangerous World - Erwann Michel-Kerjan [129]
3. I’m disappointed that I didn’t co-write Smart Choices, with Ralph Keeney and John Hammond, thirty years before we did in 1999, because it features the certainty case of decision, which logically should have preceded the uncertainty case featured so prominently in my other books. Decision analysis started in the 1960s and 1970s, concentrating on problems with uncertainties and probabilities, rather than on problems with multiple conflicting objectives, which could have kept us occupied in the early days of the field’s development. Looking at what we wanted for a choice of a career, for example, was not really the central problem of decision analysis as it developed in the last quarter of the twentieth century.
THE INTERDEPENDENCY OF SURPRISE BAD OUTCOMES
This issue of decision frameworks strongly affects public policy and the business world. I do not think that policy makers in Washington, D.C., and elsewhere in the world are sufficiently trained in the decision sciences. Moreover, the field itself is not used enough in terms of discourse, in terms of structuring arguments.
The financial crisis of 2008-2009 is a good illustration. I think what happened is that a lot of people were making financial decisions based on classical utility theory, looking at individual attitudes toward risk, and acting accordingly. But they didn’t bring into their analysis an awareness that if there is a surprise on the lower end in one problem, there may be a causal relationship with having a surprise at the lower end in other problems. The problems themselves are treated independently, but they are really dependent. Having a bad outcome in one makes it more likely that you are going to have a bad outcome in another. When the problems are analyzed, they are analyzed as completely independent. I think the interdependency of surprise bad outcomes is something that has to be studied much more, as highlighted by Erwann Michel-Kerjan in his chapter in this book.
A PARADIGM SHIFT FOR ACADEMICS: FROM PROBLEM SOLVERS TO PROBLEM INVENTORS
I myself have not kept up enough with the details of different financial instruments to be able to judge what the responsibility of the decision sciences could have been in averting some of the dilemmas surrounding this recent financial crisis. But whether one considers international negotiations, financial crises, or the management of global risks more generally, I would contend that the way decision analysts have approached these issues could be much improved.
Usually, decision analysts address the problems that are given to them and they have to try to solve them. But much more fundamentally, the analysts, instead of being just problem solvers, should also be problem inventors. They need to make the pie bigger—it is too restrictive in terms of the things that decision analysts are called upon to do. They also have to become much more proactive in the choice of problems that they work on. To solve the as-yet-unforeseen problems of the world they must become problem envisioners. For example, we could have researchers looking at what could happen in the Middle East twenty-five to thirty years from now. What if we had an institution in Crete, Cyprus, or Malta, where researchers from the Middle East could come together to think inventively about how they might collaborate and cooperate to overcome certain problems?
Today’s resolutions of international disputes will determine how and when future problems will be negotiated. The lure of potential joint gains from future negotiations should be reflected in the Pareto frontiers of the negotiation problems of today. If some countries are having difficulties resolving their current differences, perhaps they should speculate about