Government and politics Strategy

How should government manage big risks – pandemics to financial shocks?

Geoff Mulgan

Another Geoff Mulgan post, but a very different one from his reflections on the imaginary crisis, which spanned continents, philosophies and centuries. This one is a rigorously pragmatic account of how governments should manage risk effectively, using the UK as a case study and drawing on Geoff’s own experience of working in government.

There is much to reflect on in the post, but one of the points which comes through very clearly is the need to accept apparent short-term inefficiency, in the form of many kinds of excess capacity, in order to maximise overall long-term efficiency and effectiveness. There is of course an important debate to be had about how much of what kinds of capacity is worth paying for, but if that debate takes place in a political environment in which short-term cost efficiency is valued above all else, it is not likely to end in the optimal place.

Governments can’t avoid being the insurer of last resort for high impact risks. It matter to all of us that the premiums are kept paid up.

Preparing for risks is costly. It takes people and resources away from immediate priorities. But ultimately protecting people from risk is the heart of what government is for, and good bureaucracy manages risk systematically. Indeed, times like this remind us why boring, competent, reliable and forward-looking bureaucracy is so vital to helping us live our lives freely.  They worry so that we don’t have to.

Futures Strategy

A Failure, But Not Of Prediction

Scott Alexander – Slate Star Codex

At one level, this is about why we didn’t see COVID-19 coming. At another, it is using that as a case study of a whole class of decisions which depend on making judgements about uncertain futures – which is to say most of the ones that matter. The problem is not a shortfall in prediction skills, which is just as well because prediction is a tricky game. It is instead presented as a shortfall in probabilistic reasoning skills, which in turn relates to the classic risk management scales of likelihood and impact. Low likelihood, high impact events matter a great deal – which is why the insurance industry exists. If there is a 10% chance of an imminent global pandemic, it is well worth investing in mitigation, even if it turns out that the pandemic fizzles out – which is why it made sense to stockpile large quantities of flu vaccine in 2009 which turned out not to be needed.

But, slightly less explicitly in the article, there is another step which is essential before any of this becomes useful, as opposed to merely interesting. Probabilistic reasoning can be a good pointer to action, but it has succeeded only if appropriate action is in fact taken. So perhaps those showing greatest wisdom back in January and February were not either those who dismissed what was happening in Wuhan as far away and unimportant, or those who jumped immediately to proclaiming imminent global catastrophe – but those who saw from an apparently moderate risk, an immediate need to take precautionary actions.

There is, of course, a political dimension to this as well. Back in 2009, the then French Health Minister was heavily criticised for the money spent – money apparently wasted – on one of those vaccine stockpiles. She is quite rightly unapologetic, but it’s another reason why understanding the concept of risk and its mitigation is important. As Alexander observes,

Uncertainty about the world doesn’t imply uncertainty about the best course of action!