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Simplicity: smart & stupid

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Summary:
David Gauke has been rightly praised for this: Rather than recognising the challenges of a fast-changing society require sometimes complex responses, that we live in a world of trade-offs, that easy answers are usually false answers, we have seen the rise of the simplifiers. This echoes a fine piece by Ian Leslie who says: The disease of politics today is not populism, so much, as simplism: the oversimplification of complex problems. I want to quibble, though. There are – to simplify! – two different types of simplicity, the stupid and the smart. Stupid simplicity is the sort that Gauke and Leslie are rightly decrying – the sort that denies the reality of complexity. This is the sort of simplicity that thinks there is a simple cause of our problems – be it immigrants, Joos or

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David Gauke has been rightly praised for this:

Rather than recognising the challenges of a fast-changing society require sometimes complex responses, that we live in a world of trade-offs, that easy answers are usually false answers, we have seen the rise of the simplifiers.

This echoes a fine piece by Ian Leslie who says:

The disease of politics today is not populism, so much, as simplism: the oversimplification of complex problems.

I want to quibble, though. There are – to simplify! – two different types of simplicity, the stupid and the smart.

Stupid simplicity is the sort that Gauke and Leslie are rightly decrying – the sort that denies the reality of complexity. This is the sort of simplicity that thinks there is a simple cause of our problems – be it immigrants, Joos or greedy bankers – or that there is a simple answer such as Brexit or higher taxes. Conspiracy theorists are often guilty of this simplicity.  So too are those who fail to see trade-offs, such as between democracy and prosperity: both sides of the Brexit debate are guilty of this.  

There is, however, a smart form of simplicity. It acknowledges that the world is complex and our cognition bounded, and so it looks for simple but empirically-based cognitive short cuts. Gerd Gigerenzer, for example, has shown (pdf) that simple rules of thumb can work well. And Robyn Dawes (pdf) and Paul Meehl (pdf) have both shown that simple statistical models often do better than professional judgments which try to explicitly acknowledge complexity. Sometimes, hedgehogs are better than foxes. Einstein

We see this in finance. If you want to know the chances of recession, it’s better to look at a simple indicator such as the yield curve than (pdf) at economists’ forecasts, which almost always fail to see recessions coming. And simple indicators such as the dividend yield, a moving average, foreign buying of US equities or the ratio (pdf) of consumer spending to wealth do a better job or predicting stock market returns than do the professionals.

Sometimes, even, simple policies do better than tricksy ones. Simply buying an index-tracker fund (pdf) means you will often do better than most fund managers who try to incorporate complexity into their stock-picking.

Which poses the question: can the same be said in politics? For me, one of the great virtues of a (high) universal basic income is that it recognizes that people often switch between unemployment, insufficient hours and low-wage work, and that there are huge deadweight costs in trying to assess needs. It’s a simple solution to complexity. In the same vein, simple institutions such as Robert Shiller’s macro markets might do a better job of insuring us against recessions than the impossibly complex job of forecasting them in advance. And part of the case for worker democracy is that dispersed wisdom can cope with complexity better than can top-down management.

My point here is that there are no general rules. Sometimes simple answers work moderately well: in a complex world, the best we can do is satisfice. But sometimes they don’t. All that matters is the evidence. It’s not good enough to pretend that there are simple answers, but equally, telling us that “it’s more complex than that” can be a false sophistication.

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