The IMF has published an update of its interesting uncertainty index. Noone will be surprised to find that the Covid-19 pandemic and the presidential elections drove uncertainty up, but the real scoop in the chart is the overall slant of the curve we can construct:
If the upward slope of the curve suggests that independent of the actual events the world is getting more and more uncertain. Think about that for a moment and think about what this implies going forward – and we can use the chart comparables to ask a few interesting questions.
(i) If this trend continues, we are likely to experience an event that makes Covid-19 feel like the Iraq War in terms of the sum total social and economic uncertainty generated — what kind of event could that be?
(ii) If uncertainty is growing linearly, are there points we should watch out for where this linear growth in uncertainty lead to phase shifts in society overall?
(iii) What is the root cause of this increased uncertainty?
On the last question we could offer the hypothesis that increased social, technical and economic complexity is driving uncertainty, and so it seems unlikely to reverse course anytime soon, unless we suffer a great societal collapse – what anthropologist Joseph Tainter calmly refers to as “rapid simplification”.
The other observation is that not only does uncertainty seem to grow over time – it also seems to subtly change in duration and aggregate. This is no surprise if you believe some risks are multiplicative, but still – it is interesting to imagine how the uncertainty in the graph may be the aggregate result of many small, compounding uncertainties.
All in all a good reminder to upgrade our reference classes to a more uncertain state.