John Kay is a British business economist who has written many books. Mervyn King is a former governor of the Bank Of England. About four decades ago, they wrote a book called the ‘British Tax System’ which became a bestseller. This is their second jointly authored book.

It is a good book as such books go. But it is overly long. Messrs Kay and King have taken over 500 pages to say something that could easily have been said in 200 pages, namely, that we don’t know what will happen in the future. Que sera sera.

If you have the time, say, about an hour every day for about two weeks, you should give the book a shot. You will, at the very least, see how many different ways there are to come to the proposition that the future is unknowable.

The central thesis of the book is that you can’t take an informed decision today about some event that will happen in the future. They then go on to say that decisions about the future based on likelihood or probability are pointless because there is no way you can assign a probability that will take into account every possible contingency.

The corona virus rather proves their point but, then, if you can’t take a rational decision based on probabilities, what do you do? You may as well ask the parrot man on the pavement outside the station or go to an astrologer or read Tarot cards or tea leaves. The problem is not merely that the future is unknowable but it is that despite that people want to know what’s going to happen.

This, I think, is the central weakness of the book. It doesn’t offer a workable alternative. It is not enough, after all, to say no you can’t know if people want to know.

In the end, to intellectualise their arguments, they come up with a rehash of Frank Knight’s 1922 distinction between risk and uncertainty. Knight, an American, was one of the finest economists of his era.

He said while risk can be controlled, uncertainty can’t. For example, if you drive carefully you can control risk. But you can’t control uncertainty such as when a fool suddenly runs across your car.

Subjective probability

However, the authors do take the reader through a nicely explained survey of what different Western thinkers have had to say about uncertainty. They discuss three major contributors to the way thinking about it has evolved.

There is Frank Knight, of course, but also John Maynard Keynes. Both were proponents of the view what distinguishes risk from uncertainty, that is, between what can be reasonably countered or allowed for, and what can’t, regardless of anything anyone could do about it.

The authors then let out a plaintive bleat about an English mathematician from Cambridge University called Frank Ramsey. He died at the age of 26 of post-surgery complications.

Ramsey proposed that it wasn’t necessary to arrive at a probability of something happening on the basis of, say, a frequency distribution. It was enough, in a sense, if you thought it would happen.

His theory said that you don’t need to toss a coin a hundred times to conclude that the probability of its turning up heads (or tails) is half. You can simply assume it to be half and carry on from there, which is what most people do anyway.

One of the examples they give is of the probability that Osama bin Laden was in the compound. No one really knew for sure but the CIA may have said it was 95 per cent sure even though there was no frequency distribution to confirm this.

This has come to be known as subjective probability and it pretty much put paid to Knight and Keynes. Kay and King don't seem at all happy about this.

So then?

What is the broad takeaway then from such a fat book? You can either dip into the books listed in the 38 page bibliography or look up the three pages of ‘Further Reading’ or both.

In case that isn’t very appealing, I’d say that the main message of the book is in the appendix. Sadly, they have devoted just nine pages to it. It needed more discussion.

In it the authors finally get into the core propositions of decision-making under uncertainty, a subject that some of the greatest economists and mathematicians have analysed to the bone and the marrow.

Silly obiter

To conclude, I must point out something that is pointlessly offensive. I hope the Indian publisher will take note.

On page 432 of the Indian edition, which I have, they approvingly quote Barack Obama who said success needs both individual initiative and working with others. That’s fine, because it is such a trite point.

Then, quite needlessly, they say the great Indian mathematician Srinivasa Ramanujam — after calling him a destitute, which he most emphatically was not — would not have had the success he had without the backing of GH Hardy the great Cambridge mathematician who invited Ramanujam to Cambridge.

“Without Hardy he would never have gained acceptance for his ideas amongst the community of mathematicians.”

That surely says more about the community of mathematicians they are referring to than of the Obama proposition.

The reviewer is a senior Delhi-based journalist