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Are we living in an uncertainty epidemic?
Why everything feels confusing right now—and why it matters.
Looking back in time, we can identify defining features of decades with relative ease. The 1950s, for example, were defined by post-war economic recovery, the baby boom, and fear about communism and rock and roll. The 1960s were a time of cultural clashes with peace-loving hippies, the Civil Rights Movement, and political assassinations. The 1970s saw an oil crisis with stagflation and widespread unemployment, but also great advances in biochemistry and computing. These movements swayed the lives of our parents and grandparents and shaped the challenges they faced in everyday life.
What’s the defining feature of our time, the 2020s? It’s hard to see the direction of history when you’re in the middle of it, but there are people whose job it is to provide an answer. One of those people is the economist Kristalina Georgieva, Managing Director of the International Monetary Fund. She oversees efforts to secure financial stability, promote economic growth, and reduce poverty for everyone, so she concerns herself with the most important trends in the world.
Shortly after Georgieva took office, on January 17th, 2020, she was a guest speaker at the Peterson Institute for International Economics in Washington, D.C. (a 10-minute bike ride from my house). She took the podium with authority, thanking the organizers, praising a recent report of theirs, and gaining a few laughs from her colleagues in the room. She then opened her talk by listing several catastrophic events that were throwing wrenches into her agenda of stability:
We have the forest fires in Australia with catastrophic impact.
We have tensions in the Middle East that have been a very troubling start of the year. [They] receded some, but nonetheless.
We had a signing of a trade agreement that is certainly good news, but is not sorting out all the complexities of issues between these two large economies [the U.S. and China]. And for sure is not resolving the fundamental questions that need addressing in the trade system so it can succeed in the future.
If I were to mark the words that come to my mind at the start of this new decade, it is increased uncertainty.
Looking back, we can see the irony in Georgieva’s speech. It was delivered just three days before the first case of COVID-19 was discovered in the United States. The largest public health crisis in recent history was about to shake up the economy more than she could have ever foreseen. If she was right about the importance of her central theme, uncertainty, she had little idea of its magnitude.
Why care about uncertainty?
If uncertainty really is a defining feature of our time, we should all be paying attention. Uncertainty messes with almost everything we care about.
One example is politics. A large body of research in political psychology suggests that uncertain times cause people to crave clear-cut explanations of societal issues, which they find on the polarized flanks of the political spectrum. Particularly vulnerable to this are people with high intolerance of uncertainty and other forms of cognitive rigidity. When I studied this question using the tools of neuroscience, I found that people with higher intolerance of uncertainty even have more polarized brain responses to ambiguous political information. With a hotly contested U.S. Presidential election scheduled for 2024, growing uncertainty could push the United States further into polarization and civil strife.
Another example is mental health. Uncertainty drives down economic activity, which means rising unemployment, debt, and poverty. Although a recession doesn’t necessarily cause a wholesale worsening of mental health for all, anyone who individually suffers from these direct economic impacts has a much increased risk of developing mental illness and suicidal behavior. Not surprisingly, the U.S. Department of Health and Human Services lists economic stability as the first of five core “social determinants” of health in their Healthy People 2030 initiative. Since mental illness has been on the rise, uncertainty may be an important intervention point in years to come.
There’s also a more detailed story about uncertainty and mental health. Even if you don’t lose your job in a recession, greater uncertainty means less control over your life, and the lack of control is a big part of the relationship between poverty and mental illness. People are vulnerable to anxiety and depression when they’re unsure whether they’ll be able to house or feed their families next week. Looming uncertainty also forces people to develop complex ways of sustaining their existence. The world’s poorest people, for instance, develop complex financial portfolios to meet their daily needs, juggling many parameters (borrowing, lending, saving, investing) to maintain a financial equilibrium that could collapse any day. The chronic stress that follows from these worries and behavioral demands is, in the long run, harmful for neural and mental health.
Given all this, it’s vitally important to know whether the world is actually getting more uncertain in this decade and how this will affect our daily lives. Answering this question is not straightforward and requires information from many different fields of study as well as from lived experience—making it an ideal topic for this newsletter. So in this new series of posts entitled The uncertainty epidemic, I want to compile a rich understanding of uncertainty in the 2020s, built up of diverse viewpoints from the sciences and beyond.
Here, to start, are three perspectives that seem particularly relevant.
The balance of money
Let’s first turn to Georgieva’s own field: macro-economics. As far as I understand, there is no one objective measure of economic uncertainty. But there are expert economists whose job it is to make judgments of macro-economic uncertainty based on what they read about stock markets, exchange rate policies, industrial innovation, and so on. Some of these people work at the Economist Intelligence Unit and report their findings four times a year. And what’s great for us is that a team of researchers have counted the number of times the word “uncertainty” (and variants) appears in these reports since 1990. They then computed the quarterly average “uncertainty” word frequency per country report weighted by the countries’ GDP. Here’s the resulting figure:
This picture is fascinating to me because it spans my entire life, from the spring of 1990 to the present day. Across these thirty-three years, three key patterns appear. First, the 1990s stand out as a very calm era. In fact, since I became an adult during the 2008 financial crisis, there hasn’t been a single quarter with uncertainty as low as the average in the first ten years of my life. Washington Post columnist George Will has fittingly called the 1990s a “holiday from history“ that ended abruptly with the 9/11 attacks. Second, ongoing highs and lows in global economic uncertainty follow the main political moments of recent history, such as the Iraq war and Brexit. And third, despite these fluctuations, we can make out a consistent trend toward greater average uncertainty since the year 2000. In the eyes of the Economist Intelligence Unit, the world economy is becoming more and more uncertain.
To be fair, starting the graph in 1990 may be misleading. The decade to the left of the Y axis, the 1980s, saw its own share of uncertainty with economic trouble, the Chernobyl disaster, and fear of nuclear war. To account for that, here’s another way to look at macro-economic uncertainty that provides a longer timescale: economic policy uncertainty. Three economists constructed this measure by counting articles in 6 major newspapers that mentioned uncertainty, the economy, and policy terminology (e.g. “White House”). It goes back to the start of the previous century:
This graph suggests that economic policy uncertainty was once as high as it is today, notably around the Great Depression and the Second World War. But it also shows that the 1980s, with all their flaws, were not nearly as uncertain as recent years. Indeed, economic policy uncertainty seems to have consistently drifted upwards since an all-time low around 1960. And this is not a meaningless measure either: further on in their paper, the economists show that economic policy uncertainty is historically associated with stock price volatility, reduced investment, and unemployment.
In sum, I’m not saying that the world is more uncertain in the 2020s than it has ever been. But since two-thirds of the world was born in or after 1980, the 2020s are likely the most uncertain period most of us can remember. The majority of the world population has never experienced living in a world as elusive as ours.
The balance of powers
As the previous plots clearly show, peaks and troughs in economic uncertainty are tied to geopolitical events. So how stable is the balance of powers in today’s world?
One way to answer this question is to investigate data on interstate conflict. Among gorillas, a young male may fight for dominance when the reigning silverback is growing weaker. In much the same way, human armed conflict can signal a shift in the balance of powers between nations. According to veteran economics blogger, we are currently witnessing the end of Pax Americana: a long period of United States and NATO dominance on the world stage. After the Cold War ended (again, 1990), we experienced a protracted period of relative peace, but this is coming to a close—and the result is felt in Ukraine and Israel today.
Here’s relevant data as compiled by the Uppsala Conflict Data Program in Sweden:
The graph shows the 2022 uptick in worldwide deaths in state-based conflicts, driven mainly by the wars in the Ukraine, the Western Sahara region, and Ethiopia. The data from 2023 is not in yet, but will be compounded by the deaths in the recent conflict between Israel and Hamas. So just as with economic uncertainty, uncertainty around geopolitical power seems to be on the rise in the 2020s.
The balance of life
Finally, let’s consider why countries would desire dominance in the first place. Animals typically fight to gain access to territory, food, or mates, all of which are limited and necessary for generating offspring. In the same vein, human conflict may be triggered by a precarious supply of vital resources: inhabitable land, water, minerals, and so on. Here’s from a 2012 United Nations report:
The exploitation of high-value natural resources, including oil, gas, minerals and timber has often been cited as a key factor in triggering, escalating or sustaining violent conflicts around the globe. Furthermore, increasing competition over diminishing renewable resources, such as land and water, are on the rise. This is being further aggravated by environmental degradation, population growth and climate change. The mismanagement of land and natural resources is contributing to new conflicts and obstructing the peaceful resolution of existing ones.
It’s noteworthy that there is some academic debate on the question whether resource scarcity can actually trigger inter-state war. But it is undeniable that with a changing climate and a growing population, many basic resources will become more scarce in the near future. Experts are already predicting mass climate migration toward Western countries, which will only be met by growing anti-immigrant sentiment. The way we handle our planet, therefore, shapes the amount of conflict we can expect.
A way forward was proposed by economist Kate Raworth in her 2017 book Doughnut economics. Raworth identified lower and upper limits to human activity based on a “social foundation” (minimal water, food, health, etc. for every person) and an “ecological ceiling” (maximal CO₂ emissions, pollution, etc. for the planet). In between these limits, there lies a “safe and just space for humanity”. The idea is that if every society can achieve a steady state that sufficiently cares for every human while avoiding too large a toll on the environment, we will be able to secure the good life for all well into the future.
Since the donut’s rise to prominence, cities and countries around the world have attempted to measure the various dimensions of the upper and lower limits using a variety of indicators from economics, ecology, and public health. This work allows us to also track how countries have been doing over time. If excessive demands on the environment can spark conflict, and conflict triggers economic uncertainty—then what can we say about our demands on the environment in the past 30 years and into the future?
An international team of researchers published their answer in Nature Sustainability last year. Here’s a key graph from that paper:
In this figure, the percentage of countries that successfully avoid asking too much from our planet (i.e. stay under the ecological ceiling) is plotted on the vertical axis. Despite all recent initiatives to curb climate change, this number has actually decreased since 1992 (black lines). The green lines represent the predicted number following a variety of scenarios; most likely, we will do even worse in years to come. This is matched by other signs of growing ecological uncertainty, including a growing risk of zoonotic diseases like covid-19 and significant crop losses as early as 2030. If our demands on the planet keep growing, coveted resources will become more scarce, crises will become more likely, and uncertainty will rise as a result.
Given the data summarized above, I think it’s fair to be alarmed. But it would not be helpful to stop there. Let’s think through what growing uncertainty will mean for us who have to live it.
I think we’re facing a fascinating challenge. Instinctively, uncertainty makes us freeze: we want to hide away and roll into a little ball, protecting ourselves from the outside world like a pangolin. But the big questions of our time require great courage and creativity to resolve: we need to approach history, not avoid it. How can we overcome our fear in the face of uncertainty?
This post is already too long (sorry), so let’s save potential answers for a future one. For now, I’m curious to hear what you see as the most important way to deal with growing uncertainty in the 2020s. Let me know in a comment or email and I’ll add it to the series.
Next week: another Educated Guess.