Our Need for Fictions.
We like to think that all problems have solutions. The reasons may be complex and difficult to grasp, but our faith is that if we understand the causes, we can cure the effects.
And the simpler answers are better. The appearances of things are often confusing, yet if we dig deeply enough we will get to the core of truth that will give us more control over events. But that belief is getting harder and harder to sustain.
Investors, for example, used to try to focus on "the fundamentals" of a stock to determine if it would grow in value. Was the company well capitalized? well managed? strategically positioned in the market? Brokerage firms used to employ analysts to study such factors in order to advise their customers. But, then, economists looked at the data more closely and discovered that no analyst actually out performed the market systematically. The best an investor could do was to diversify, assemble a large basket of securities that covered the range of possibilities. That discovery led to the birth of index funds. They don't solve the problem for investors, but they make it easier to live with it.
Recently Jonah Lehrer wrote in Wired about how science too is failing us. He focused on the pharmaceutical industry's efforts to produce drugs that target specific ills, and he gave the example of an extremely promising drug to treat cholesterol developed by Pfizer. In the final phase of clinical trials it turned out that the drug did not work. Indeed, in many cases, it harmed patients. (See, "Trials and Errors: Why Science Is Failing Us.")
Lehrer reminded us that the Scottish philosopher David Hume pointed out over 200 hundred years ago that we never really know the causes of anything. We see correlations between events and we make up stories that connect them, but "causal explanations are oversimplifications." According to Lehrer, "they help us grasp the world at a glance." On the other hand, "those same shortcuts get us into serious trouble in the modern world when we use our perceptual habits to explain events that we can't perceive or easily understand."
Clean water seems to improve public health dramatically. When surgeons wash their hands, fewer patients die. These are robust correlations. But when we try to account for the complexities of biological compounds interacting with the body or to predict the behavior of financial markets, we get enmeshed in our own fictions. "The details always change, but the story remains the same: We think we understand how something works, how all those shards of fact fit together. But we don't."
Lehrer concludes: "we live in a world in which everything is knotted together, an impregnable tangle of causes and effects. Even when a system is dissected into its basic parts, those parts are still influenced by a whirligig of forces we can't understand or haven't considered or don't think matter."
We need our common sense explanations of things, but we also need to be wary of them. This is particularly true as our world gets more complex and interrelated. And it won't get easier.