In his thought-provoking series of Reith lectures for the BBC, former Bank of England Governor Mark Carney traced a line through the 3 global crises of recent times.
He talked about the credit crisis of 2007 to 2008, the current COVID pandemic and the climate crisis, upon which Dr Carney is now focused in his role as a UN special envoy and as finance adviser for the UK presidency of COP26.
His overall theme was ‘How we get what we value’ where he sought to contrast the mathematical or economic values of things with the broader societal perspectives.
The former might be market-related or formulaic while the latter are somewhat less scientific but nevertheless most important ethical, social or political values.
He started with the credit crisis where bank balance sheets and liquidity were based on market values for credit derivatives that proved to be grossly unreliable when confidence in their foundation began to unravel.
He then moved to COVID where tensions exist as the economic effects of the pandemic responses are being weighed against the cost in human life, health and well-being.
And he finished with the climate where short-term value optimisation of the traditional kind was, to his mind, hindering the longer-term sustainability of life on the planet.
In these examples, he observed that the seeds of disaster are being sown whenever economic values do not reflect societal values.
He described with some pride the much greater resilience that developed countries are building into their financial systems following the credit crisis. As a result, banks now face tougher tests of their capacity to bear risks.
Equally, regulators have brought in much tighter controls to improve culture and behaviour within financial institutions. He saw this response as a model example for the other crises where there is arguably a similar need to build resilient risk management into systems that are beyond the dependency on just simple market or economic measures These must embrace wider societal values and necessitate global co-operation to be truly effective.
It was a compelling listen, but what has it to do with actuaries in government?
Actuaries in government
Well, we actuaries are of course extremely comfortable dealing with the traditional measures of value, including those systems referenced in the three examples that Dr Carney used in his lectures. Indeed, we are often seen as reliable experts in being able to derive values in accordance with traditional and familiar approaches.
But we are also relentlessly curious people who do not see their work packed away so readily in a neat, tidy box.
We recognise, for example, that modelling will only ever provide a simplified view of the world. We can understand and interpret wider contexts and incorporate these views into our analysis and advice. We recognise that our worlds are generally uncertain and therefore incapable of being defined or expressed by a simple number or equation.
Having a single expert adviser who can straddle both the technical complexity of the numbers and the wider, societal or behavioural contexts with equal competence is perhaps asking for too much.
But it is how we as actuaries are increasingly challenging ourselves in this uncertain and fast-changing world.
As a result, we work closely with others to translate the output of our analysis into useable intelligence which can help improve the decision making required to address the challenges we are facing.
So please, before you assume actuaries work in a narrow field of technical expertise, talk to us and share the problems you are trying to address. We are much more than clever calculators working within systems; we can be effective partners working on those systems!
With best wishes for a better 2021, and a successful COP26.
The opinions in this blog post are not intended to provide specific advice. For our full disclaimer, please see the About this blog page.