Complexity Science and the Art of Policy Making

What should be meant by a scientific approach to policy and how it might help create a more appropriate way of reaching decisions? Many years in practical policy making show that it is part science and part art. Complex systems science, as a form of story telling, can create links between them. Three aspects of policy making are considered: (1) the nature of proof in science and decision making, and how introducing new science into decision making is an under appreciated problem; (2) optimisation and that, despite optimal solutions not existing, policy makers want a single solution with unintended consequences left for future generations of policy makers; and (3) ceteris paribus—other things being equal, and the problem of deciding which things can be left alone and over what time periods. In policy, proof is an argument required by investors, regulators, and other decision makers. Proof must satisfy the beliefs and traditions of the decision maker, even when the former contradict observation and the latter are flawed, e.g. ‘we have been doing it this way for thirty years so it must be right’. In policy, the belief in optimisation is particularly strong, within a tradition that focusses on parts and ignores wholes. Arguably, individuals do not always optimise and often make decisions by copying others, opening up new ways of nudging people towards compliance. Also firms may not optimise due to risk aversion, lack of information, or just focussing on survival. Even if optimisation were possible, a narrow view on what is being optimised can lead to missed opportunities, as in the case of the multiple returns of agglomeration. Also, although innovation is a pillar of economic policy, its necessary dynamics are incompatible with equilibrium theories. Equilibrium also suggests that ‘do nothing’ is a policy option for no change, rather than drifting into the unknown. However, ‘doing something’ has the additionality problem, namely showing the benefits over doing nothing or something else. All investment impacts are on the balance of probabilities. Risk free investment and risk free polices are not possible in a complex world. What matters is to have a strong story, backed up by strong evidence on the main elements of the story. Then take a bet.