Last year a high-profile panel of expertsknown as the Copenhagen Consensus ranked the world’s most pressing environmental, health and social problems in a prioritized list.

Assembled by the Danish Environmental Assessment Institute under its then director, Bjørn Lomborg, the panel used cost-benefit analysis to evaluate where a limited amount of money would do the most good. It concluded that the highest priority should go to immediate concerns with relatively well understood cures, such as control of malaria. Long-term challenges such as climate change, where the path forward and even the scope of the threat remain unclear, ranked lower.

Usually each of these problems is treated in isolation, as though humanity had the luxury of dealing with its problems one by one. The Copenhagen Consensus used state-of-the-art techniques to try to bring a broader perspective. In so doing, however, it revealed how the state of the art fails to grapple with a simple fact: the future is uncertain. Attempts to predict it have a checkered history–from declarations that humans would never fly, to the doom-and-gloom economic and environmental forecasts of the 1970s, to claims that the “New Economy” would do away with economic ups and downs. Not surprisingly, those who make decisions tend to stay focused on the next fiscal quarter, the next year, the next election. Feeling unsure of their compass, they hug the familiar shore.

This understandable response to an uncertain future means, however, that the nation’s and the world’s long-term threats often get ignored altogether or are even made worse by shortsighted decisions. In everyday life, responsible people look out for the long term despite the needs of the here and now: we do homework, we save for retirement, we take out insurance. The same principles should surely apply to society as a whole. But how can leaders weigh the present against the future? How can they avoid being paralyzed by scientific uncertainty?

In well-understood situations, science can reliably predict the implications of alternative policy choices. These predictions, combined with formal methods of decision analysis that use mathematical models and statistical methods to determine optimal courses of action, can specify the trade-offs that society must inevitably make. Corporate executives and elected officials may not always heed this advice, but they do so more often than a cynic might suppose. Analysis has done much to improve the quality of lawmaking, regulation and investment. National economic policy is one example. Concepts introduced by analysts in the 1930s and 1940s–unemployment rate, current-account deficit and gross national product–are now commonplace. For the most part, governments have learned to avoid the radical boom-and-bust cycles that were common in the 19th and early 20th centuries.

The trouble now is that the world faces a number of challenges, both long- and short-term, that are far from well understood: how to preserve the environment, ensure the future of Social Security, guard against terrorism and manage the effects of novel technology. These problems are simply too complex and contingent for scientists to make definitive predictions. In the presence of such deep uncertainty, the machinery of prediction and decision making seizes up. Traditional analytical approaches gravitate to the well-understood parts of the challenge and shy away from the rest. Hence, even sophisticated analyses such as the one by the Copenhagen Consensus have trouble assessing the value of near-term steps that might shape our long-term future.

The three of us–an economist, a physicist and a computer scientist all working in RAND’s Pardee Center–have been fundamentally rethinking the role of analysis. We have constructed rigorous, systematic methods for dealing with deep uncertainty. The basic idea is to liberate ourselves from the need for precise prediction by using the computer to help frame strategies that work well over a very wide range of plausible futures. Rather than seeking to eliminate uncertainty, we highlight it and then find ways to manage it. Already companies such as Volvo have used our techniques to plan corporate strategy.

By Steven W. Popper, Robert J. Lempert and Steven C. Bankes

More here.