We recently wrote a post entitled “Let me tell you a Story”, in which we pointed out that, because human beings are always trying to make sense of the world they inhabit, they like to create stories and narratives.
In this post, we thought we would develop the point a little further in reference to the work of Edward Fullbrook, who has undertaken extensive research into the ways in which how narratives are defined and approached affects outcomes, because of the impact that has on an individual’s or group’s ability to reason.
It can be very tempting to state that there can be only one correct answer, theory or narrative to explain a particular phenomenon or outcome. However, with the possible exception of mathematical proofs, that is often not the case; and the way in which narratives are created and, more importantly, promulgated is actually critical in many areas of enquiry, as is the availability of language sufficient to describe them.
As Fullbrook pointed out in a seminal paper (Narrative Pluralism, published in 2007, and to which the post is heavily indebted), when quoting Wittgenstein: ”The limits of my language mean the limit of my world…and what we cannot think we cannot say either”.
So, in constructing a theory or a narrative, if our approach is self-limited (a so-called “narrative fixation”), it is highly likely that the value of what we describe is also limited, and probably not representative of the messiness and complexity of reality. It is somewhat ironic that the ability to integrate thoughts and impose some form of order is much admired in many economic circles (think of all those “models”!), when a far more effective approach would be to accept that “narrative pluralism” (i.e., considering more than one approach) is likely to provide a richer and more useful, albeit “messier” outcome. After all, economies such as those of the United States are incredibly complex and complicated. One only has to consider the wasteland created by neoclassical economics through the mechanism of the Great Recession to understand that fetishizing one approach over another is dangerous, and moves theory into the realm of ideology.
And when narratives or theories become hegemonic in, say, the area of financial regulation, they can become exceedingly dangerous; because they tend to constrain the ability of those affected to challenge their validity and point out that “the Emperor has no clothes”. For example, US GAAP or IFRS could be regarded as “hegemonic” in their own geographical spheres; yet by requiring conformity with a particular approach to what are often complex realities, they often impose behaviours or actions that may have no economic or business value. Add to this the human tendencies towards herding and imitation and one has the makings of a self-referential, closed “system”, in which the heretics are declared anathema.
Yet consider Werner Heisenberg’s (yes, that Heisenberg) comment that: “What we observe is not nature, but nature exposed to our method of questioning”. We try to make the observations “fit”, when any observation only reveals one facet of a more complex reality. The heretics and the thinkers who do not kow-tow to the naked Emperor should be celebrated. The dangers of becoming too satisfied with a particular narrative or theory because it has proven “accurate” in a particular set of circumstances are very real- debacles such as Long Term Capital are sufficient evidence of that!
At Awbury, the team tries to avoid accepting that there can be only one “right answer”, because doing so runs the risk of “fitting” the narrative into some comforting framework, when we should be challenging our assumptions and testing them frequently for their continuing validity.
And one final thought: Karl Popper showed that no amount of verification and inductive support can ever truly prove a theory- each remains vulnerable to refutation and replacement. The history of scientific discovery provides ample evidence of that reality.
The Awbury Team