Reframe: How to solve the world’s trickiest problems
By Eric Knight
Black Inc Books, $29.95, pp 244
The West is enduring particularly uncertain times. What tepid economic growth it can muster is being undermined by a discredited financial system propped up by bureaucratic conceit. Periodic eruptions in the Middle East are a worrying reminder of how quickly international relations could lurch toward disaster. And the Earth’s changing climate, whatever its cause, is widely believed to threaten the living standards of future generations, if not ultimately their existence.
In that fraught context, Australian writer Eric Knight’s Reframe optimistically reminds us that ‘we can resolve our trickiest problems … [but] the most common mistake is to search for the answers in the wrong place without thinking to adjust our point of view’. Indeed, seemingly insurmountable problems can be solved by individual creativity and the serendipity of free markets rather than central planning.
In the style of Freakonomics — a successful popular economics book published in 2005 — Knight examines how climate change, global terrorism, US immigration and the global financial crisis are better addressed once they are ‘reframed’ and approached more holistically.
Too often, Knight argues, we look at problems through a metaphorical magnifying glass. ‘Reframe the problem — remove the magnifying glass — and we may arrive at the right answer,’ he writes, promising readers he can ‘reframe some of our most intractable political debates’.
Knight opens with a discussion of Long-Term Capital Management, the ill-fated multibillion-dollar hedge fund that imploded spectacularly in the late 1990s when Russia defaulted. The fund’s famous managers included Nobel Prizewinners and a slew of mathematics gurus, but that wasn’t enough to ward off catastrophe. ‘The error in judgement happened at the very start of the investment process … by taking a small strip of history and plugging it into their model, [the managers] were reacting to short-term anomalies and not long-term trends,’ writes Knight.
Knight examines the more recent financial crisis too, referencing the tulip mania that bedevilled the Dutch economy in the early 17th century. He draws from more recent economic theories — such as Herbert Simon’s idea of ‘bounded rationality’ and Kahneman and Tversky’s ‘prospect theory’ — which explain how people naturally tend to think the future will be a continuation of the recent past.
Most of the book dwells on facets of the climate change debate, however. Knight, whose doctorate at Oxford was in the economics of climate change, appears to sympathise with the standard policy proposals that flow from official climate science. But he rightly criticises environmentalists and ‘climate deniers’ for using short-term, extreme weather events to convince the public of the rightness or wrongness of various climate positions. ‘The weather was a compelling way of framing the problem because it fitted nicely on television screens … but changes in climate were barely perceptible over a decade,’ he writes.
Recalling the serious intellectual and religious feuds that accompanied Copernicus’s and later Galileo’s revelation that the Earth revolves around the sun, Knight shows how politics has come to poison climate change science too, including the pronouncements of the IPCC. ‘Framing climate change as a contest between two kinds of certainty — belief and scepticism — was dramatically satisfying but intellectually loose,’ he writes. Knight lets readers ponder how we can better build democratic institutions to find a balance between delegating decisions to experts like scientists while respecting voters’ freedoms.
Perhaps the most optimistic refrain in the book is how the Malthusian population quandary, which foretold doom as human reproduction outstripped the world’s food supply, continually emerges in various guises. Yet it has been routinely flouted by technological developments combined with the free market system and a precipitously falling birth rate. ‘The point of all this was not that we needed to do nothing to address climate change,’ writes Knight, arguing that the West and the developing world might transition to low carbon usage far more quickly than we are currently expecting.
Knight also homes in on the debate about immigration into the US, in particular the ongoing furore over the influx of Mexicans over its southern border. Knight decries how the immigrants’ legal status obscures the more powerful economic forces causing Mexicans to leave their homeland. On the other hand, Knight finds evidence that increased immigration of Mexicans lowers the wages of America’s lowest paid — which is partly what has animated the Tea Party, he contends. I must confess, as an Australian, I would have preferred a chapter on the economics of Australia’s immigration rather than one on America’s.
One could argue that Knight’s essential thesis — that ‘by changing the way we see our trickiest problems, we have a better chance of solving them’ — is easier said than done. But that doesn’t detract from the readability and erudition of his text. For me, Knight’s book is an interesting celebration of the insights of brilliant men and women whose prescience or ingenuity have changed the world for the better, rather than an overarching framework for changing how we should view the world.
Knight has a conversational writing style that makes the book accessible to a wide audience. The author’s relative youth — he is not yet 30 — makes his achievement more impressive. The author was educated at Sydney’s Sydney Grammar and went on to win a Rhodes scholarship to Oxford. Since then he’s worked as a lawyer, a consultant for the OECD and the UN, and now for Boston Consulting Group.
The book is enjoyable if a little too optimistic about human intelligence and progress. The age of progress since the early Enlightenment is after all a tiny sliver of human history, which followed thousands of years of brutish stasis.
In the opening chapter Knight presents the famous Duncker experiment, presenting readers with a candle, a box of pins and some matches, then asking them to consider how to mount the candle on the wall without wax dripping on the table below. ‘Once the solution is revealed to us, we get it … no one makes the same mistake twice,’ enthuses Knight. Having returned to that chapter after a month’s gap, alas, I did.
Adam Creighton is economics correspondent for the Australian.