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But even when the perfect liver became available a few days after she was put on the list, doctors could not operate. What made Nataline different from most transplant patients, and what eventually brought her case to the attention of much of the country, was that her survival did not depend on the availability of an organ or her clinicians or even the quality of care she received. It rested on her health insurance company.

Cigna had denied the initial request to cover the costs of the liver transplant. And the insurer persisted in its refusal, claiming that the treatment was “experimental” and unproven, and despite numerous pleas from Nataline’s physicians to the contrary.

But as relatives and friends organized campaigns to draw public attention to Nataline’s plight, the insurance conglomerate found itself embroiled in a public relations nightmare, one that could jeopardize its very existence. The company reversed its decision. But the change came too late. Nataline died just a few hours after Cigna authorized the transplant.

Mr. Potter was the head of corporate communications at two major insurers, first at Humana and then at Cigna. Now Mr. Potter has written a fascinating book that details the methods he and his colleagues used to manipulate public opinion

Mr. Potter goes on to describe the myth-making he did, interspersing descriptions of front groups, paid spies and jiggered studies with a deft retelling of the convoluted (and usually eye-glazing) history of health care insurance policies.

We learn that executives at Cigna worried that Nataline’s situation would only add fire to the growing public discontent with a health care system anchored by private insurance. As the case drew more national attention, the threat of a legislative overhaul that would ban for-profit insurers became real, and Mr. Potter found himself working on the biggest P.R. campaign of his career.

Cigna hired a large international law firm and a P.R. firm already well known to them from previous work aimed at discrediting Michael Moore and his film “Sicko.” Together with Cigna, these outside firms waged a campaign that would eventually include the aggressive placement of articles with friendly “third party” reporters, editors and producers who would “disabuse the media, politicians and the public of the notion that Nataline would have gotten the transplant if she had lived in Canada or France or England or any other developed country.” A “spy” was dispatched to Nataline’s funeral; and when the Sarkisyan family filed a lawsuit against the insurer, a team of lawyers was assigned to keep track of actions and comments by the family’s lawyer.

In the end, however, Nataline’s death proved to be the final straw for Mr. Potter. “It became clearer to me than ever that I was part of an industry that would do whatever it took to perpetuate its extraordinarily profitable existence,” he writes. “I had sold my soul.” He left corporate public relations for good less than six months after her death.

“I don’t mean to imply that all people who work for health insurance companies are greedier or more evil than other Americans,” he writes. “In fact, many of them feel — and justifiably so — that they are helping millions of people get they care they need.” The real problem, he says, lies in the fact that the United States “has entrusted one of the most important societal functions, providing health care, to private health insurance companies.” Therefore, the top executives of these companies become beholden not to the patients they have pledged to cover, but to the shareholders who hold them responsible for the bottom line.

The first step in establishing risk-adjusted premiums is to know the likelihood of the depth of flooding at each address. This information has to be address-specific because the severity of flooding can vary widely over small distances, for example, from one side of a road to the other.

A litany of reasons is given for withholding data. At times it seems that refusal stems from a view that insurance is innately evil. This is ironic in view of the gratuitous advice sometimes offered by politicians and commentators in the aftermath of extreme events, exhorting insurers to pay claims even when no legal liability exists and riverine flood is explicitly excluded from policies.

Risk Frontiers is involved in jointly developing the National Flood Information Database (NFID) for the Insurance Council of Australia with Willis Re, a reinsurance broking intermediary. NFID is a five year project aiming to integrate flood information from all city councils in a consistent insurance-relevant form. The aim of NFID is to help insurers understand and quantify their risk. Unfortunately, obtaining the base data for NFID from some local councils is difficult and sometimes impossible despite the support of all state governments for the development of NFID. Councils have an obligation to assess their flood risk and to establish rules for safe land development. However, many are antipathetic to the idea of insurance. Some states and councils have been very supportive – in New South Wales and Victoria, particularly. Some states have a central repository – a library of all flood studies and digital terrain models (digital elevation data). Council reluctance to release data is most prevalent in Queensland, where, unfortunately, no central repository exists.

Second, models of flood risk are sometimes misused:

many councils only undertake flood modelling in order to create a single design flood level, usually the so-called one-in-100 year flood. (For reasons given later, a better term is the flood with an 1% annual likelihood of being exceeded.)

Inundation maps showing the extent of the flood with a 1% annual likelihood of exceedance are increasingly common on council websites, even in Queensland. Unfortunately these maps say little about the depth of water at an address or, importantly, how depth varies for less probable floods. Insurance claims usually begin when the ground is flooded and increase rapidly as water rises above the floor level. At Windsor in NSW, for example, the difference in the water depth between the flood with a 1% annual chance of exceedance and the maximum possible flood is nine metres. In other catchments this difference may be as small as ten centimetres. The risk of damage is quite different in both cases and an insurer needs this information if they are to provide coverage in these areas.

The ‘one-in-100 year flood’ term is misleading. To many it is something that happens regularly once every 100 years — with the reliability of a bus timetable. It is still possible, though unlikely, that a flood of similar magnitude or even greater flood could happen twice in one year or three times in successive years.

The calculations underpinning this are not straightforward but the probability that an address exposed to a 1-in-100 year flood will experience such an event or greater over the lifetime of the house – 50 years say – is around 40%. Over the lifetime of a typical home mortgage – 25 years – the probability of occurrence is 22%. These are not good odds.

Blanchard said that on her doctor's advice, she tried to have fun, including nights out at her local bar with friends and short getaways to sun destinations, as a way to forget her problems. She also doesn’t understand how Manulife accessed her photos because her Facebook profile is locked and only people she approves can look at what she posts.

Insurer confirms it uses Facebook

the insurer said: "We would not deny or terminate a valid claim solely based on information published on websites such as Facebook." It confirmed that it uses the popular social networking site to investigate clients.

Munich Re explains in the context of recent disasters (emphasis added): Overall, pressure on prices in most lines of business and regions is persisting. Munich Re therefore consistently withdrew from under-rated business. It nevertheless proved possible to expand accounts with individual major clients, so that the business volume grew slightly on balance, despite the difficult environment. Munich Re owes this profitable growth especially to its ability to swiftly offer complex, tailor-made reinsurance solutions to its clients. Besides this, the many large losses resulting from natural hazards and also from man-made events, had a stabilising influence on the lines of business and regions affected. Thus, prices increased markedly for natural catastrophe covers in Australia/New Zealand (Oceania) and in offshore energy business. There were no major changes in conditions in this renewal season. The overall outcome of the reinsurance treaty renewals at 1 January 2011 was again very satisfactory for Munich Re.

There is downward pressure on prices in the reinsurance industry because there have not been enough disasters to keep up demand and thus premium prices. The following observation was made just three months ago: Insurance and reinsurance prices have been falling across most business lines for two years, reflecting intense competition between well-capitalised insurers and a comparative dearth of major catastrophe-induced losses.

as Munch Re explains, they have been able to overcome the dearth of disasters because recent extreme events have allowed them to increase prices on coverage in a manner that not only counteracts recent losses to some degree, but even allows for "profitable growth."  As with most tall tales, the one about the financial plight of reinsurers dealing with a changed climate isn't going away any time soon. It is just another bit of  popular unreality that effective decision making will have to overcome.

In his final book, Power and Prosperity, the late Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.

In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice (on the first two of these, see this on Albert Hirschman) and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.

defining what a democratic state, viewed precisely as such a constrained protective arrangement, is entitled to do.

There exists a strand in classical liberal or, in contemporary US parlance, libertarian thought which believes the answer is to define the role of the state so narrowly and the rights of individuals so broadly that many political choices (the income tax or universal health care, for example) would be ruled out a priori. In other words, it seeks to abolish much of politics through constitutional restraints. I view this as a hopeless strategy, both intellectually and politically. It is hopeless intellectually, because the values people hold are many and divergent and some of these values do not merely allow, but demand, government protection of weak, vulnerable or unfortunate people. Moreover, such values are not “wrong”. The reality is that people hold many, often incompatible, core values. Libertarians argue that the only relevant wrong is coercion by the state. Others disagree and are entitled to do so. It is hopeless politically, because democracy necessitates debate among widely divergent opinions. Trying to rule out a vast range of values from the political sphere by constitutional means will fail. Under enough pressure, the constitution itself will be changed, via amendment or reinterpretation.

So what ought the protective role of the state to include? Again, in such a discussion, classical liberals would argue for the “night-watchman” role. The government’s responsibilities are limited to protecting individuals from coercion, fraud and theft and to defending the country from foreign aggression. Yet once one has accepted the legitimacy of using coercion (taxation) to provide the goods listed above, there is no reason in principle why one should not accept it for the provision of other goods that cannot be provided as well, or at all, by non-political means.

Those other measures would include addressing a range of externalities (e.g. pollution), providing information and supplying insurance against otherwise uninsurable risks, such as unemployment, spousal abandonment and so forth. The subsidisation or public provision of childcare and education is a way to promote equality of opportunity. The subsidisation or public provision of health insurance is a way to preserve life, unquestionably one of the purposes of the state. Safety standards are a way to protect people against the carelessness or malevolence of others or (more controversially) themselves. All these, then, are legitimate protective measures. The more complex the society and economy, the greater the range of the protections that will be sought.

What, then, are the objections to such actions? The answers might be: the proposed measures are ineffective, compared with what would happen in the absence of state intervention; the measures are unaffordable and might lead to state bankruptcy; the measures encourage irresponsible behaviour; and, at the limit, the measures restrict individual autonomy to an unacceptable degree. These are all, we should note, questions of consequences.

The vote is more evenly distributed than wealth and income. Thus, one would expect the tenor of democratic policymaking to be redistributive and so, indeed, it is. Those with wealth and income to protect will then make political power expensive to acquire and encourage potential supporters to focus on common enemies (inside and outside the country) and on cultural values. The more unequal are incomes and wealth and the more determined are the “haves” to avoid being compelled to support the “have-nots”, the more politics will take on such characteristics.

In the 1970s, the view that democracy would collapse under the weight of its excessive promises seemed to me disturbingly true. I am no longer convinced of this: as Adam Smith said, “There is a great deal of ruin in a nation”. Moreover, the capacity for learning by democracies is greater than I had realised. The conservative movements of the 1980s were part of that learning. But they went too far in their confidence in market arrangements and their indifference to the social and political consequences of inequality. I would support state pensions, state-funded health insurance and state regulation of environmental and other externalities. I am happy to debate details. The ancient Athenians called someone who had a purely private life “idiotes”. This is, of course, the origin of our word “idiot”. Individual liberty does indeed matter. But it is not the only thing that matters. The market is a remarkable social institution. But it is far from perfect. Democratic politics can be destructive. But it is much better than the alternatives. Each of us has an obligation, as a citizen, to make politics work as well as he (or she) can and to embrace the debate over a wide range of difficult choices that this entails.

What seems obvious is sometime just wrong.  This of course is why we actually do research.  So why is it that we shouldn't make what seems to be an obvious connection between these papers and recent disasters, as so many have already done?

First, the Min et al. paper seeks to identify a GHG signal in global precipitation over the period 1950-1999.  They focus on one-day and five-day measures of precipitation.  They do not discuss streamflow or damage.  For many years, an upwards trend in precipitation has been documented, and attributed to GHGs, even back to the 1990s (I co-authored a paper on precipitation and floods in 1999 that assumed a human influence on precipitation, PDF), so I am unsure what is actually new in this paper's conclusions.

However, accepting that precipitation has increased and can be attributed in some part to GHG emissions, there have not been shown corresponding increases in streamflow (floods)  or damage. How can this be?  Think of it like this -- Precipitation is to flood damage as wind is to windstorm damage.  It is not enough to say that it has become windier to make a connection to increased windstorm damage -- you need to show a specific increase in those specific wind events that actually cause damage. There are a lot of days that could be windier with no increase in damage; the same goes for precipitation.

My understanding of the literature on streamflow is that there have not been shown increasing peak streamflow commensurate with increases in precipitation, and this is a robust finding across the literature.  For instance, one recent review concludes: Floods are of great concern in many areas of the world, with the last decade seeing major fluvial events in, for example, Asia, Europe and North America. This has focused attention on whether or not these are a result of a changing climate. Rive flows calculated from outputs from global models often suggest that high river flows will increase in a warmer, future climate. However, the future projections are not necessarily in tune with the records collected so far – the observational evidence is more ambiguous. A recent study of trends in long time series of annual maximum river flows at 195 gauging stations worldwide suggests that the majority of these flow records (70%) do not exhibit any statistically significant trends. Trends in the remaining records are almost evenly split between having a positive and a negative direction.

Absent an increase in peak streamflows, it is impossible to connect the dots between increasing precipitation and increasing floods.  There are of course good reasons why a linkage between increasing precipitation and peak streamflow would be difficult to make, such as the seasonality of the increase in rain or snow, the large variability of flooding and the human influence on river systems.  Those difficulties of course translate directly to a difficulty in connecting the effects of increasing GHGs to flood disasters.

Second, the Pall et al. paper seeks to quantify the increased risk of a specific flood event in the UK in 2000 due to greenhouse gas emissions.  It applies a methodology that was previously used with respect to the 2003 European heatwave. Taking the paper at face value, it clearly states that in England and Wales, there has not been an increasing trend in precipitation or floods.  Thus, floods in this region are not a contributor to the global increase in disaster costs.  Further, there has been no increase in Europe in normalized flood losses (PDF).  Thus, Pall et al. paper is focused attribution in the context of on a single event, and not trend detection in the region that it focuses on, much less any broader context.

More generally, the paper utilizes a seasonal forecast model to assess risk probabilities.  Given the performance of seasonal forecast models in actual prediction mode, I would expect many scientists to remain skeptical of this approach to attribution. Of course, if this group can show an improvement in the skill of actual seasonal forecasts by using greenhouse gas emissions as a predictor, they will have a very convincing case.  That is a high hurdle.

In short, the new studies are interesting and add to our knowledge.  But they do not change the state of knowledge related to trends in global disasters and how they might be related to greenhouse gases.  But even so, I expect that many will still want to connect the dots between greenhouse gas emissions and recent floods.  Connecting the dots is fun, but it is not science.

Jessica Weinkle said...

The thing about the nature articles is that Nature itself made the leap from the science findings to damages in the News piece by Q. Schiermeier through the decision to bring up the topic of insurance. (Not to mention that which is symbolically represented merely by the journal’s cover this week). With what I (maybe, naively) believe to be a particularly ballsy move, the article quoted Muir-Wood, an industry scientists. However, what he is quoted as saying is admirably clever. Initially it is stated that Dr. Muir-Wood backs the notion that one cannot put the blame of increased losses on climate change. Then, the article ends with a quote from him, “If there’s evidence that risk is changing, then this is something we need to incorporate in our models.”

This is a very slippery slope and a brilliant double-dog dare. Without doing anything but sitting back and watching the headlines, one can form the argument that “science” supports the remodeling of the hazard risk above the climatological average and is more important then the risks stemming from socioeconomic factors. The reinsurance industry itself has published that socioeconomic factors far outweigh changes in the hazard in concern of losses. The point is (and that which has particularly gotten my knickers in a knot) is that Nature, et al. may wish to consider what it is that they want to accomplish. Is it greater involvement of federal governments in the insurance/reinsurance industry on the premise that climate change is too great a loss risk for private industry alone regardless of the financial burden it imposes? The move of insurance mechanisms into all corners of the earth under the auspices of climate change adaptation? Or simply a move to bolster prominence, regardless of whose back it breaks- including their own, if any of them are proud owners of a home mortgage? How much faith does one have in their own model when they are told that hundreds of millions of dollars in the global economy is being bet against the odds that their models produce?

What Nature says matters to the world; what scientists say matters to the world- whether they care for the responsibility or not. That is after all, the game of fame and fortune (aka prestige).

Doctors and other health-care workers can provide patients and families with probabilities for improvement or recovery, but statistics are hardly what is wanted. Even after profound injury or the diagnosis of an illness that statistically is nearly certain to be fatal, what people hear is the word nearly. How do we not allow the death of someone who might be saved? How do we avoid the equally intolerable salvation of a clinically dead person?

Injecting political agendas into these end-of-life complexities only confuses the problem without providing a solution.

The questions are how, when, and on whose terms we depart. It is curious that people might be convinced to avoid confronting death while they are healthy, and that society tolerates ad hominem arguments that obstruct rational debate over an authentic problem of ethics in an uncertain world.

Any seriously ill older person who winds up in a modern CCU immediately yields his autonomy. Even if the doctors, nurses, and staff caring for him are intelligent, properly educated, humanistically motivated, and correct in the diagnosis, they are manipulated not only by the tyranny of technology but also by the rules established in their hospital. In addition, regulations of local and state licensing agencies and the federal government dictate the parameters of what the hospital workers do and how they do it, and every action taken is heavily influenced by legal experts committed to their client’s best interest—values frequently different from the patient’s. Once an acutely ill patient finds himself in this situation, everything possible will be done to save him; he is in no position to offer an opinion.

Eventually, after hours or days (depending on the illness and who is involved in the care), the wisdom of continuing treatment may come into question. But by then the patient will likely have been intubated and placed on a ventilator, a feeding tube may have been inserted, a catheter placed in the bladder, IVs started in peripheral veins or threaded through a major blood vessel near the heart, and monitors attached to record an EKG, arterial blood pressure, temperature, respirations, oxygen saturation, even pressure inside the skull. Sequential pressure devices will have been wrapped around the legs. All the digital marvels have alarms, so if one isn’t working properly, an annoying beep, like the sound of a backing truck, will fill the patient’s room. Vigilant nurses will add drugs by the dozens to the IV or push them into ports. Families will hover uncertainly. Meanwhile, tens and perhaps hundreds of thousands of dollars will have been transferred from one large corporation—an insurer of some kind—to another large corporation—a health care delivery system of some kind.

While the expense of the drugs, manpower, and technology required to make a diagnosis and deliver therapy does sop up resources and thereby deny treatment that might be more fruitful for others, including the 46.3 million Americans who, according to the Census Bureau, have no health insurance, that isn’t the real dilemma of the critical care unit.

the problem isn’t getting into or out of a CCU; the predicament is in knowing who should be there in the first place.

Before we become ill, we tend to assume that everything can be treated and treated successfully. The prelate in Willa Cather’s Death Comes for the Archbishop was wiser. Approaching the end, he said to a younger priest, “I shall not die of a cold, my son. I shall die of having lived.”

best way to avoid unwanted admission to a critical care unit at or near the end of life is to write an advance directive (a living will or durable power of attorney for health care) when healthy.

, not many people do this and, more regrettably, often the document is not included in the patient’s chart or it goes unnoticed.

Since we are sure to die of having lived, we should prepare for death before the last minute. Entire corporations are dedicated to teaching people how to retire well. All of their written materials, Web sites, and seminars begin with the same advice: start planning early. Shouldn’t we at least occasionally think about how we want to leave our lives?

Flannery O’Connor, who died young of systemic lupus, wrote, “Sickness before death is a very appropriate thing and I think those who don’t have it miss one of God’s mercies.”

Because we understand the metaphor of conflict so well, we are easily sold on the idea that we must resolutely fight against our afflictions (although there was once an article in The Onion titled “Man Loses Cowardly Battle With Cancer”). And there is a place to contest an abnormal metabolism, a mutation, a trauma, or an infection. But there is also a place to surrender. When the organs have failed, when the mind has dissolved, when the body that has faithfully housed us for our lifetime has abandoned us, what’s wrong with giving up?

Just as a robust economic system is one that encourages early failures (the concepts of "fail small" and "fail fast"), the U.S. government should stop supporting dictatorial regimes for the sake of pseudostability and instead allow political noise to rise to the surface. Making an economy robust in the face of business swings requires allowing risk to be visible; the same is true in politics.

Both the recent financial crisis and the current political crisis in the Middle East are grounded in the rise of complexity, interdependence, and unpredictability. Policymakers in the United Kingdom and the United States have long promoted policies aimed at eliminating fluctuation -- no more booms and busts in the economy, no more "Iranian surprises" in foreign policy. These policies have almost always produced undesirable outcomes. For example, the U.S. banking system became very fragile following a succession of progressively larger bailouts and government interventions, particularly after the 1983 rescue of major banks (ironically, by the same Reagan administration that trumpeted free markets). In the United States, promoting these bad policies has been a bipartisan effort throughout. Republicans have been good at fragilizing large corporations through bailouts, and Democrats have been good at fragilizing the government. At the same time, the financial system as a whole exhibited little volatility; it kept getting weaker while providing policymakers with the illusion of stability, illustrated most notably when Ben Bernanke, who was then a member of the Board of Governors of the U.S. Federal Reserve, declared the era of "the great moderation" in 2004.

Washington stabilized the market with bailouts and by allowing certain companies to grow "too big to fail." Because policymakers believed it was better to do something than to do nothing, they felt obligated to heal the economy rather than wait and see if it healed on its own.

The foreign policy equivalent is to support the incumbent no matter what. And just as banks took wild risks thanks to Greenspan's implicit insurance policy, client governments such as Hosni Mubarak's in Egypt for years engaged in overt plunder thanks to similarly reliable U.S. support.

Those who seek to prevent volatility on the grounds that any and all bumps in the road must be avoided paradoxically increase the probability that a tail risk will cause a major explosion.

In the realm of economics, price controls are designed to constrain volatility on the grounds that stable prices are a good thing. But although these controls might work in some rare situations, the long-term effect of any such system is an eventual and extremely costly blowup whose cleanup costs can far exceed the benefits accrued. The risks of a dictatorship, no matter how seemingly stable, are no different, in the long run, from those of an artificially controlled price.

Such attempts to institutionally engineer the world come in two types: those that conform to the world as it is and those that attempt to reform the world. The nature of humans, quite reasonably, is to intervene in an effort to alter their world and the outcomes it produces. But government interventions are laden with unintended -- and unforeseen -- consequences, particularly in complex systems, so humans must work with nature by tolerating systems that absorb human imperfections rather than seek to change them.

What is needed is a system that can prevent the harm done to citizens by the dishonesty of business elites; the limited competence of forecasters, economists, and statisticians; and the imperfections of regulation, not one that aims to eliminate these flaws. Humans must try to resist the illusion of control: just as foreign policy should be intelligence-proof (it should minimize its reliance on the competence of information-gathering organizations and the predictions of "experts" in what are inherently unpredictable domains), the economy should be regulator-proof, given that some regulations simply make the system itself more fragile. Due to the complexity of markets, intricate regulations simply serve to generate fees for lawyers and profits for sophisticated derivatives traders who can build complicated financial products that skirt those regulations.

The life of a turkey before Thanksgiving is illustrative: the turkey is fed for 1,000 days and every day seems to confirm that the farmer cares for it -- until the last day, when confidence is maximal. The "turkey problem" occurs when a naive analysis of stability is derived from the absence of past variations. Likewise, confidence in stability was maximal at the onset of the financial crisis in 2007.

The turkey problem for humans is the result of mistaking one environment for another. Humans simultaneously inhabit two systems: the linear and the complex. The linear domain is characterized by its predictability and the low degree of interaction among its components, which allows the use of mathematical methods that make forecasts reliable. In complex systems, there is an absence of visible causal links between the elements, masking a high degree of interdependence and extremely low predictability. Nonlinear elements are also present, such as those commonly known, and generally misunderstood, as "tipping points." Imagine someone who keeps adding sand to a sand pile without any visible consequence, until suddenly the entire pile crumbles. It would be foolish to blame the collapse on the last grain of sand rather than the structure of the pile, but that is what people do consistently, and that is the policy error.

Engineering, architecture, astronomy, most of physics, and much of common science are linear domains. The complex domain is the realm of the social world, epidemics, and economics. Crucially, the linear domain delivers mild variations without large shocks, whereas the complex domain delivers massive jumps and gaps. Complex systems are misunderstood, mostly because humans' sophistication, obtained over the history of human knowledge in the linear domain, does not transfer properly to the complex domain. Humans can predict a solar eclipse and the trajectory of a space vessel, but not the stock market or Egyptian political events. All man-made complex systems have commonalities and even universalities. Sadly, deceptive calm (followed by Black Swan surprises) seems to be one of those properties.

The system is responsible, not the components. But after the financial crisis of 2007-8, many people thought that predicting the subprime meltdown would have helped. It would not have, since it was a symptom of the crisis, not its underlying cause. Likewise, Obama's blaming "bad intelligence" for his administration's failure to predict the crisis in Egypt is symptomatic of both the misunderstanding of complex systems and the bad policies involved.

Obama's mistake illustrates the illusion of local causal chains -- that is, confusing catalysts for causes and assuming that one can know which catalyst will produce which effect. The final episode of the upheaval in Egypt was unpredictable for all observers, especially those involved. As such, blaming the CIA is as foolish as funding it to forecast such events. Governments are wasting billions of dollars on attempting to predict events that are produced by interdependent systems and are therefore not statistically understandable at the individual level.

Political and economic "tail events" are unpredictable, and their probabilities are not scientifically measurable. No matter how many dollars are spent on research, predicting revolutions is not the same as counting cards; humans will never be able to turn politics into the tractable randomness of blackjack.

Most explanations being offered for the current turmoil in the Middle East follow the "catalysts as causes" confusion. The riots in Tunisia and Egypt were initially attributed to rising commodity prices, not to stifling and unpopular dictatorships. But Bahrain and Libya are countries with high gdps that can afford to import grain and other commodities. Again, the focus is wrong even if the logic is comforting. It is the system and its fragility, not events, that must be studied -- what physicists call "percolation theory," in which the properties of the terrain are studied rather than those of a single element of the terrain.

When dealing with a system that is inherently unpredictable, what should be done? Differentiating between two types of countries is useful. In the first, changes in government do not lead to meaningful differences in political outcomes (since political tensions are out in the open). In the second type, changes in government lead to both drastic and deeply unpredictable changes.

Humans fear randomness -- a healthy ancestral trait inherited from a different environment. Whereas in the past, which was a more linear world, this trait enhanced fitness and increased chances of survival, it can have the reverse effect in today's complex world, making volatility take the shape of nasty Black Swans hiding behind deceptive periods of "great moderation." This is not to say that any and all volatility should be embraced. Insurance should not be banned, for example.

But alongside the "catalysts as causes" confusion sit two mental biases: the illusion of control and the action bias (the illusion that doing something is always better than doing nothing). This leads to the desire to impose man-made solutions

Variation is information. When there is no variation, there is no information. This explains the CIA's failure to predict the Egyptian revolution and, a generation before, the Iranian Revolution -- in both cases, the revolutionaries themselves did not have a clear idea of their relative strength with respect to the regime they were hoping to topple. So rather than subsidize and praise as a "force for stability" every tin-pot potentate on the planet, the U.S. government should encourage countries to let information flow upward through the transparency that comes with political agitation. It should not fear fluctuations per se, since allowing them to be in the open, as Italy and Lebanon both show in different ways, creates the stability of small jumps.

As Seneca wrote in De clementia, "Repeated punishment, while it crushes the hatred of a few, stirs the hatred of all . . . just as trees that have been trimmed throw out again countless branches." The imposition of peace through repeated punishment lies at the heart of many seemingly intractable conflicts, including the Israeli-Palestinian stalemate. Furthermore, dealing with seemingly reliable high-level officials rather than the people themselves prevents any peace treaty signed from being robust. The Romans were wise enough to know that only a free man under Roman law could be trusted to engage in a contract; by extension, only a free people can be trusted to abide by a treaty. Treaties that are negotiated with the consent of a broad swath of the populations on both sides of a conflict tend to survive. Just as no central bank is powerful enough to dictate stability, no superpower can be powerful enough to guarantee solid peace alone.

As Jean-Jacques Rousseau put it, "A little bit of agitation gives motivation to the soul, and what really makes the species prosper is not peace so much as freedom." With freedom comes some unpredictable fluctuation. This is one of life's packages: there is no freedom without noise -- and no stability without volatility.∂

how long should political liberals have let debate last? Here we reach another issue to parse, that of dividing the spheres of discourse of politics and society.The political sphere includes lawmakers, who have their name for a reason: they make laws. They cannot sit around and debate endlessly. They must, at some point, push legislation through (which is at the center of the debate over filibuster reform).

take note of another passage from Mill: “It is the duty of governments, and of individuals, to form the truest opinions they can; to form them carefully, and never impose them on others unless they are quite sure of being right. But when they are sure … it is not conscientiousness but cowardice to shrink from acting on their opinions. ... Men, and governments, must act to the best of their ability. There is no such thing as absolute certainty, but there is assurance sufficient for the purposes of human life." (Mill, 25-26, emphasis added).

Yet our division of spheres of discourse means passage of a bill – or even defeat – does not mark the end of debate. Indeed, many Americans continued to discuss the merits of the legislation, with some even filing lawsuits arguing it was unconstitutional (I think these stand little chance of going anywhere). American society at large can and will continue to have the conversation about health insurance reform. Then, in the next election, they will bring their beliefs to the polls. They will expect those voted in to act. And then, the conversation will continue. Politics is a continuous process. By dividing up spheres of discourse into political and societal, we see that debate never really ends – it’s just that sometimes lawmakers need to get on with their job, and leave debate to the public.

Strict constructionists argue that their analyses should confine themselves strictly to positive (that is, descriptive) analysis: identify who wins and who loses from a public policy, and how much, but leave judgments about the social merits of the policy to politicians.

a researcher’s political ideology or vested interest in a particular theory can still enter even ostensibly descriptive analysis by the data set chosen for the research; the mathematical transformations of raw data and the exclusion of so-called outlier data; the specific form of the mathematical equations posited for estimation; the estimation method used; the number of retrials in estimation to get what strikes the researcher as “plausible” results, and the manner in which final research findings are presented. This is so even among natural scientists discussing global warming. As the late medical journalist Victor Cohn once quoted a scientist, “I would not have seen it if I did not believe it.”

anyone who sincerely believes that seemingly scientific, positive research in the sciences — especially the social sciences — is invariably free of the researcher’s own predilections is a Panglossian optimist.

majority of economists have been unhappy for more than a century with the limits that the strict constructionist school would place upon their professional purview. They routinely do enter the forum in which public policy is debated

The problem with welfare analysis is not so much that ethical dimensions typically enter into it, but that economists pretend that is not so. They do so by justifying their normative dicta with appeal to the seemly scientific but actually value-laden concept of efficiency.

economics is not a science that only describes, measures, explains and predicts human interests, values and policies — it also evaluates, promotes, endorses or rejects them. The predicament of economics and all other social sciences consists in their failure to acknowledge honestly their value orientation in their pathetic and inauthentic pretension to emulate the natural sciences they presume to be value free.

By the Kaldor-Hicks criterion, a public policy is judged to enhance economic efficiency and overall social welfare — and therefore is to be recommended by economists to decision-makers — if those who gain from the policy could potentially bribe those who lose from it into accepting it and still be better off (Kaldor), or those who lose from it were unable to bribe the gainers into forgoing the policy (Hicks). That the bribe was not paid merely underscores the point.

In applications, the Kaldor-Hicks criterion and the efficiency criterion amount to the same thing. When Jack gains $10 and Jill loses $5, social gains increase by $5, so the policy is a good one. When Jack gains $10 and Jill loses $15, there is a deadweight loss of $5, so the policy is bad. Evidently, on the Kaldor-Hicks criterion one need not know who Jack and Jill are, nor anything about their economic circumstances. Furthermore, a truly stunning implication of the criterion is that if a public policy takes $X away from one citizen and gives it to another, and nothing else changes, then such a policy is welfare neutral. Would any non-economist buy that proposition?

Virtually all modern textbooks in economics base their treatment of efficiency on Kaldor-Hicks, usually without acknowledging the ethical dimensions of the concept. I use these texts in my economics courses as, I suppose, do most my colleagues around the world. But I explicitly alert my students to the ethical pitfalls in normative welfare economics, with commentaries such as “How Economists Bastardized Benthamite Utilitarianism” and “The Welfare Economics of Health Insurance,” or with assignments that force students to think about this issue. My advice to students and readers is: When you hear us economists wax eloquent on the virtue of greater efficiency — beware!

is a problem of the utilization of knowledge which is not given to anyone in its totality.

who is to do the planning. It is about this question that all the dispute about "economic planning" centers. This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals. Planning in the specific sense in which the term is used in contemporary controversy necessarily means central planning—direction of the whole economic system according to one unified plan. Competition, on the other hand, means decentralized planning by many separate persons. The halfway house between the two, about which many people talk but which few like when they see it, is the

Which of these systems is likely to be more efficient depends mainly on the question under which of them we can expect that fuller use will be made of the existing knowledge.

It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available—though this is of course merely shifting the difficulty to the problem of selecting the experts.

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.

the relative importance of the different kinds of knowledge; those more likely to be at the disposal of particular individuals and those which we should with greater confidence expect to find in the possession of an authority made up of suitably chosen experts. If it is today so widely assumed that the latter will be in a better position, this is because one kind of knowledge, namely, scientific knowledge, occupies now so prominent a place in public imagination that we tend to forget that it is not the only kind that is relevant.

It is a curious fact that this sort of knowledge should today be generally regarded with a kind of contempt and that anyone who by such knowledge gains an advantage over somebody better equipped with theoretical or technical knowledge is thought to have acted almost disreputably. To gain an advantage from better knowledge of facilities of communication or transport is sometimes regarded as almost dishonest, although it is quite as important that society make use of the best opportunities in this respect as in using the latest scientific discoveries.

The common idea now seems to be that all such knowledge should as a matter of course be readily at the command of everybody, and the reproach of irrationality leveled against the existing economic order is frequently based on the fact that it is not so available. This view disregards the fact that the method by which such knowledge can be made as widely available as possible is precisely the problem to which we have to find an answer.

One reason why economists are increasingly apt to forget about the constant small changes which make up the whole economic picture is probably their growing preoccupation with statistical aggregates, which show a very much greater stability than the movements of the detail. The comparative stability of the aggregates cannot, however, be accounted for—as the statisticians occasionally seem to be inclined to do—by the "law of large numbers" or the mutual compensation of random changes.

the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. The statistics which such a central authority would have to use would have to be arrived at precisely by abstracting from minor differences between the things, by lumping together, as resources of one kind, items which differ as regards location, quality, and other particulars, in a way which may be very significant for the specific decision. It follows from this that central planning based on statistical information by its nature cannot take direct account of these circumstances of time and place and that the central planner will have to find some way or other in which the decisions depending on them can be left to the "man on the spot."

We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used. But the "man on the spot" cannot decide solely on the basis of his limited but intimate knowledge of the facts of his immediate surroundings. There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger economic system.

The problem which we meet here is by no means peculiar to economics but arises in connection with nearly all truly social phenomena, with language and with most of our cultural inheritance, and constitutes really the central theoretical problem of all social science. As Alfred Whitehead has said in another connection, "It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them." This is of profound significance in the social field. We make constant use of formulas, symbols, and rules whose meaning we do not understand and through the use of which we avail ourselves of the assistance of knowledge which individually we do not possess. We have developed these practices and institutions by building upon habits and institutions which have proved successful in their own sphere and which have in turn become the foundation of the civilization we have built up.

To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world.

That an economist of Professor Schumpeter's standing should thus have fallen into a trap which the ambiguity of the term "datum" sets to the unwary can hardly be explained as a simple error. It suggests rather that there is something fundamentally wrong with an approach which habitually disregards an essential part of the phenomena with which we have to deal: the unavoidable imperfection of man's knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired. Any approach, such as that of much of mathematical economics with its simultaneous equations, which in effect starts from the assumption that people's knowledge corresponds with the objective facts of the situation, systematically leaves out what is our main task to explain. I am far from denying that in our system equilibrium analysis has a useful function to perform. But when it comes to the point where it misleads some of our leading thinkers into believing that the situation which it describes has direct relevance to the solution of practical problems, it is high time that we remember that it does not deal with the social process at all and that it is no more than a useful preliminary to the study of the main problem.

The discomfort of many clinicians comes from the fact that the data are derived mainly from clinical trials, which exclude the elderly and people with multiple problems. Yet in the “real world” of medicine, particularly general practice, most patients are elderly and most have multiple problems. So can the “evidence” be applied to these patients? Unthinking application of multiple evidence-based guidelines may cause serious problems, says Mike Rawlins, chairman of NICE.

There has always been anxiety that the zealots would insist evidence was all that was needed to make a decision, and in its early days NICE seemed to take this line. Critics quickly pointed out, however, that patients had things called values, as did clinicians, and that clinicians and patients needed to blend their values with the evidence in a way that was often a compromise.

Social scientists have tended to be wary of the reductionist approach of evidence-based medicine and have wanted a much broader range of information to be admissible.

Evidence-based medicine has been at its most confident when evaluating drug treatments, but many interventions in health care are far more complex than simply prescribing a drug. Insisting on randomized trials to evaluate these interventions may not only be inappropriate, but also misleading. Interventions may be stamped “ineffective” by the hardliners when they actually might offer substantial benefits. Then there is the constant confusion between “evidence of absence of effectiveness” with “absence of evidence of effectiveness”—two very different things.

even some of the strongest proponents of evidence-based medicine have become uneasy, as we have increasing evidence that drug companies have managed to manipulate data. In the heartland of evidence-based medicine—drug trials—the “evidence” may be unreliable and misleading.

All this doesn’t mean that evidence-based medicine should be abandoned. It means, rather, that we must never forget the complex relationship between evidence and truth.

I suspect Indian scientists have retired hurt to the pavilion. They were exposed to some nasty public scrutiny on a deal made by a premier science research establishment, Indian Space Research Organisation (ISRO), with Devas, a private company, on the allocation of spectrum. The public verdict was that the arrangement was a scandal; public resources had been given away for a song. The government, already scam-bruised, hastily scrapped the contract.

Take the issue of genetically-modified (GM) crops. For long this matter has been decided inside closed-door committee rooms, where scientists are comforted by the fact that their decisions will not be challenged. Their defence is “sound science” and “superior knowledge”. It is interesting that the same scientists will accept data produced by private companies pushing the product. Issues of conflict of interest will be brushed aside as integrity cannot be questioned behind closed doors. Silence is the best insurance. This is what happened inside a stuffy committee room, where scientists sat to give permission to Mahyco-Monsanto to grow genetically-modified brinjal.

This case involved a vegetable we all eat. This was a matter of science we had the right to know about and to decide upon. The issue made headlines. The reaction of the scientific fraternity was predictable and obnoxious. They resented the questions. They did not want a public debate.

As the controversy raged and more people got involved, the scientists ran for cover. They wanted none of this messy street fight. They were meant to advise prime ministers and the likes, not to answer simple questions of people. Finally, when environment minister Jairam Ramesh took the decision on the side of the ordinary vegetable eater, unconvinced by the validity of the scientific data to justify no-harm, scientists were missing in their public reactions. Instead, they whispered about lack of “sound science” in the decision inside committees.

The matter did not end there. The minister commissioned an inter-academy inquiry — six top scientific institutions looked into GM crops and Bt-brinjal — expecting a rigorous examination of the technical issues and data gaps. The report released by this committee was shoddy to say the least. It contained no references or attributions and not a single citation. It made sweeping statements and lifted passages from a government newsletter and even from global biotech industry. The report was thrashed. Scientists again withdrew into offended silence.

The final report of this apex-science group is marginally better in that it includes citations but it reeks of scientific arrogance cloaked in jargon. The committee did not find it fit to review the matter, which had reached public scrutiny. The report is only a cover for their established opinion about the ‘truth’ of Bt-brinjal. Science for them is certainly not a matter of enquiry, critique or even dissent.

the world has changed. No longer is this report meant only for top political and policy leaders, who would be overwhelmed by the weight of the matter, the language and the expert knowledge of the writer. The report will be subjected to public scrutiny. Its lack of rigour will be deliberated, its unquestioned assertion challenged.

This is the difference between the manufactured comfortable world of science behind closed doors and the noisy messy world outside. It is clear to me that Indian scientists need confidence to creatively engage in public concerns. The task to build scientific literacy will not happen without their engagement and their tolerance for dissent. The role of science in Indian democracy is being revisited with a new intensity. The only problem is that the key players are missing in action.

in complex systems, "no matter how effective conventional safety devices are, there is a form of accident that is inevitable" - hence the term "normal accidents".

system accidents occur with many technologies: Take the example of a highway blow-out leading to a pile-up. This may have disastrous consequences for those involved but cannot be described as a disaster. The latter only happens when the technologies involved have the potential to affect many innocent bystanders. This "dread factor" is why the nuclear aspect of Japan's ordeal has come to dominate headlines, even though the tsunami has had much greater immediate impact on lives.

It is simply too early to say what precisely went wrong at Fukushima, and it has been surprising to see commentators speak with such speed and certainty. Most people accept that they will only ever have a rough understanding of the facts. But they instinctively ask if they can trust those in charge and wonder why governments support particular technologies so strongly.

Industry and governments need to be more straightforward with the public. The pretence of knowledge is deeply unscientific; a more humble approach where officials are frank about the unknowns would paradoxically engender greater trust.

Likewise, nuclear's opponents need to adopt a measured approach. We need a fuller democratic debate about the choices we are making. Catastrophic potential needs to be a central criterion in decisions about technology. Advice from experts is useful but the most significant questions are ethical in character.

If technologies can potentially have disastrous effects on large numbers of innocent bystanders, someone needs to represent their interests. We might expect this to be the role of governments, yet they have generally become advocates of nuclear power because it is a relatively low-carbon technology that reduces reliance on fossil fuels. Unfortunately, this commitment seems to have reduced their ability to be seen to act as honest brokers, something acutely felt at times like these, especially since there have been repeated scandals in Japan over the covering-up of information relating to accidents at reactors.

Post Fukushima, governments in Germany, Switzerland and Austria already appear to be shifting their policies. Rational voices, such as the Britain's chief scientific adviser John Beddington, are saying quite logically that we should not compare the events in Japan with the situation in Britain, which does not have the same earthquake risk. Unfortunately, such arguments are unlikely to prevail in the politics of risky technologies.

firms and investors involved in nuclear power have often failed to take regulatory and political risk into account; history shows that nuclear accidents can lead to tighter regulations, which in turn can increase nuclear costs. Further ahead, the proponents of hazardous technologies need to bear the full costs of their products, including insurance liabilities and the cost of independent monitoring of environmental and health effects. As it currently stands, taxpayers would pay for any future nuclear incident.

Critics of technology are often dubbed in policy circles as anti-science. Yet critical thinking is central to any rational decision-making process - it is less scientific to support a technology uncritically. Accidents happen with all technologies, and are regrettable but not disastrous so long as the technology does not have catastrophic potential; this raises significant questions about whether we want to adopt technologies that do have such potential.

3. Collaboration at scale Across many economies, the number of people who undertake knowledge work has grown much more quickly than the number of production or transactions workers. Knowledge workers typically are paid more than others, so increasing their productivity is critical. As a result, there is broad interest in collaboration technologies that promise to improve these workers' efficiency and effectiveness. While the body of knowledge around the best use of such technologies is still developing, a number of companies have conducted experiments, as we see in the rapid growth rates of video and Web conferencing, expected to top 20 per cent annually during the next few years.

4. The growing ‘Internet of Things' The adoption of RFID (radio-frequency identification) and related technologies was the basis of a trend we first recognised as "expanding the frontiers of automation." But these methods are rudimentary compared with what emerges when assets themselves become elements of an information system, with the ability to capture, compute, communicate, and collaborate around information—something that has come to be known as the "Internet of Things." Embedded with sensors, actuators, and communications capabilities, such objects will soon be able to absorb and transmit information on a massive scale and, in some cases, to adapt and react to changes in the environment automatically. These "smart" assets can make processes more efficient, give products new capabilities, and spark novel business models. Auto insurers in Europe and the United States are testing these waters with offers to install sensors in customers' vehicles. The result is new pricing models that base charges for risk on driving behavior rather than on a driver's demographic characteristics. Luxury-auto manufacturers are equipping vehicles with networked sensors that can automatically take evasive action when accidents are about to happen. In medicine, sensors embedded in or worn by patients continuously report changes in health conditions to physicians, who can adjust treatments when necessary. Sensors in manufacturing lines for products as diverse as computer chips and pulp and paper take detailed readings on process conditions and automatically make adjustments to reduce waste, downtime, and costly human interventions.

5. Experimentation and big data Could the enterprise become a full-time laboratory? What if you could analyse every transaction, capture insights from every customer interaction, and didn't have to wait for months to get data from the field? What if…? Data are flooding in at rates never seen before—doubling every 18 months—as a result of greater access to customer data from public, proprietary, and purchased sources, as well as new information gathered from Web communities and newly deployed smart assets. These trends are broadly known as "big data." Technology for capturing and analysing information is widely available at ever-lower price points. But many companies are taking data use to new levels, using IT to support rigorous, constant business experimentation that guides decisions and to test new products, business models, and innovations in customer experience. In some cases, the new approaches help companies make decisions in real time. This trend has the potential to drive a radical transformation in research, innovation, and marketing.

Using experimentation and big data as essential components of management decision making requires new capabilities, as well as organisational and cultural change. Most companies are far from accessing all the available data. Some haven't even mastered the technologies needed to capture and analyse the valuable information they can access. More commonly, they don't have the right talent and processes to design experiments and extract business value from big data, which require changes in the way many executives now make decisions: trusting instincts and experience over experimentation and rigorous analysis. To get managers at all echelons to accept the value of experimentation, senior leaders must buy into a "test and learn" mind-set and then serve as role models for their teams.

6. Wiring for a sustainable world Even as regulatory frameworks continue to evolve, environmental stewardship and sustainability clearly are C-level agenda topics. What's more, sustainability is fast becoming an important corporate-performance metric—one that stakeholders, outside influencers, and even financial markets have begun to track. Information technology plays a dual role in this debate: it is both a significant source of environmental emissions and a key enabler of many strategies to mitigate environmental damage. At present, information technology's share of the world's environmental footprint is growing because of the ever-increasing demand for IT capacity and services. Electricity produced to power the world's data centers generates greenhouse gases on the scale of countries such as Argentina or the Netherlands, and these emissions could increase fourfold by 2020. McKinsey research has shown, however, that the use of IT in areas such as smart power grids, efficient buildings, and better logistics planning could eliminate five times the carbon emissions that the IT industry produces.

7. Imagining anything as a service Technology now enables companies to monitor, measure, customise, and bill for asset use at a much more fine-grained level than ever before. Asset owners can therefore create services around what have traditionally been sold as products. Business-to-business (B2B) customers like these service offerings because they allow companies to purchase units of a service and to account for them as a variable cost rather than undertake large capital investments. Consumers also like this "paying only for what you use" model, which helps them avoid large expenditures, as well as the hassles of buying and maintaining a product.

In the IT industry, the growth of "cloud computing" (accessing computer resources provided through networks rather than running software or storing data on a local computer) exemplifies this shift. Consumer acceptance of Web-based cloud services for everything from e-mail to video is of course becoming universal, and companies are following suit. Software as a service (SaaS), which enables organisations to access services such as customer relationship management, is growing at a 17 per cent annual rate. The biotechnology company Genentech, for example, uses Google Apps for e-mail and to create documents and spreadsheets, bypassing capital investments in servers and software licenses. This development has created a wave of computing capabilities delivered as a service, including infrastructure, platform, applications, and content. And vendors are competing, with innovation and new business models, to match the needs of different customers.

8. The age of the multisided business model Multisided business models create value through interactions among multiple players rather than traditional one-on-one transactions or information exchanges. In the media industry, advertising is a classic example of how these models work. Newspapers, magasines, and television stations offer content to their audiences while generating a significant portion of their revenues from third parties: advertisers. Other revenue, often through subscriptions, comes directly from consumers. More recently, this advertising-supported model has proliferated on the Internet, underwriting Web content sites, as well as services such as search and e-mail (see trend number seven, "Imagining anything as a service," earlier in this article). It is now spreading to new markets, such as enterprise software: Spiceworks offers IT-management applications to 950,000 users at no cost, while it collects advertising from B2B companies that want access to IT professionals.

9. Innovating from the bottom of the pyramid The adoption of technology is a global phenomenon, and the intensity of its usage is particularly impressive in emerging markets. Our research has shown that disruptive business models arise when technology combines with extreme market conditions, such as customer demand for very low price points, poor infrastructure, hard-to-access suppliers, and low cost curves for talent. With an economic recovery beginning to take hold in some parts of the world, high rates of growth have resumed in many developing nations, and we're seeing companies built around the new models emerging as global players. Many multinationals, meanwhile, are only starting to think about developing markets as wellsprings of technology-enabled innovation rather than as traditional manufacturing hubs.

10. Producing public good on the grid The role of governments in shaping global economic policy will expand in coming years. Technology will be an important factor in this evolution by facilitating the creation of new types of public goods while helping to manage them more effectively. This last trend is broad in scope and draws upon many of the other trends described above.