Starting with the near-disastrous failure to anticipate and manage the 2008 financial crisis and deepening during the chaos of the Trump era, international relations scholars have been struggling to deal with the limitations of our conceptual tools for understanding the endemic uncertainties of world politics. Peter Katzenstein, building on his earlier book that dismantled the rational expectations theory of market behavior, now offers this comprehensive, colorfully written manifesto for a philosophically sophisticated, pragmatically grounded approach to the unknown unknowns that repeatedly surprise and bedevil us.
Katzenstein diagnoses the original sin of scholars of world politics as their insistence on treating uncertainty as if it were mere risk. In situations of risk, the actor can never be sure of achieving the desired outcome, but adequate information allows calculation of the probability of outcomes associated with different courses of action. Uncertainty, in contrast, provides no sound basis for calculating probabilities. What is even worse, “only after the moment has passed, and the world has moved on, can we know with some confidence whether we were in the domain of risk or uncertainty” (p. 19). Many actors and scholars facing deep uncertainty tend to be overconfident about proceeding as if they are operating under calculable risk. Katzenstein’s book traces the destructive consequences of this analytic hubris in chapters on market turmoil, nuclear crisis behavior, global climate disaster, and the unintended consequences of advanced technology.
His prescriptive recommendation is to recognize that situations of true uncertainty are not amenable to simple cause-and-effect diagnosis and control. Instead, actors and scholars should stay open to agile adaptation, looking for opportunities for improvisational, innovative responses to unforeseeable challenges. Trial and error are inevitable, because “there is no master plan” (p. 224). These are problems to be lived with and managed by focusing on nimble adaptive processes, not structures that create a framework of predictable control. We should be foxes, not hedgehogs.
Stressing the importance of pragmatic “worldviews” as a foundation for common sense, Katzenstein begins with a remarkably lucid, accessible discussion of the ideas of Wilhelm Dilthey, Max Weber, Martin Heidegger, and Thomas Kuhn. I would have liked to see also a discussion of Imre Lakatos, who took seriously the idea that scientific paradigms rise and fall based not only on subjective mental constructs but also on objective research findings on big questions. Katzenstein distinguishes between small, circumscribed problems whose narrow parameters permit calculations based on risk as opposed to uncertain, hopelessly complex, causally entangled “big worlds” that can be navigated in real time but not reduced to a planned itinerary. He observes that Kenneth Waltz overlooks the indeterminacy of oligopolistic competition in the big world of the balance of power.
The title of another theory chapter promises a discussion of “storytelling” and “narrative,” noting how children instinctively learn to order their disorderly world. He laments the inadequacy of theories as abstractions and favors instead scientific models as purpose-built pragmatic tools. What he does not explore are literary narrative forms that engage interest, channel thought, and establish public common knowledge through indelible tropes of plot conflict and character development, as in the Greek myths and Uncle Tom’s Cabin.
The lead empirical chapter shows compellingly how the rational expectations model of risk calculation led the financial system to the brink of self-destruction. His account of investment ratings agencies as a social convention that “exist to transform uncertainty into risk” is a pure gem. He shows how traders gamed this system to “create the very uncertainties that their trading risk is supposed to mitigate” (p.129).
A chapter on nuclear weapons strategy recounts hair-raising near accidents during the Cuban missile crisis and hyper-rationalist US Defense Secretary Robert McNamara’s emotional meltdown during deliberations of President Kennedy’s ExComm. Katzenstein picks apart flawed attempts to control events through the application of technical rationality and extolls instead the success of “learning by doing,” asserting that the deft use of “language cut to the core of the crisis” (p. 203). On the plane of theory, he reports that Thomas Schelling’s works on nuclear coercive bargaining invoke “risk” 102 times, but “uncertainty” only 10 times (p. 181). However, he praises Schelling’s argument about the “threat that leaves something to chance,” acknowledging that this is a cut far above Herman Kahn’s wooden escalation ladder (p. 208). Fortunately, Robert Jervis’s later writing on nuclear deterrence built on Schelling’s best insights, which Jervis taught to generations of international security scholars like Colin Kahl, who was the top Defense Department official cautiously managing escalation risks during the most volatile stage of the Ukraine war. Officials like Kahl understood that this required exercising judgment in the domain of uncertainty, not just risk. Their logically coherent theories of the security dilemma, shared risk of escalation, salami tactics, and perceptual heuristics and biases were in routine use in winning internal debates among Biden administration policymakers.
A future-oriented chapter takes up the problems of grappling with the uncertainties of global climate change and artificial intelligence. The thoroughly researched climate discussion recounts the inadequate payoff from theory-based engineering and economic approaches. What has been missing, Katzenstein suggests, are politically attuned, pragmatic, problem-solving practices (p. 187). An especially interesting discussion of the holistic Gaia idea is perhaps the book’s best illustration of why high uncertainty “big worlds” cannot be comprehended through the tools of systems theory. The biosphere is not “stable, passive, and inert” but “unstable, active, and mobile, marked by multiple processes and agents operating at different temporal scales,” he explains. “There is no holistic totality for planet Earth. Yet no part exists apart from the whole” (p. 199). The AI discussion concludes with the question of “why humans so persistently make the same mistake—overestimating their ability to predict and control futures” (p. 217). Arguably, this is a question on which the most headway has been achieved by normal science laboratory psychology work on “overconfidence bias.”
The book wraps up with a plea for “the unity of knowledge” as a quest, not a result; eclecticism and experimentalism; various improvised forms of coping with the risk-uncertainty problem; complementarity of risk and uncertainty from a pragmatic perspective; and recognition of overlap between scientific and religious worldviews (p. 311).
Katzenstein is convincing in directing attention to the distinctive character of uncertainty in action and theory. His preferred solution of nimble, opportunistic adaptation is certainly on the list of strategies for coping with uncertainty, but his unity of knowledge stance does not preclude other established solutions that overlap with his own insights. Robert Jervis’s psychology book stresses the need to “keep an open mind” but also explains why people’s need for cognitive shortcuts works against this. Jervis’s system effects book stresses the need to “do two things at once”: one to move toward the goal and another to fend off systemic reactions to the change. Less cognitively challenging expedients mentioned by Katzenstein include Herbert Simon’s organizational routines of “satisficing” rather than optimizing decisions, as well as the practice of distributing single goals to different parts of the organization, which ignore hard-to-calculate tradeoffs with other goals. Katzenstein also notes John Steinbruner’s Cybernetic Theory of Decision, which shows how routine feedback processes sustain normal functionality despite uncertainty. When such systems are overwhelmed by novel challenges, Jonathan Mercer notes the adaptive role of emotional salience in funneling the decider’s attention to the most vital threats. Theories of bounded rationality show how uncertainty can be accommodated without requiring a wholesale abandonment of purpose-driven calculation. Most of these existing solutions to complexity and uncertainty are intended for decision-making in a broad range of circumstances, not only the problem of risk versus uncertainty. They emerged from established disciplinary research programs in organization theory, decision theory, psychology, or behavioral economics, and they typically take care to specify hypotheses and mechanisms.
Katzenstein’s book is light on institutions, favoring a more free-wheeling style of process that gives more latitude to unfettered agency. This differs from the many scholars of international political economy who still adhere to some version of John Ruggie’s “embedded liberalism,” which seeks to institutionalize markets in a Keynesian democratic welfare state. This staple Cold War era formula manages uncertainty by combining the strategy of institutional routinization with the strategy of nimble trial-and-error adjustments by empowered experts. This approach is possibly at odds with Katzenstein’s assumptions that the world is too turbulent a place to reliably channel agency through an institutional straitjacket. Meanwhile, he might expect that experts will fail on their end by trying to force uncertainty into the mold of risk. In our era of revolutionary disruption, this is the kind of debate we should be having.
