This page highlights some of the work of FinSTIC members. If you have content that you feel would be relevant to highlight to members of our community then please contact us
What is sustainability?
In November 2021, FinSTIC hosted a discussion what we mean when we mean when we talk about sustainability.
There was a presentation by Nico Aspinall, followed by a short discussion with Nick Silver (both members of FinSTIC) and later with questions from other attendees.
Public interest, purpose-driven institutions and the actuary as arbiter of the ethical process
In March 2021, Nico Aspinall, FinSTIC member presented at the Institute and Faculty of Actuaries Finance in the Public Interest webinar. His remarks from the webinar have now been collated into a paper (which can be found here). In this paper he argues that:
- The concept of the public interest aligns well with public goods, commons and externalities to business.
- That purpose-driven organisations treat these as external capitals they rely on rather than externalities they can ignore.
- That actuaries should see themselves as the arbiter of the processes an organisation takes to translate its stakeholders’ objectives into strategy.
- That ethics relates to the clarity of the actions an organisation takes and its purpose.
Along the way we will need to recapture a spirit of institutional subjectivity abandoned by a “market knows best” mentality
Redefining the purpose of the investment system: How can the investment industry drive capital to the investments needed to create a carbon-neutral society?
In December 2020, FinSTIC partnered with the Hoffman Centre for Sustainable Resource Economy at Chatham House.
When we invest, our monies pass through a complex chain of financial intermediaries to corporates or governments who are expected to be able to generate value over our investment timeframes. The purpose of this system is, arguably, to generate returns for investors commensurate with their risk appetites; over the long-term this should be consistent with driving capital to those entities that will thrive in a world converting to carbon-neutrality.
But in practice, does the structure and incentives of the industry prevent this happening? This event, hosted by Chatham House’s Hoffmann Centre for Sustainable Resource Economy and FinSTIC, explores the current structure of the investment industry through a systems lens.
How well does it work? Does the interaction of key participants result in financial flows being directed to long-term, carbon-neutral investments? Ultimately, what is the purpose of the investment system, and what changes in behaviours are required to achieve the necessary redirection of capital that the climate crisis urgently requires?
Below is a link to the recording of the event.
Thermodynamics, replication and ecology: what do they imply for economics?
FinSTIC hosted a seminar in September 2020 covering Thermodynamics, replication and ecology. A summary video of the event content is below by Nico Aspinall.
Ecology, Anthropology and Keynes “Animal Spirits” by M Bruce Beck
A couple of months ago Nico Aspinall presented the inaugural FinSTIC Seminar. It was on “Thermodynamics, Replication, and Ecology”, but driven by Nico’s question of “What Do They Mean for Economics?” (23 September, 2020) . The merit of the present blogpost originates in the grand sweep of Nico’s presentation and the contrast it provided. A sweep and contrast that have allowed me to put some of my own parallel (systems) thinking — about economics and actuarial practice — in better order.
Celestial Universe, Evolution, and the Climax Community
To go from the celestial universe to molecular biology and the code of life is really quite something. If, when such a grand sweep is driven by the second law of thermodynamics, in the interests of advancing economic thought and actuarial practice, it is yet something more. It is Systems Thinking. To loop over to the metaphors of ecological systems (as Nico did) is still more of what is, in fact, Systems Thinking of a cross-disciplinary nature.
The sense was this. Life is ever creating free energy. The second law of thermodynamics is thus driving an ecosystem, begun with pioneering types able to exploit abundant resources, ever inexorably towards the climax community. Which community is especially talented in creating systems of exquisitely intricate, inter-related structure, not least for storing the mobilised and captured resources. If this evolution were so, the behaviour of ecosystems — and economies (because they were the focal destination of Nico’s seminar) — would be dominated in turn by two classes of biological species and agents: the swashbuckling, risk-taking, pioneering types; and the “complexifying”, risk-managing, resource-conserving types.
So there can obviously be something significant about the evolutionary in economic thought and actuarial practice.
Animal Spirits and the Sociability of Beings
Along the way, however — in all of this evolution and biological life’s creative pursuit of thermodynamically free energy — some of those animal spirits of Keynes and the human propensities of Greenspan1 have inveigled their way in, not least in respect of we humans as social beings. How very inconvenient! How very disruptive. Like those all-too-familiar gales and avalanches of Schumpeterian creative destruction — if not Mazzucato’s “destructive creations”, or Buffett’s ur-alt “economic discontinuities” — which set seemingly inexorable progress back from time to time.
So when it comes to animal spirits and sociability, there also has to be something significant about the institutional in economic thought — something about how we organise ourselves into different groups (of “swashbucklers” and “complexifiers”, for instance); into businesses, IFoA’s, FinSTIC’s, and the like; into different ways of problem-solving; profoundly differing ways of making decisions; and just as profoundly different ways of economising. Into ways, in sum, deeply entrenched and solidified as so-called Durkheimian social solidarities (no less).
Something Obviously “Evolutionary” — and Something Not-so-obviously “Institutional” —About This Systems Thinking
As so often, things for me begin with Ecology. Usually they pass through and are greatly enriched by social Anthropology. At the FinSTIC website they must have something to say of Actuarial Practice. But to get to a way of infusing Keynes’ animal spirits into economic thought, and there addressing them, requires at bottom something from Neuroscience and the evolution of the body’s nervous system and brain functions. For it is from that destination that (conceptually) those animal spirits can be infused back into Economics, courtesy of the institutional embeddedness of Cultural Theory (from Social Anthropology).
I too (like Nico) am asking myself — or rather others, hopefully economists among them — just what might these things mean for Economics?
Appropriating Ecology; Pontificating on Economics
An acknowledgement, therefore, is necessary. A certain intellectual humility is indispensable to enquiry in this inter- and multi-disciplinary realm. I note thus these two things. First, “ecology”, with its ecosystems, must be one of the most appropriated disciplines of our time. If I declare myself as an engineer, and a control engineer (worse still), I can sense horror welling up in some ecologists. Second, if instead I were a trained economist, I would feel just a little irked by how many people from so very many other disciplines are for ever telling me what is the essence of “my” discipline.
And a third thing, for which I shall not apologise. I challenge anyone to say something of substance about Systems Thinking in less than 650 words, which is about what I have used up in coming just this far!
A Health Warning Too
To skim across the tops of Ecology, Anthropology, Actuarial Practice, Economics, Neuroscience, and Control Engineering — in the dozen or so additional pages of my supporting document — is to court obvious criticisms: of an excess of conceptual leaps in an argument spread molecularly thin over too many disciplines. It is essential, however, that I travel to such lengths at such considerable speed, to demonstrate adequately in one shortish document what I intend in the value of cross-disciplinary Systems Thinking.
My end-point images, of a hermit-like Adaptor strategy for decision-making and a mouse- or moose-like financial asset class, may evoke nothing but the haughty disbelieving scoff. By way of compensation, I provide an Appendix on what must pass for a “procedure” of cross-disciplinary Systems Thinking. I also offer indications of how each skimming touch of a discipline can be anchored in the basis of more substantial literature and reasoning, mostly in footnotes — including a retort to any haughty disbelieving scoff.
Bruce’s full paper can be found here.
1 Greenspan, A (2013), The Map and The Territory. Risk, Human Nature, and the Future of Forecasting, Penguin, New York.