Decision making under uncertainty: How can we make smart decisions?

Nidhi Kalra
Senior Decision Scientist, World Bank
Research

Nidhi Kalra, Senior Decision Scientist at the World Bank, introduces new methodologies to help policy-makers make better decisions when faced with uncertainty and disagreement. In a series of upcoming blog posts, she and her colleagues will present concepts and examples of how this innovative work is being applied on the ground.

Many investment and policy decisions will have long-term consequences. Infrastructure like bridges, roads, and dams often lasts for decades and need to be useful throughout their lifetimes. Near-term investments can shape development well beyond their lifetimes, sometimes for centuries, because the long-term socioeconomic system reorganizes itself around those near term changes.

Yet we live in an increasingly unpredictable world governed by competing beliefs and preferences. Many developing countries have experienced unprecedented and often unpredicted changes in their political economy, land use, demographics, and the natural environment. Today, there is scientific consensus that the planet is warming due to greenhouse gas emissions. Yet, there is tremendous uncertainty and disagreement among both scientists and policy makers about what the future climate will be in a particular region. There is also uncertainty about the specific effects that climate change will have on different sectors and groups. Moreover, parties to a decision often have competing priorities, beliefs, and preferences, making it difficult to reach consensus on a course of action. Climate change amplifies these differences, e.g. between conservation and development, between mitigation and adaptation, and between growing fast and growing clean.

Figure 1: Uncertainty and disagreement challenge good decision making. The first pair of figures shows Shanghai's rapid development in just twenty years, from 1990 to 2010, well within the lifetime of many investments.  The second pair of images illustrates the uncertainty about future climate change. Here, two models project significant and opposite changes in annual rainfall in Africa from 2080-2100 (relative to 1980-2000). The third pair of figures highlights the frequent conflict in priorities between conservation and development. Identifying sound long term decisions, and building consensus around them, is difficult amid these challenges, but better decision making processes can help.
  
At the World Bank, we’re asking: How can we make smart decisions amid these challenges?  We’ve found that the process by which we make decisions matters. How we use data, how we engage stakeholders, and how we use criteria to weigh options matter. In the World Bank’s Sustainable Development Network, we are tailoring and piloting methodologies that help manage uncertainty and disagreement. Many traditional approaches to decision making ask us to first reduce uncertainty by agreeing on current and future conditions, and then analyze our decision options. When faced with disagreement and uncertainty, these “Agree-then-Analyze” processes can encourage bias and gridlock, and lead us to brittle decisions. We can instead invert these steps, using on “Analyze-then-Agree” processes, in which we assess the merits of our decision options first, and build agreement around those that are robust -- working well in the widest range of potential conditions. Many of these approaches have already been applied in developed countries. We are tailoring them to the unique needs of the developing world.

Pilot studies have shown that by tackling decisions with “inverted” decision processes, we can:

  • Generate buy-in by including diverse beliefs and making analyses more transparent;
  • Identify strategies that are robust, performing well no matter what the future brings;
  • Focus decision makers’ attention on the tradeoffs between decision options;
  • Seek agreement where it matters most: on actions, rather than on predictions.

We are also training decision makers and analysts in the use of these methods. We have developed several training programs that use discussions, debate, and role play to help participants experience the challenges of uncertainty and disagreement, and to understand how new methods can help manage them. All of this work falls under a wider World Bank program on Data + Decision Making for Green Growth, an affiliated program of the GGKP. And so it was fitting that we launched our first training program at the GGKP Practitioners Workshop in Bogor, Indonesia in June, 2013. In the coming weeks, we will have a series of blog posts on these activities and how they can play a key role in realizing green growth.

Image sources:
Rapid changes:
http://www.skyscrapercity.com 
Competing priorities: 
http://commons.wikimedia.org/wiki/File:Rainforest_canopy.jpg
http://commons.wikimedia.org/wiki/File:Aerial_view_of_the_Civic_District,_Singapore_-_20110224.jpg
Uncertain future:
IPCC, 2007. Climate Change: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Solomon, S., Qin, D., Manning, M., Chen, Z., Marquis, M., Averyt, K.B., Tignor, M., Miller, H.L. (Eds.), Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, 996 pp.
Mangroves: 
http://commons.wikimedia.org/wiki/File:Mangrove_growth-isla_de_ratones_PR.jpg

Themes :
The opinions expressed herein are solely those of the authors and do not necessarily reflect the official views of the GGKP or its Partners.