Scenario accretion

One useful way of working with scenarios involves building on someone else’s.  For example, John Robb identifies a productive one from the Financial Times (source; might need login), then expands upon it from his own perspective.

Willem Buiter

I: Willem Buiter (who works at Citi) looks at how a Eurozone breakup might play out by first imagining different top-level possibilities.

A full or comprehensive break-up, with the euro area splintering into a Greater Deutschmark zone and about 10 national currencies would create pandemonium…
Exit, partial or full, would likely be precipitated by disorderly sovereign defaults in the fiscally and competitively weak member states, whose currencies would weaken dramatically and whose banks would fail…
If Spain and Italy were to exit…

Next Buiter focuses on one case, that of a Greek exit.  Note how he carefully breaks down steps over time.  Then he returns this partial example to the broader context, finding some interesting competition possibilities.  Buiter also splits his scenario by different causes, comparing voluntary with involuntary exits.

After this, Buiter presents other national cases (Italy, Germany), moving more quickly.

Note that Buiter offers quantified assessments of each event’s likelihood.

II: Robb’s additions are very different.  He writes Buiter and his population  (economists, analysts, financial leaders) into the story:

crisis and depression scenarios like this… are all presented as being on the cusp of occurring… Nobody “in charge” seems to be able to diagnose the real problems with our system.

Obviously this is a criticism both of scenario and system.

Similarly, Robb quickly analyses the scenario’s conclusions, again critically:

The solutions being proposed are either a) more confidence (through bailouts) and b) more confidence (through more deficit spending).  In other words:  the problem is merely psychological and all you and I need to do is take some anti-depressants to eradicate any lingering pessimism.

He also draws attention to one quiet part of Buiter’s scenario, again critically:

None of the bad actors that profit from the behavior that led us into this crisis, either in government or in the financial sector, are held to account. 

III: This could be a useful exercise for a group, presenting them with a scenario, then asking them to write to it in this style, a mix of analysis, criticism, and development.

Maybe it could go further, with each group’s work moved to another group for third-order response.  Actually, how far can this go?  Would a round robin scenario exercise have group benefits (for participants) and/or utility for outside audiences?

 

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