Global uncertainty is the new normal. Here’s why institutional legitimacy and resilience is crucial

The world has never had more data, more models, or more economists. It has rarely felt more out of control. Uncertainty, not risk, has become the defining condition of our era. Central bankers invoke it. Political leaders use it to defer decisions and justify extraordinary decisions. Academics are struggling to adapt their theories to a brave new world of unexpected outcomes and erratic policy choices. The IMF’s World Uncertainty Index – which tracks how often the word appears in economic and political reporting across 143 countries – has been running at historically elevated levels for the better part of a decade, with fresh spikes after every major shock.

We seem to be living through a permanent emergency, and uncertainty is the buzzword, but what can we do about it? The answer is less complicated than the question suggests: societies that invest in strong, inclusive institutions weather uncertainty better than those that don’t.

The temptation, when uncertainty is this pervasive, is fatalism; if nothing can be predicted, nothing can be done except short-term fixes and profiteering. The US stock market is a case in point. Increasingly disconnected from the real economy , it is being driven by a wave of high-stakes bets on artificial intelligence: OpenAI, Anthropic, and now SpaceX are among the most anticipated IPOs of the decade, with valuations that price in a benign future of near-limitless technological returns. Markets actors are doubling down on optimistic predictions rather than preparing for disruption. Geopolitical risk, financial fragility, and the very uncertainty that defines this era are being systematically under-priced.

Distinguishing uncertainty from risk

But not everything qualifies as uncertainty. There is a difference between uncertainty and risk, and confusing the two leads to the wrong responses. Risk refers to situations where we do not know the outcome but can measure the odds. Insurance companies exist for a reason:…

Source