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The Actuary The magazine of the Institute & Faculty of Actuaries

On the philosophical actuary

Hand grenade throwing as a college sport; What to say when you talk to yourself; European spoons before 1700; Enjoy your chameleon; Teach yourself alcoholism; Explosive spiders and how to make them; How to cook husbands; New corpus of Anglo-Saxon great square-headed brooches; Correct mispronunciations of some South Carolina names; Songs of a chartered accountant; Sex after death: these are all books assuredly published in London over the past century, according to the fascinating tome Bizarre books, by Russell Ash and Brian Lake. No doubt if there were to be a book entitled Actuarial applications of pre-Renaissance philosophy, we might hope to see it included in such a collection. But such a book, although unusual, might not be as dry or eccentric as the title would suggest. Philosophy helps us to consider ethical problems; philosophy helps us to think objectively about the assumptions underlying our everyday work; philosophy was even declared the winner at a recent debate hosted by The Economist, ‘Does economics need more maths, or more philosophy?’, as you may remember from the excellent July leader of my editorial colleague Seamus Creedon. What actuarial philosophers would appear in such a book? Indeed, who would qualify for the exciting sobriquet of ‘most actuarial philosopher’?An obvious contender is William of Ockham, born in the late 13th century. It was Ockham who stressed the need for simplicity in modelling, and ‘Ockham’s razor’ is a principle cherished by many a non-life pricing actuary (among others). Ockham expressed this principle in two ways: ‘plurality should not be posited without necessity’, and ‘it is useless to do with more what can be done with less’.Ockham also made notable contributions in other areas of interest to actuaries. He was one of the first thinkers to draw attention to induction (the basis of much of our parameterisation) as distinct from deduction. ‘Every individual of the same kind has an effect of the same kind’, he wrote in his Opera Theologica.Unfortunately, we may have to disqualify him on the grounds that he is what might be called an actuarial heretic: Ockham refused to recognise the existence of quantity, a position which led (because of its implications concerning transubstantiation) to his being investigated for heresy. Wherever would we actuaries be without quantities to quantify? Moving on, another candidate is the less obvious St Thomas Aquinas. His claim to actuarial-cum-philosophical fame lies principally in his writings on the virtue of prudence. In his monumental cathedral of medieval metaphysics, the 3,000-page Summa Theologica, Aquinas writes at length – as I suppose one would expect – of the cardinal virtues: prudence, fortitude, temperance, and justice (a list dating back at least to the time of Plato). What is surprising is the centrality that Aquinas accords to the virtue of prudence: he ranks it pre-eminent among the cardinal virtues, to the extent that the lack of prudence could make the result of exercising, for instance, fortitude a non-virtuous result. The Summa Theologica contains various interesting comments on prudence and foresight: for instance, ‘future contingents, in so far as they can be directed by man to the end of human life, are the matter of prudence’, and ‘the certitude of prudence cannot be so great as completely to relieve all anxiety’, which I suppose could be conveniently paraphrased as ‘the prudent man does not expect certainty’.However, Aquinas made some unfashionably deterministic remarks about fate while discussing the contention that ‘time and chance happen to all’ (see September editorial), and we may have to search for a more stochastically minded philosopher-hero.Perhaps a more actuarial choice would be Seneca, one of the most well known of the Stoic philosophers. Much of his philosophy is based on the application of prudence and foresight, often to alarmingly pessimistic extremes; at one stage, he writes: ‘Everlasting misfortune does have one blessing, that it ends up toughening those whom it constantly afflicts’ (a line which Nietzsche later adopted as his notorious ‘that which does not kill you only makes you stronger’, eventually to become the motto of Germany’s crack Grossdeutschland regiment, and since rumoured to have been adopted as a motto by the FSA).On the subject of chance and fortune, Seneca wrote at length: ‘Chance must necessarily have great influence over our lives, because we live by chance.… Never have I trusted fortune, even when she seemed to offer peace… [Fortune” falls heavily on those to whom she is unexpected: the man who is always expecting her easily withstands her.’The above is interesting, if not terribly profound, but there are two completely different reasons why we might wish to rank Seneca as the most actuarial of philosophers. Behind his ‘I care not for wealth’ façade, Seneca was actually an astute financier, who had made a large part of his fortune from running a loan business in Britain; his penal interest rate terms were thought to be one of the chief causes of Boudicca’s revolt against the Romans in ad60. And, just as significantly, Seneca was brother to the patron quasi-saint of actuarial dining clubs, Gallio (see Acts, ch 18). What reasons could be more appropriate?