06 Apr 2020 Some Notes on the Methodology of Actuarial Science

Dear Friends and Colleagues,

In researching and writing A History of British Actuarial Thought, I developed a habitual commitment to reading obscure actuarial papers as a form of relaxation. Once the book was published, I found I couldn’t quite kick the habit, but its focus evolved from the history of our subject – who did what when and why – to its methodology – how do we ‘do’ actuarial science, why do we do it that way, and are there alternative approaches that may offer a better chance of ‘success’ (whatever that means…).

To study methodology, I first tried to educate myself on the basics of the philosophy of science and the study of the scientific method. I then attempted to consider the methodology of our subject through that lens. I have now committed some thoughts on these topics to paper.

The work has two parts. Part One discusses the topics of philosophy of science that I judged may be germane to the methodology of actuarial science. This includes chapters dedicated to the philosophy of probability and the philosophy of economics, as well as broader discussions of the scientific method and its application in the natural and social sciences. Those who are already familiar with these topics, or who have no deep interest in them, may consider Part One as a sort of extended appendix, and jump straight to Part Two. Part Two contains the discussions specific to the methodology of actuarial science.

The analysis presented in Part Two may at times be viewed as somewhat contentious. There is, I would argue, little value in a discussion of methodology that does not provoke the practitioner into re-appraising at least some of their foundational working assumptions. As Bertrand Russell famously wrote more than a century ago, it is the purpose of philosophy to free our thoughts from the ‘tyranny of custom’.On The Methodology of Actuarial Science_07042020

In attempting to write this piece, another philosopher’s words also resonated: ‘writing a book on methodology requires the skills of an individual who is at once presumptuous and masochistic’. Whilst those who know me well will doubtless vouch for the presence of these character traits, I would nonetheless like to highlight that the thoughts recorded in this work are exploratory, tenuous and, no doubt, fallible. As such, I do not offer this work as a completed solution. Rather, I hope it may stimulate actuaries and others with an interest in their work to consider the questions that this analysis prompts and offer their own answers.

With that objective in mind, I have decided to share my work to date and invite you to take a look and share your thoughts with me and others. You can download it here: On The Methodology of Actuarial Science.

All the best,

Craig