A number of things that people take for granted around the world are actually
merely expressions of popular perceptions of how risk is calculated, rather
than being outright expressions of such risk calculations carried out
objectively. That is guaranteed to be a controversial notion but arguably much
more logical, at least, than whatever passes for expertise in much of the media
The Japanese earthquake with its ensuing after-effects - natural (the
catastrophic tsunami) and artificial (the catastrophic nuclear plant
explosions) - has merely helped people to understand the dynamic in a more
holistic fashion. Reflecting on the after-effects of the quake, readers can
observe a now-familiar pattern of assumptions that center on the mythical
probabilities that underpin the logic of emergency response, but also evident
sectors as varied as nuclear plant safety and insurance company assumptions.
Nothing in this article is meant as an attack on the Japanese government or on
nuclear engineers, nor indeed on financial wizards sitting in insurance
companies. It is merely intended to elucidate the methodology behind some
complex decisions, some of which are later exposed to have been based on either
incorrect data or faulty process logic.
Writing in the Financial Times this week, an intellectually stimulating John
Kay points out:
Yet many unknown events are neither known or unknown.
We have general, but not very specific, ideas about what might happen. The
result may not be clear even after it has happened ... For half a century or
more, the prevailing doctrine has been that such issues can be pressed into a
probabilistic framework. If you frame appropriate questions - "What odds would
you take that Germany and Greece will have a common currency in 2020?" - and
press respondents hard, polite people will usually give answers. But such
answers are often inconsistent - a finding that is often interpreted as
demonstrating that the respondents are irrational. What it really tells us is
that probabilistic mathematics does not correspond to the way most people
think. We consider scenarios rather than probabilities, we review narratives
rather than contemplate quantitative outcomes. Perhaps this is because it is
the only way we can deal with a world of unknowns.
letter writer by the name of Neil Craig from the United Kingdom to Asia Times
Online on March 17th points out:
We see the "environmentalists" are
eager to talk about the Japanese catastrophe. Not the earthquake and tsunami
which looks to have killed 10,000 people, but the consequent reactor failure
which has caused neither death not injury to anybody. This ten thousandfold
lack of balance is typical of the way the word "nuclear" is reported as if it
were a form of black magic ... The LNT hypothesis has never been anything but
an evidence free scare story. Despite its "official" acceptance by government
apparatchiks in both the Soviet and "democratic" worlds it has never had any
scientific evidence whatsoever behind it.
The LNT - or linear
no threshold - hypothesis concerns radiation doses in humans, and particularly
the possibility of them causing damage at low levels.
What these writers highlight is that emotional reactions to natural
catastrophes and whatever follows from them all merely help to further skew
objective analysis that could be based on either data or rigorous science.
Example 1: Living in California : A primary example of a
situation when the difference between probabilities and scenario analysis
tinged with emotions comes to play would relate to the dangers of living in
California. Before one considers other dangers such as marijuana and Hollywood,
the focus of this article is on something far beyond human control namely the
movements and otherwise of tectonic plates. Wikipedia image of our planetís
Quotation The focus though is on a specific area, around the Pacific Ocean, in
what is known as the Ring of Fire for its series of submerged volcanoes and
fault lines. The ring of fire is represented in Wikipedia as follows:
Quotation More specifically, events since the beginning of 2010 have pointed to
increased activity in the ring of fire. A close up of the area shown in the
first picture highlights (through dark black lines) the quakes in Haiti (7.0,
January 2010), Chile (8.8, February 2010; 7.2, March 2010; 7.0, May 2010 and
July 2010), New Zealand (6.3, February 2011) and Japan (9.0, March 2011).
When presented with a series of such events and what little we know of the
planet's substrate tensions, it only would be logical to ponder on the "next
big one". Based on the trend, we can see that the likelihood of a the next one
being on the US West Coast and in particular along the San Andreas fault is at
least within the realm of probability.
We do not know enough about the transmission of substrate shocks, nor indeed
have a long enough series of accurate historical data, to map out the next
incidence of a quake. Estimation of losses to life and property are of course
even more difficult because minor (in the context of the size of our planet)
differences in the epicentre have logarithmically large effects on the damage.
This raises a number of questions, for example:
Policy quandary - Suppose you are a US government official in charge of
managing catastrophes (no, not you Treasury Secretary Geithner) and you were
presented the above information along with more rigorous scientific analysis
(which your correspondent here lacks) would you:
a. Escalate the risk assessment of California and organize evacuations?
b. Let the people know about elevated risk, increase preparations but avoid
c. Make all preparations for the "big one" but not explicitly inform people?
d. Do nothing different to avoid any panic?
Before indulging in a pure academic evaluation of each of these courses of
action, though, readers must also consider if (as a politician) any or more of
the following factors are applicable?
1. Is the official an incumbent, challenger or new person in the job?
2. The stage of economic recovery and/or decline with the estimated economic
impact of any action against inaction;
3. The spending environment particularly as regards non-essential services such
as "rainy day" preparation funds?
4. The integrity of the scientist making the assessment and credibility of data
5. Political and/or religious affiliation of the different parties (eg to
Given my understanding of California politics, the budget environment as well
as general atmospheric factors such as home price trends, the most logical
course of action would be for any government to follow the third option, viz
make the required preparations while avoiding a full panic through information
From that evolution of thinking, it is clear though that what appears to be a
logical course of action today will not quite be the same if disaster does
strike, and all good things forbid, a few hundred or thousand lives are lost
despite all the preparations. If handled properly and communicated adequately,
the "act of nature" will be quickly forgotten.
Another "Katrina moment" on the other hand is unlikely to be either forgotten
- The decision making is hard enough for someone who faces
the job of disclosing such sensitive information to the wider public. What
about the people who live in California? Anyone with cursory interest in
science as well as current affairs - admittedly not a whole lot of people these
days - would have significant doubts about living in the state given these
However, the decision framework for an individual is more complex rather than
less so, for any number of reasons:
a. Inertia arising from jobs and lifestyle: the most important factor keeping
young families in any place is of course the jobs and careers of the various
individuals in the family as well as the lifestyle choices. Uprooting one's
family based on a woolly expectation of distant disaster could lead to some
comic situations as well as family strife;
b. Inertia arising from miscalculated probability: as John Kay notes in the
article referred to earlier, human beings simply cannot handle probability
calculations. Within this category, it's more difficult to hang on to views of
extreme events happening when a series of events provides negative
reinforcement (eg no quake because there hasnít been one in your lifetime);
c. Inertia arising from natural optimism: behavioral science notes a number of
situations where people choose situations with adverse probabilities due to
optimism; thus even if the probability of an earthquake is calculated as
reasonably high there is a rationalization of minimal personal impact and
damage ("we are high up in the mountains);