søndag 30. mai 2010

Reflections on Risk

This morning, I ran the numbers on traffic fatalities in the US and Norway.

The background was a Charles Krauthammer's article in the Washington Post, "A disaster with many fathers", where he insinuates that there would be fewer oil spills if the oil companies were allowed easier access to other potential oil fields, in shallower water. To me, that's like saying that there would be fewer traffic accidents if roads were better and cars were cheaper, so drivers could afford to upgrade to newer, safer models.

This hypothesis is testable.
America, for example, has fantastically good roads, compared to Norway. Their fleet of cars is also much younger, thanks to the fact that cars cost next to nothing there.

Does this lead to fewer accidents? Apparently not. The US has
2,4-2,6 times more traffic related fatalities per inhabitant per year.

My first idea when I saw this number, must that it must be due to Americans driving more than Norwegians. Wouldn't better roads lead to more driving and then to more accidents? If so, that would be bad for Charles Krauthammer, since it would imply that better access to more oil fields would simply result in more drilling and more oil spills.

When I checked the numbers, it turned out that Americans do indeed drive more than Norwegians, but only enough to explain 15% of the effect.

My wife suggested that the remaining 85% difference might be due to higher fines and stricter law enforcement in Norway. It's true that the fines for speeding are higher here, but the enforcement is actually laxer: In Norway I see policemen doing speed checks once or twice a year, and in America I see them several times a day when I'm doing long road trips.

My conclusion is that the remaining 85% of the difference must be due to the fact that Americn drivers (just like Norwegians) compensate for better roads and cars by adapting their driving style to the perceived level of risk they're comfortable with, and that
Americans are collectively less risk-averse than Norwegians.

There's no reason that Americans in general would behave more responsibly in boardrooms than behind steering-wheels. What we really, really need to do, is to create systems of governance in the widest sense, that keep the risktakers out of positions where we can't afford to have them. Like in certain parts of the banking system, or behind automatic weapons. We need to limit their freedom, in order to preserve our own opportunities.

Why aren't Americans more risk-averse? Is it because America is populated by the descendants of people who preferred the risk of the great unknown, to the certainty of what they had at home?
If so, it's strange to see how strong the effect is, and just how Kraut-headed (sorry, but that pun was irresistible) Charles Krauthammer is in his belief.

How far does the Tea Party Movement want to go?

I've been having a discussion with some of my friends lately about the "Tea Party" movement, and their idea that we should promote individual freedom whenever we can. This is an intensely political question. Is there an easy answer anywhere? The "Tea Party" followers seem to think that there is.

Last night, I read Bob Herbert's article "An Unnatural Disaster" about the oil spill in the Gulf. It struck me immediately that this is an opportunity to discuss the balance between freedom and opportunity in our society: The freedom of for example BP to take risks, versus the opportunities of practically everyone else in the regional ecosystem.

This morning, I was offered Charles Krauthammer's article "A disaster with many fathers" as an alternative opinion the matter. I read it with great interest.

Both articles suffer from the same weakness: They've been written to please the demographic that already subscribes to each columnist's way of thinking. It's as if both of them know that there's thin ice out there in the middle of the lake, and none of them wants to go anywhere near it.

Bob Herbert's take on the issue, is to have more Government Control. I'm not sure that's the only answer. Government employees aren't always competent, and they can sometimes be bribed. My favourite book on the subject is Nevil Shute's autobiographical "Slide Rule", that details why the "capitalist" airship R100 flew as it should, while the government-built R101 went up in flames and killed 48 people.

Charles Krauthammer's views puzzle me more. He seems to be insinuating that the Deepwater Horizon accident was caused by drilling in unusually deep water, and that we'd all be safer if the oil companies were allowed to drill in more locations in shallow water. That is pure nonsense.

The Deepwater Horizon has precious little to do with the amount of water between the rig and the wellhead on the ocean floor, and everything to do with BP's willingness to take risks. At that critical moment in time, just before the well blew out, BP was comfortable with keeping only two cement plugs and a potentially compromised blowout preventer between themselves and disaster.

* They continued the drilling,in spite of the fact that the rubber seal in the blowout preventer was compromised (chunks of rubber were coming up),

* They continued with the drilling in spite of the fact that one of the actuators (there were two) for the preventer wasn't working properly, and

* They started replacing the heavy drilling mud with lighter salt water before placing the third and final cement plug that was supposed to seal the well.

(Source: "60 minutes" interview with surviving crew member and experts on offshore drilling safety).

This was a bit like making love with only two condoms and the ragged remains of a third, when they knew that the baby, if they sired one, was going to be another Adolf Hitler.

I've heard Bob Herbert described is a leftist. That's weird, seen from the European perspective. A real leftist would have argued that the government should not only be the one to decide how many condoms to use: It should also own the whole drilling operation. That's where I've always felt that leftists are delusional.

Krauthammer, on the other hand, is just as delusional if he thinks that oil companies will start behaving responsibly just as soon as they're allowed to drill in shallower water: That's almost like arguing that teenage boys will be less likely to lose their heads when girls have shorter skirts. Some boys will take reasonable precautions. Others won't, and that's how it is.

The question that ought to be discussed at the "Tea Party" is how to keep the latter out of the boardrooms, (or for instance how easy their access to handguns should be, to go off on a related tangent).

My view is that we need systems of governance that keep business (and not only people) in check, because businesses are led by people, and because some of them (like banks and oil companies) are capable of causing truly horrendous damage. However, even small businesses can cause damage that is serious for smaller communities, and since some businesses are led by idiots and other by crooks, there's no exempt them from oversight just because they're small.

What worries me about the "Tea Party" movement is that I only see them arguing one side of the equation: Towards fewer rules and less regulation. That's why I see them as anarchists and fundamentalists, more than right-wing extremists. What I'm wondering is: How far do they actually want to go? Do they think that the current oil spill in the Gulf is the result of an acceptable risk? Do they concede that society needs any safeguards at all against undue risk-taking or outright criminal behaviour on the part of businessmen and corporations? Where, in all the fogbank, do they want to draw the limits?

I agree with them that a simplified society with fewer rules is attractive. As a lawyer I have often despaired over the naive belief that some politicians have, that all problems can be solved if we only get enough rules. On the other hand, I haven't seen a single empirical study indicating that the societies that have the lowest number of rules, or the least amount of government oversight are the ones that function best.

I'm curious about all my friends' views on this.


:-J