Saturday


past and future

In my last post, The Retrodiction Wall, I introduced several ideas that I think were novel, among them:

A retrodiction wall, complementary to the prediction wall, but in the past rather than the present

A period of effective history lying between the retrodiction wall in the past and the prediction wall in the future; beyond the retrodiction and prediction walls lies inaccessible history that is not a part of effective history

A distinction between diachronic and synchronic prediction walls, that is to say, a distinction between the prediction of succession and the prediction of interaction

A distinction between diachronic and synchronic retrodiction walls, that is to say, a distinction between the retrodiction of succession and the retrodiction of interaction

I also implicitly formulated a principle, though I didn’t give it any name, parallel to Einstein’s principle (also without a name) that mathematical certainty and applicability stand in inverse proportion to each other: historical predictability and historical relevance stand in inverse proportion to each other. When I can think of a good name for this I’ll return to this idea. For the moment, I want to focus on the prediction wall and the retrodiction wall as the boundaries of effective history.

The retrodiction wall in the past and the prediction wall in the future mask inaccessible portions of history from us.

The retrodiction wall in the past and the prediction wall in the future mask inaccessible portions of history from us.

In The Retrodiction Wall I made the assertion that, “Effective history is not fixed for all time, but expands and contracts as a function of our knowledge.” An increase in knowledge allows us to push the boundaries the prediction and retrodiction walls outward, as a diminution of knowledge means the contraction of prediction and retrodiction boundaries of effective history.

certainty risk uncertainty

We can go farther than this is we interpolate a more subtle and sophisticated conception of knowledge and prediction, and we can find this more subtle and sophisticated understand in the work of Frank Knight, which I previously cited in Existential Risk and Existential Uncertainty. Knight made a tripartite distinction between prediction (or certainty), risk, and uncertainty. Here is the passage from Knight that I quoted in Addendum on Existential Risk and Existential Uncertainty:

1. A priori probability. Absolutely homogeneous classification of instances completely identical except for really indeterminate factors. This judgment of probability is on the same logical plane as the propositions of mathematics (which also may be viewed, and are viewed by the writer, as “ultimately” inductions from experience).

2. Statistical probability. Empirical evaluation of the frequency of association between predicates, not analyzable into varying combinations of equally probable alternatives. It must be emphasized that any high degree of confidence that the proportions found in the past will hold in the future is still based on an a priori judgment of indeterminateness. Two complications are to be kept separate: first, the impossibility of eliminating all factors not really indeterminate; and, second, the impossibility of enumerating the equally probable alternatives involved and determining their mode of combination so as to evaluate the probability by a priori calculation. The main distinguishing characteristic of this type is that it rests on an empirical classification of instances.

3. Estimates. The distinction here is that there is no valid basis of any kind for classifying instances. This form of probability is involved in the greatest logical difficulties of all, and no very satisfactory discussion of it can be given, but its distinction from the other types must be emphasized and some of its complicated relations indicated.

Frank Knight, Risk, Uncertainty, and Profit, Chap. VII

This passage from Knight’s book (as the entire book) is concerned with applications to economics, but the kernel of Knight’s idea can be generalized beyond economics to generally represent different stages in the acquisition of knowledge: Knight’s a priori probability corresponds to certainty, or that which is so exhaustively known that it can be predicted with precision; Knight’s statistical probably corresponds with risk, or partial and incomplete knowledge, or that region of human knowledge where the known and unknown overlap; Knight’s estimates correspond to unknowns or uncertainty.

Frank Knight's tripartite distinction among certainty, risk, and uncertainty can be employed in a decomposition of the epistemic continuum into the knowable, the partially knowable, and the unknowable.

Frank Knight’s tripartite distinction among certainty, risk, and uncertainty can be employed in a decomposition of the epistemic continuum into the knowable, the partially knowable, and the unknowable.

Knight formulates his tripartite distinction between certainty, risk, and uncertainty exclusively in the context of prediction, and just as Knight’s results can be generalized beyond economics, so too Knight’s distinction can be generalized beyond prediction to also embrace retrodiction. In The Retrodiction Wall I generalized John Smart‘s exposition of a prediction wall in the future to include a retrodiction wall in the past, both of which together define the boundaries of effective history. These two generalizations can be brought together.

Effective history lies between the brick walls of prediction and retrodiction.

Effective history lies between the brick walls of prediction and retrodiction.

A prediction wall in the future or a retrodiction wall in the past are, as I noted, functions of knowledge. That means we can understand this “boundary” not merely as a threshold that is crossed, but also as an epistemic continuum that stretches from the completely unknown (the inaccessible past or future that lies utterly beyond the retrodiction or prediction wall) through an epistemic region of prediction risk or retrodiction risk (where predictions or retrodictions can be made, but are subject to at least as many uncertainties as certainties), to the completely known, in so far as anything can be completely known to human beings, and therefore well understood by us and readily predictable.

If we open up the prediction wall or the retrodiction wall and allow them to be thick, we can interpolate Knight's tripartite epistemic continuum into both the boundary of future knowledge and the boundary of past knowledge.

If we open up the prediction wall or the retrodiction wall and allow them to be thick, we can interpolate Knight’s tripartite epistemic continuum into both the boundary of future knowledge and the boundary of past knowledge.

Introducing and integrating distinctions between prediction and retrodiction walls, and among prediction, risk and uncertainty gives a much more sophisticated and therefore epistemically satisfying structure to our knowledge and how it is contextualized in the human condition. The fact that we find ourselves, in medias res, living in a world that we must struggle to understand, and that this understanding is an acquisition of knowledge that takes place in time, which is asymmetrical as regards the past and future, are important features of how we engage with the world.

This process of making our model of knowledge more realistic by incorporating distinctions and refinements is not yet finished (nor is it ever likely to be). For example, the unnamed principle alluded to above — that of the inverse relation between historical predictability and relevance, suggests that the prediction and retrodiction walls can be penetrated unevenly, and that our knowledge of the past and future is not consistent across space and time, but varies considerably. An inquiry that could demonstrate this in any systematic and schematic way would be more complicated than the above, so I will leave this for another day.

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Grand Strategy Annex

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Wednesday


Eighth in a Series on Existential Risk:

risk_diagram

Every Risk is also an Opportunity


It is a commonplace that every risk is an opportunity, and every opportunity is a risk; risk and opportunity are two sides of the same coin. This can also be expressed by distinguishing negative risk (what we ordinarily call “risk” simpliciter) and positive risk (what we ordinarily call “opportunity”). What this means in terms of existential thought is that every existential risk is an existential opportunity, and existential opportunity is at the same time an existential risk.

If we understand by risk the uncertainty of frequency and uncertainty of magnitude of future loss, then by opportunity we should understand the uncertainty of frequency and uncertainty of magnitude of future gain. The relative probability of a loss is offset by the relative probability of a gain, and the relative probability of a gain is offset by the relative probability of a loss; both are calculable; both are, in principle, insurable. Thus these risks and opportunities represent the subset of uncertainties that present actionable mitigation strategies. Where uncertainty exceeds the possibility of actionable mitigation, we pass beyond insurable risk to uncertainty proper.

In existential risk scenarios, our very existence is at stake; in existential opportunity scenarios, again, our very existence is at stake. To formulate this parallel to the above, we can assert that existential risk is the uncertainty of frequency and uncertainty of magnitude of future loss of earth-originating life and civilization, while existential opportunity is the uncertainty of frequency and uncertainty of magnitude of future gain for earth-originating life and civilization. In formulating the existential condition of humanity, there is little that is risk sensu stricto, since much of the big picture of the human future is given over to uncertainty that lies beyond presently actionable risk. However, the calculus of risk and reward remains, even if we are not speaking strictly of risk that can be fully calculated and thus fully insured. In other words, the existential uncertainties facing humanity admit of a distinction between positive uncertainties and negative uncertainties. Any valuation of this kind, however, is intrinsically disputable and controversial.

Given that our very existence is at stake in existential opportunity no less than in existential risk, a future defined by the realization of an existential opportunity might be unrecognizable as a human future. Indeed, the realization of an existential opportunity might be every bit as unrecognizable as the realization of an existential threat, which means that the two futures might be indistinguishable, which means in turn that existential opportunity might be mistaken for existential risk, and vice versa.

Faced with a stark choice (i.e., faced with an existential choice), I think few would choose extinction, flawed realization, permanent stagnation, or subsequent ruination over species survival, flawless realization, permanent amelioration, or subsequent escalation. (If, in moments of decision in our life, we make our choice in fear and trembling, how must we fear and tremble in moments of decision for our species?) Any such choice, however, is not likely to be visited upon us in this form.

Much more likely that an explicit choice between an utopian future of astonishing wonders and a dystopian future of dismal oppression is an imperceptibly gradual process whereby a promising future suggests certain day-to-day decisions (seemingly seizing an opportunity) which lead incrementally to a future with unintended consequences that greatly outweigh the promises that prompted the daily decisions that led to the future in question. This is how history generally works: by degrees, and not by intention. (Notwithstanding the Will Durant quote — “The future never just happened, it was created.” — that I mentioned in Predicting the Human Future in Space.)

In so far as industrial-technological civilization continues its exponential growth of technology (growing incrementally and often imperceptibly by degrees, and not always by intention), and therefore also the growth of human agency in shaping our environment, the expanding scope of this civilization will mitigate certain existential risks even as it exposes humanity to new and unprecedented risks. That is to say, industrial-technological civilization itself is at once both a risk and an opportunity. Civilization centered on escalating industrial-technological development exposes us to escalating industrial accidents and unintended consequences of technology, unprecedented pollution from industrial processes, changes in our way of life, and indeed changes to our very being as a result of the technological transformation of humanity (i.e., transhumanism).

At the same time, escalating industrial-technological development offers the unprecedented possibility of a spacefaring civilization, which could establish earth-originating life off the surface of the earth and thereby secure the minimum redundancy necessary to the long-term survival of such life. The transition of the terrestrial economy to an economy fully integrated with the industrialization of space — a process that I have called extraterrestrialization — could not take place without the advent of industrial-technological civilization.

Yet the expansion of business operations and interests into extraterrestrial space is a paradigm of uncertainty — no such effort has been made on a large scale, and so the risks of such an enterprise are unknown and cannot be calculated, fully managed, or insured against. Space operations therefore exemplify uncertainty rather than risk, and for the same reason that such operations are uncertain, their execution is potentially beset with contingencies unknown to us today. This does not make such an enterprise is too risky to contemplate — this is the only imaginable contribution that industrial-technological civilization can make to the long-term survival of earth-originating life — but we must undertake such enterprises without illusions or the subsequent losses endured may become socially unsustainable leading to the end of the enterprise. Subsequent unforeseen losses resulting from the transition to a spacefaring civilization may even be interpreted as a form of subsequent ruination, and thereby conceived by many as an existential threat. How we understand existential risk, then, affects what we understand to be a risk and what we understand to be a reward.

In the larger context of industrial-technological civilization we can identify individual industries and technologies that represent in themselves both risks and opportunities. The most fantastic speculations of transhumanist utopias, like the most dismal speculations on transhumanist dystopias, constitute unprecedented opportunities (or risks) implied by the present trajectories of technology. One of the best examples of risk and opportunity in future technology are the possibilities of nano-scale robots. The development of nano-scale robots could, on the one hand, provide for unprecedented medical technologies — robots that could be injected like an inoculation which would treat medical conditions from the inside out, repairing the body on a microscopic scale and potentially greatly improving health and extending longevity. On the other hand, nano-scale robots loose in the biosphere could potentially cause great harm. if not havoc, perhaps even resulting in a gray goo scenario.

In so far as any proposed existential risk mitigation initiatives prioritize safety over opportunity, any concern for existential risk could itself become an existential risk by lending support for policies that address risk through calculated stagnation instituted as a risk-averse response to existential threats. The question then becomes how humanity can lower its exposure to existential risks without reducing its existential opportunities. The attempt to answer this question, even if it does not issue in clear, unambiguous imperatives, may at least provide a framework in which to conceptualize problematic scenarios for the human future that some may identify as desirable while others would identify the same as a moral horror — such as transhumanism.

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danger imminent existential threat

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Existential Risk: The Philosophy of Human Survival

1. Moral Imperatives Posed by Existential Risk

2. Existential Risk and Existential Uncertainty

3. Addendum on Existential Risk and Existential Uncertainty

4. Existential Risk and the Death Event

5. Risk and Knowledge

6. What is an existential philosophy?

7. An Alternative Formulation of Existential Risk

8. Existential Risk and Existential Opportunity

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ex risk ahead

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Grand Strategy Annex

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Tuesday


Earth and the moon in one frame as seen from the Galileo spacecraft 6.2 million kilometers away. (from Picture of Earth from Space by Fraser Cain)

Earth and the moon in one frame as seen from the Galileo spacecraft 6.2 million kilometers away. (from Picture of Earth from Space by Fraser Cain)

In my post Existential Risk and Existential Uncertainty I cited Frank Knight’s distinction between risk and certainty and attempted to apply this to the idea of existential risk. I suggested that discussions of existential risk ought to distinguish between existential risk (sensu stricto) and existential uncertainty.

In Knight’s now-classic work Risk, Uncertainty, and Profit, Frank Knight actually made a threefold distinction in the kinds of probabilities that face the entrepreneur:

1. A priori probability. Absolutely homogeneous classification of instances completely identical except for really indeterminate factors. This judgment of probability is on the same logical plane as the propositions of mathematics (which also may be viewed, and are viewed by the writer, as “ultimately” inductions from experience).

2. Statistical probability. Empirical evaluation of the frequency of association between predicates, not analyzable into varying combinations of equally probable alternatives. It must be emphasized that any high degree of confidence that the proportions found in the past will hold in the future is still based on an a priori judgment of indeterminateness. Two complications are to be kept separate: first, the impossibility of eliminating all factors not really indeterminate; and, second, the impossibility of enumerating the equally probable alternatives involved and determining their mode of combination so as to evaluate the probability by a priori calculation. The main distinguishing characteristic of this type is that it rests on an empirical classification of instances.

3. Estimates. The distinction here is that there is no valid basis of any kind for classifying instances. This form of probability is involved in the greatest logical difficulties of all, and no very satisfactory discussion of it can be given, but its distinction from the other types must be emphasized and some of its complicated relations indicated.

Frank Knight, Risk, Uncertainty, and Profit, Chap. VII

At the end of the chapter Knight finally made his point fully explicit:

It is this third type of probability or uncertainty which has been neglected in economic theory, and which we propose to put in its rightful place. As we have repeatedly pointed out, an uncertainty which can by any method be reduced to an objective, quantitatively determinate probability, can be reduced to complete certainty by grouping cases. The business world has evolved several organization devices for effectuating this consolidation, with the result that when the technique of business organization is fairly developed, measurable uncertainties do not introduce into business any uncertainty whatever. Later in our study we shall glance hurriedly at some of these organization expedients, which are the only economic effect of uncertainty in the probability sense; but the present and more important task is to follow out the consequences of that higher form of uncertainty not susceptible to measurement and hence to elimination. It is this true uncertainty which by preventing the theoretically perfect outworking of the tendencies of competition gives the characteristic form of “enterprise” to economic organization as a whole and accounts for the peculiar income of the entrepreneur.

Frank Knight, Risk, Uncertainty, and Profit, Chap. VII

Knight’s distinction between risk and uncertainty — between probabilities that can be calculated, managed, and insured against and probabilities that cannot be calculated and therefore cannot be managed or insured against — continues to be taught in business and economics today. (It is a distinction closely parallel to Rumsfeld’s distinction between known unknowns and unknown unknowns, though worked out in considerably greater detail and sophistication.) Knight’s slightly more subtle threefold distinction among probabilities might be characterized as a tripartite distinction between certainty, risk, and uncertainty.

Knight acknowledges, in his account of statistical probability, i.e., risk, that there are at least two complications:

1. that of eliminating all truly indeterminate features, and…

2. the impossibility of enumerating the equally probable alternatives involved

Knight’s hedged account of risk obliquely acknowledges the gray area that lies between risk and uncertainty — a gray area that can be enlarged in favor of risk as our knowledge improves, or which can be enlarged in favor of uncertainty as additional complicating favors enter into our calculation of risk and render our knowledge less effective and our uncertainty all the greater. That is to say, the line between risk and uncertainty is unclear, and it can move, which makes it doubly ambiguous.

certainty risk uncertainty

These hedges are important qualifications to make, because we all know from real-life experience that additional complicating factors always enter into actual risks. We may try to insure ourselves, and therefore to secure our interests against risk, but fine print in the insurance contract may deny us a settlement, or we may have forgotten to pay our premiums, or a thousand other things might go wrong between our careful planning and the actual events of life that so often preempt our planning and force us to deal with the unexpected with insufficient preparation. As Bobby Burns put it, “The best laid schemes o’ Mice an’ Men, Gang aft agley, An’ lea’e us nought but grief an’ pain, For promis’d joy!”

field_mouse small

Such consideration span the entire universe from field mice to galaxies. A coldly rational assessment of risk can be made, and resources can be expended to mitigate risk to the extent calculated, but not only are the limits to our knowledge, but we don’t know where the limits to our knowledge lie. Indeterminate features can creep into our calculation and equally probable alternatives could be in play without our even being aware of the fact.

Some events that pose existential risks or global catastrophic risks can be predicted with a high degree of accuracy, and some cannot. Even about those risks that seem predictable to a high degree of accuracy — say, the life of the sun, which can be predicted on the basis of our knowledge of cosmology, and which thereby would seem to give us some knowledge of how long a time we have on earth to lay our schemes — admit of indeterminate elements and equally probably scenarios. The end of the earth seems a long way off, if the earth lasts almost as long as the sun, and putting our existential risk far in the future seems to diminish the threat.

There is a famous quote from Frank Ramsey (who died tragically young in a mountain climbing accident, as might happen to anyone, anytime) that is relevant here, both economically and philosophically:

My picture of the world is drawn in perspective and not like a model to scale. The foreground is occupied by human beings and the stars are all as small as three-penny bits. I don’t really believe in astronomy, except as a complicated description of part of the course of human and possibly animal sensation. I apply my perspective not merely to space but also to time. In time the world will cool and everything will die; but that is a long time off still and its present value at compound discount is almost nothing.

From a paper read to the Apostles, a Cambridge discussion society (1925). In ‘The Foundations of Mathematics’ (1925), collected in Frank Plumpton Ramsey and D. H. Mellor (ed.), Philosophical Papers (1990), Epilogue, 249

Despite Ramsey having referred (in another context) to the “Bolshevik menace” of Brouwer and Weyl, it has been said that Ramsey became a constructivist not long before he died. This conversion should not surprise us, given Ramsey’s Protagorean profession in his passage.

Protagoras famously said that Man is the measure of all things, of those things that are, that they are, and of those things that are not, that they are not. (πάντων χρημάτων μέτρον ἐστὶν ἄνθρωπος, τῶν μὲν ὄντων ὡς ἔστιν, τῶν δὲ οὐκ ὄντων ὡς οὐκ ἔστιν.) Protagoras may be counted as the earliest of proto-constructivists, of which company Kant and Poincaré may be considered the most famous.

In the passage quoted above, Ramsey is essentially saying in a modern idiom that man is the measure of all things, even of time and space — that man is the measure of the farthest reaches of time and space, and in so far as these distant prospects of human experience are inaccessible, they are irrelevant. Ramsey is important in his respect because of his consciously chosen anthropocentrism. In a post-Copernican age, this is significant. We are all, of course, familiar with the advocates of the anthropic cosmological principle, and their implicit anthropocentrism, but Ramsey gives us a slightly different perspective on anthropocentrism. Ramsey essentially brings constructivism to our moral life, and in so doing suggests that the moral imperatives posed by existential risk can be safely ignored for the time being.

What Ramsey is saying here is that we can make a definite calculation of the lives of the stars — and also the expected life of our sun — and that we can insure against this risk, but that the risk lies so far in the future that its present value is practically nil. In other words, the eventual burning out of the sun is a risk and not an uncertainty. On the contrary, it is not an uncertainty at all, but a certainty. Just as the finite amount of oil on Earth must eventually come to an end, the finite sun must also come to an end.

What our growing knowledge of cosmology is teaching us is that we are not isolated from the wider universe. Events on a cosmic scale have influenced the development of life on earth, and may well be responsible for our development as a species. If the earth had not been hit by an asteroid or comet about 65 million years ago, mammals may never have developed as they did, and we would not exist. And if our solar system did not bob up and down through the galactic plane of the Milky Way, resulting in geophysical rhythms from the the gravitational interaction with the rest of the galaxy, a distant asteroid of comet might not have been dislodged from its stable orbit and sent careening toward earth.

Given our connection with the wider universe, and our vulnerability to its convulsions, what we know about our local risks (which is not nearly enough, as recent unpredicted episodes have shown us) is not enough to make a calculation of our vulnerability. What appears superficially to be a calculable risk has uncertainty injected back into it by the cosmological context in which all astronomical events take place.

If the death of the sun were the only existential risk against which we needed to insure ourselves, we would not need to be in any hurry about existential risk mitigation, because we would have literally millions of years to build a spacefaring civilization and thus to insure ourselves against that predictable catastrophe. But in our violent universe (as Nigel Calder called it) scarcely a million years goes by without some cosmic catastrophe occurring, and we don’t know when then next one will arrive.

Carl Sagan rightly pointed out that an event that is unlikely to happen in a hundred years may be inevitable in a hundred millions years:

The Earth is a lovely and more or less placid place. Things change, but slowly. We can lead a full life and never personally encounter a natural disaster more violent than a storm. And so we become complacent, relaxed, unconcerned. But in the history of Nature, the record is clear. Worlds have been devastated. Even we humans have achieved the dubious technical distinction of being able to make our own disasters, both intentional and inadvertent. On the landscapes of other planets where the records of the past have been preserved, there is abundant evidence of major catastrophes. It is all a matter of time scale. An event that would be unthinkable in a hundred years may be inevitable in a hundred million.

Carl Sagan, Cosmos, Chapter IV, “Heaven and Hell”

Perhaps in one of his most quoted lines, Sagan said that we are “star stuff,” and certainly this is true. However, the corollary of this inspiring thought is that our star stuff is subject to the natural forces that shape the destinies of stars, and in shaping the destiny of stars, shape the destiny of men who live on planets orbiting stars.

Understanding ourselves as “star stuff” entails understanding ourselves as living in a dangerous universe replete with devouring black holes, gamma ray bursts, supernovae, and other cataclysms almost beyond the capacity of human beings to conceive.

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Tuesday


Voltaire famously said of the Holy Roman Empire that it was neither holy, nor Roman, nor an empire. In a similar spirit we might say of the “Patient Protection and Affordable Care Act” (apparently named by the shade of Kafka) that it will not protect patients, that it will not make health care more affordable, that it is not about care, and it is not even an act — rather, it is an excuse for legislative inaction. It is as though someone proposed “solving” the problem of homelessness by passing a law that every homeless person must either buy a house or rent an apartment or face a fine. Great. Problem solved.

With the US Supreme Court hearing arguments on the constitutionality of the provisions of PPACA, political rhetoric is heating up and the news stories are flying thick and fast. I don’t have much confidence that the Supreme Court will decide the case on the constitutional merits — this is, after all, a political process, so the judgment will be a political judgment. That is unavoidable. But apart from the legal constitutional issues posed by PPACA, there are the larger questions of whether or not it is any good as legislation. After all, a law can be lousy and still pass constitutional muster.

One thing for sure that PPACA isn’t going to save anyone any money. It is not about affordability. If you really believe that funneling vast new sources of money into insurance companies is going to make the health care industry more frugal and more efficient, then if we met we probably wouldn’t have anything to say to each other because our perspectives are essentially incommensurable. And please be clear about the fact that this legislation is not about providing health care, it is about purchasing insurance, and, as anyone who has purchased health insurance knows, having health insurance is not the same thing as receiving health care.

Health care premiums will continue to ratchet upward, steadily and relentlessly, and the new pool of forced contributors to the system will mean that even more money will be dumped into the ever-hungry maw of the medical-industrial complex, as more and more of US GDP disappears into a rat hole without a shred of accountability. Everyone knows the dismal statistics: the US spends a greater part of its GDP on health care than almost any other country (and since the US has the largest economy in the world, this means that not only are the rates the worst, but the absolute numbers are the highest also), and the US population is far from being the healthiest for all the money that is spent on health care. The US population has been very poorly served by the health care industry. What are we going to do about it? We are going to reward the industry by giving it even more money and forcing everyone to participate in a deeply troubled industry.

PPACA is not an act, because it takes no action — it does not confront the vested interests of the health care industry (whether hospitals or doctors or labs or the manufacturers or medical technology), it does not confront the vested interests of the insurance industry, it does not confront the vested interests of the pharmaceutical manufacturers, it does not confront the vested interests of the US government itself, and it does nothing to change the way health care is managed or delivered. Rather than taking on the powerful, the PPACA targets the most vulnerable and least powerful elements of our society — people who do not already have health insurance and probably cannot afford it.

It will be obvious from the above that I have nothing good to say about PPACA, but there are three simple things that could be done that would cause me to drop my objections:

1. a universal single-payer system

2. an “opt out” clause

3. bring all employees of the government, from the president on down to the lowest bureaucrat, into the PPACA as individuals forced to purchase insurance under the individual mandate

Unfortunately, all three of my alternatives are politically “radioactive” to the point that they are not even on the agenda. We do not talk about the ways in which real reform could be brought to health care in the US; instead we take action against those least able to resist the intervention of the government into their lives. This reveals the rapacity of the welfare state in its most ugly aspect.

I would have no objection whatsoever to a universal single-payer health care system in the US. In fact, I think it would be a good idea. When it is mentioned how every other industrialized nation-state has universal health care, so we therefore need to have government-mandated health care in the US also, it curiously goes unmentioned that the vast majority of these universal health plans are single payer systems that eliminate private insurance in favor of a truly universal system. In the US we don’t discuss this — not because the older universal single payer systems in Europe are running into chronic problems not unlike over-promised legacy pension systems (which is true) — but rather because the insurance industry in the US is very big, very profitable, and employs a lot of very wealthy and influential people. A tough-minded administration would be willing to take on vested interests like the insurance industry, but nothing whatsoever is being done by the PPACA to reign in insurance companies, who stand to be flooded with a tsunami of new money unless the individual mandate is struck down by the Supreme Court.

An “opt out” clause would be equally fine with me. Since PPACA incorporates an individual mandate, which particularly targets individuals, why not give the individual a chance to opt out of the system? And I do mean opt out entirely. I would be perfectly willing to carry a card in my wallet, like an organ donor card, or even to wear a tag around my neck, explicitly stating that I have opted out of PPACA and that I am not to be taken to a hospital or an emergency room unless I have the money available to pay cash on the barrel head for my treatment. I can imagine the people who thought this through would think I am crazy, and if my opinion mattered it would be denounced as barbaric and inhuman. So be it. I have no problem with it. If I die as a result of injuries sustained from a car crash because no ambulance was called, I accept that risk. (As I have attempted to explain in Risk Management: A Personal View, I believe the management of risk to be illusory, and in fact a moral hazard.) If I came down with a chronic problem requiring medical care, I would seek medical help in a country where the prices of the health care industry have not been so distorted by non-market incentives. So I am perfectly willing (if not enthusiastic) to do without the entire US health care system.

Similarly, I would have no objection to the PPACA if I knew that those making the law had to live according to its dictates (or alternatively, if they provided the benefits that they receive under their plan to the American people generally — but then that truly is politically unthinkable, is it not?). As with the unspeakable alternative of a universal single payer health care system, which would take on the vested interests of the health care industry, the insurance industry, and the pharmaceutical industry, government employee inclusion in PPACA provisions would not only take on the vested interests of the US government, but would also ensure that something actually gets done. As I wrote above, the legislation in its present form does nothing except to target the disadvantaged and the powerless — not something that you would call courageous legislation. If the people who wrote this law had to live according to its provisions, they might actually do something and make some changes. At present, they have no incentive whatsoever to do anything.

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Friday


Should risk management consist of three steps?

I have never thought of myself as a person who takes risks. On the contrary, I view my actions as cautious and calculated, since I am not likely to engage in some activity until I judge it to be a sure thing. But others see things otherwise. Some years ago I was talking to a financial adviser and I was taken up short when he characterized me as a risk taker. I think this was primarily because of my attitude to insurance. I have a personal distaste for insurance, probably from a mixture of instinct and experience. This may sound odd, but it is accurate.

Should risk management consist of four steps?

As I see it, the attempt to manage risk is illusory. I act upon this view by minimizing my insurance coverage. (This is what struck my financial adviser as risky.) About the only regrets I have in life are when I paid for an insurance policy when I didn’t strictly have to do so under legal compulsion. It felt a lot like flushing money down a toilet, and this latter exercise would probably be more fun than sending a check to an insurance company. Buying insurance does not give me peace of mind, it only makes me angry.

Should risk management consist of five steps?

One of the reasons I view the attempt to manage risk as illusory is because of my personal experiences with insurance policies that do not pay when you most need them. There are countless stories in the news, some of them tragic, about people who thought they were covered for some eventuality but found out in their hour of need that they were not. Whether it is someone who lost their home to a flood and later found a waiver in the homeowner’s policy for flood damage, or someone who cannot convince their HMO to pay for some particular medical procedure and who is dying as a result, there is almost always something in the fine print that makes it possible for an insurance company to deny coverage. These episodes are not accidental. Insurance companies have many lawyers who write up policies precisely to minimize the losses of the insurance companies for whom they work, and insurance adjusters can be even more creative in their interpretation of events.

Should risk management consist of six steps?

The state of Oregon requires that Oregon residents maintain insurance on their motor vehicles. I always buy the legal minimum, which means that I get liability insurance, but no collision or comprehensive coverage. I have no life insurance policy, but I have no wife or children so the only beneficiaries could be my sisters or parents or a charity. Also, life insurance feels like blood money to me. I wouldn’t want to receive a payoff, and I wouldn’t want someone to profit from my demise. I think it is a good policy to be worth more alive than dead; it gives others an incentive to keep you around. The moorage where I live requires residents to have fire insurance, and this seems reasonable to me as a fire could easily spread, so again I get the minimum coverage required, which is to say that I have the structure covered but not the contents. How could one replace the contents of one’s home? If you have picked up irreplaceable items throughout your life, and received gifts from family and friends, your possessions are more than widgets that can be replaced. Being paid for their loss would, to me, feel like getting blood money for objects.

Should risk management consist of seven steps?

I also have no health insurance. That’s right, I’m one of those people who make up the statistic of 47 million Americans without health insurance. And I am fully prepared to accept the consequences of my actions (and inaction). I have emergency instructions in my mobile phone that state that I have no health insurance and that no special measures are to be taken to preserve my life, because I can’t afford them. I suppose if I were taken to an emergency room contrary to my wishes, and I died despite any efforts made to save my life, that a diligent collector for the hospital might come after my assets to pay the bill, so they might eventually get their pound of flesh.

Should risk management consist of eight steps?

What would I do if I were diagnosed with a serious condition that required major surgery or some expensive treatment like chemotherapy? One thing I can tell you is what I would not do, and what I would definitely not do is to seek treatment in the US. Policies and litigation have so distorted the market for health care that no ordinary working class person in the US can afford to be sick, but this is not the case everywhere in the world. Since I know people all over the world, if I required major medical treatment, I would send out e-mails to friends in other countries and ask them to find a doctor who speaks English and to get an estimate for the procedure needed. I would without hesitation seek treatment in Korea or Peru, Indonesia or Argentina, before I would seek treatment in the US.

Should risk management consist of nine steps?

Perhaps you think this is odd, and perhaps even odd enough to be pathological. I have had many disagreements with others over insurance. None of the arguments that have been advanced to try to convince me of the folly of my position have changed my mind; they certainly have not changed how I feel about insurance. Then could we at least, at the very minimum, agree that it is rational to minimize risk, and to not take any unnecessary risks? Alas, we cannot even agree on the rational minimization of risk. As I see it, risk (like pain) is a good thing that forces us to think through our course of action carefully, so that the minimization of risk by way of insurance is a moral hazard that lures people unnecessarily into braving risks they would otherwise avoid.

Should risk management consist of n or more steps?

Allow me to relate a little story about the philosophical dimensions of risk. Contemporary legal and political philosophy is dominated (utterly dominated) by the work of John Rawls. Rawls’ claim to fame is a thought experiment. According to Rawls, a just society is a society that would be chosen behind a “veil of ignorance,” that is to say, if we would choose a social system not knowing what place we would be born into it, then that is a just social system (by our lights). The assumption here is that, if you don’t know the position in which you will be born into in a society, you will choose a thoroughly egalitarian system so that the birth lottery does not relegate you to a irremediably marginal role. It has been observed that this thought experiment and its presumed outcome assumes that the individual choosing a society from behind a veil of ignorance is risk averse. Of course, not everyone is risk averse, and there may be individuals — perhaps many of them — who might prefer inequitable social arrangements and be willing to take the risk that they will either end up in a privileged position or that they can manipulate the social system in question sufficiently to their benefit that the initial inequity will not be a liability that they cannot overcome.

John Rawls formulated one of the most influential thought experiments of our time, such that a just social order would be chosen from behind a veil of ignorance.

I don’t take the Rawlsian thought experiment too seriously, partly because almost no one believes in their own impoverishment and immiserization before they have hit rock bottom, and partly because the Rawlsian emphasis upon fairness seems so vulgar that it might have been explicitly conceived in contradistinction to the Aristotelian conception of areté. How would Aristotle’s Great Souled Man judge a society from behind a veil of ignorance? He would value most highly that society in which the highest virtues would attain their highest development. This would not necessarily be an egalitarian society, and it would not be a society without risk.

Great accomplishments, great deeds, and great undertakings are all won in the face of adversity and risk. To eliminate risk from the world would be to eliminate the possibility of greatness and excellence (areté); to minimize risk would be to minimize the possibility of greatness and excellence (areté). There is a sense, then — an Aristotelian sense — in which virtue is predicated upon risk. Even the great works of art, literature, poetry, science, mathematics, and philosophy all enjoin risk and entail risk. It is a risk to entertain a radical new idea or to present a radically new vision to the world. One risks one’s career, one’s reputation, one’s ability to make a living, one’s friends — in a word, one risks everything in attempting any authentic innovation. And yet almost everything of value in the world comes from such efforts, and from such willingness to court risk, all in the pursuit of being true to oneself.

This is perhaps a somewhat grandiose if not histrionic characterization of risk, but even if we reduce our scope and scale to the most intimate and personal perspective, risk cannot be eradicated from life. To be alive is to be at risk of dying. Whether we choose to think in terms of our legacy we leave in the world or our immediate personal circumstances, in remains true that we cannot control the world, we cannot control our circumstances, we cannot control what others say, think, do, or feel, and sometimes we cannot even control ourselves. The world is an unpredictable place, and, as I have argued many times in several posts, we ought to expect to be blindsided by history. And if we are blindsided by history to our misfortune, we ought also expect that our insurance policy is not going to cover the loss or make us whole again.

Perhaps risk management need only consist of a single step, and that is the recognition of inescapable risk.

I hope that this personal view of risk management has managed to convince you of one thing. I do not expect to have convinced you that the attempt to manage risk is illusory, but I may have been able to successfully make the point that an individual’s attitude to risk management is deeply embedded in the way that a given individual sees the world. A conception of risk management is predicated upon a particular Weltanschauung. Two individuals with distinct outlooks on life are also likely to have distinct ideas on how to best manage risk — or, as the case may be, to live with risk and not attempt to wish it away. The point is that there is not a single rational and pragmatic way to manage risk, but that the management of risk will be relative to the criteria of reasonableness and pragmatism that follows from a given Weltanschauung.

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Note added 03 March 2011: There was a great article in Financial Times by John Kay, Don’t blame luck when your models misfire, which includes the following:

“Like practitioners of alchemy and quack medicine, these modellers thrive on our desire to believe impossible things. But the search for objective means of controlling risks that can reliably be monitored externally is as fruitless as the quest to turn base metal into gold. Like the alchemists and the quacks, the risk modellers have created an industry whose intense technical debates with each other lead gullible outsiders to believe that this is a profession with genuine expertise.”

What can I say other than that I agree? This isn’t quite as blunt as my contention that, “the attempt to manage risk is illusory,” but it is not far from it. If the technical debates of risk modellers constitute a profession without genuine expertise, as implied by Kay, it is high time that we declared our independence from technocrats who would presume to control us all for our own good.

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