When We Fail to Manage Risk

Last Thursday I went to Huntsman Hall to see a talk by U.S. Department of Homeland Security Secretary Michael Chertoff, titled “When We Fail to Manage Risk.” The Dow had fallen 700 points the previous day. The housing bubble and the credit crunch and the subprime meltdown and the extra digit on the Times Square deficit billboard were all over the news. I was curious to gauge the mood of the business community so I went to the talk in order to eavesdrop on the audience. For the presentation itself, I had low expectations. A few weeks prior, the Department of Homeland Security had run a campus recruiting event – the word on the street was, they needed statisticians and analysts to deal with all that surveillance data they’d been gathering. So I thought this talk would be part of a recruitment drive for talented students whose private sector prospects had plunged with the markets.

The eavesdropping was dull, since most people were engaged with their phones and laptops. But the talk was more interesting than I’d expected. Chertoff drew on natural disaster scenarios to illustrate his points, but the economy was the obvious subtext. He started out by solemnly informing us that the core responsibility for risk management lies with the private sector. After all, he said, the right to balance risk and reward – to take chances and reap the consequences - is “the definition of freedom.” After the shout-out to the free-market folks, Chertoff spent the rest of his talk explaining why the market can’t do it alone. In his words, “we have difficulties because of the way we are wired.” Because humans are bad at “estimating time-horizons,” we choose immediate gratification over long-term safety. Because we are harbor a blindness to “collateral and cascading external costs,” we set up conditions whereby our actions come back to haunt us. Because we “resist transparency,” and hate to explain ourselves, we foster faithlessness. Unchecked, markets (us, only bigger) are impulsive, selfish, and secretive. That’s why we need the Department of Homeland Security to protect us from ourselves. Apparently, strong yet realistic regulation can check dangerous human tendencies without smothering human initiative. In his diagnosis of our current financial problems, Chertoff neatly de-politicized greed by framing it as a hard-wired flaw that could be diagnosed and compensated for through sound managerial techniques. From a Foucauldian perspective, the talk practically analyzed itself.

From a Hornerian perspective, I thought the talk was a little perverse. To illustrate why people should be required to build elevated houses on flood plains, Chertoff described touring a neighborhood after a bad hurricane. Whole rows of houses were “crushed, as if a giant had stepped on them,” but occasionally he’d see a house that was practically untouched, because it had been built on stilts. In Chertoff’s words, these homeowners could move back into their intact houses “like it never happened.” OK, yes, that’s an overstatement -- if your neighborhood is a pile of rubble, even if you still have a house your situation is not good. My point is not that Chertoff is being disingenuous, but rather, that his focus on individual risks and benefits constrained his ability to promote his larger cause. The anecdote exemplified a problem for public discourse in general: when we talk about public responsibility for the public good, we are rhetorically hamstrung by the neoliberal frame. A focus on individual outcomes impoverishes our ability to conceive of the common good on its own terms, without the baggage of zero-sum ideology (i.e., one guy wins and one guy loses) which (IMO) is the constant subtext of the individualist frame. Chertoff made this point: if the builder and the buyer accept the costs of elevating a house, then the owner will survive a hurricane. But there’s a false equivalence afoot. I admit, I’m a knee-jerk communitarian, so people who take sides in the eternal struggle between big bad gummint and the feisty lone individual may not agree with me, but maybe in order to really conceive of the community protecting the community, we need to talk about it and think about it through a different frame.

I read The Grapes of Wrath last August on vacation with my family (I got teased for picking such a gloomy beach read.) It’s a remarkable book, and now that everyone’s talking about the Great Depression I think of it often. Anyone interested in sustainable agriculture will find it eerily relevant. Steinbeck has a lot to say about community and the common good. Since the economic slide appears to be snowballing, I’ve found myself pondering how things will go –will we start using powdered dry milk and Tang again? Will multigenerational households become typical? Will we go all survivalist and suspicious and start hunkering down with our guns and canned goods? On the latter point, I found this very cogent argument against the impulse to hoard and defend. To survive a financial/social/ecological catastrophe, Charles Hugh Smith wrote,

…the best protection isn't owning 30 guns; it's having 30 people who care about
you. Since those 30 have other people who care about them, you actually have 300
people who are looking out for each other, including you. The second best
protection isn't a big stash of stuff others want to steal; it's sharing what
you have and owning little of value. That's being flexible, and common, the very
opposite of creating a big fat highly visible, high-value target and trying to
defend it yourself in a remote setting.

Read the whole essay: Smith is not a pie-in-the-sky hippie dreamer. In his view, people are sinful, some more than others, and bad things happen when we fail to manage risk. However, he and Chertoff have very different ideas about how to survive a catastrophe. In Smith’s pragmatic view of risk management, he invokes a moral economy / gift economy fueled by voluntary relationships, not a market economy running on profit and loss. Sure, there’s a false equivalence here too: Smith describes a smallish community on the edge of a wilderness, and Chertoff is working on a national scale. Still, Smith makes me feel a lot more capable and optimistic about surviving the years ahead. I’m “on the job market” – I sent out a bunch of job applications, and today I got an email notice that one job search has been suspended because of “the current economic crisis affecting American higher education (and beyond).” I hope this does not signal the start of a trend, but if it does, I’ll work on my home-brewing skills and follow Smith’s advice on risk management.

Note: After posting this I read a Chris Hedges essay on TruthDig that quoted Canadian philosopher John Ralston Saul on elites' obliviousness to a concept of the commons. He puts it nicely:

“Their inability to see the human as anything more than interest driven made it
impossible for them to imagine an actively organized pool of disinterest called
the public good."

Why You Should Vote, etc. (Part 2)

In the last post, I made an argument about why it was important that everyone vote, even so-called “bad” voters. I picked as my example a group of farmers from Appalachia. Some readers might accuse me of playing to stereotype there. Well, I was playing to stereotype, and consciously so, and that’s part of my whole problem with Brennan’s argument.

In his Bloggingheads discussion with Will Wilkinson, Brennan is pretty vague about what constitutes “good voting.” It evidently includes being well informed, using reason rather than emotion in making one’s choice, and carefully considering both sides of an issue before deciding. Also, people who question their own motives are probably good voters. Of course those criteria, self-applied, would include pretty much every American who has voted in any election since the birth of the republic. As Brennan himself concedes, a friend of his—a person who Brennan assures us is NOT a good voter—saw himself reflected in the description of the good voter: consequently, this friend was pretty enthusiastic about Brennan’s argument. Brennan, unsurprisingly, also includes himself in the category of people who are good voters, as does Wilkinson.

So, who isn’t in that category? It’s pretty big, according to Brennan, who estimates only about 30 to 40 per cent of the population are good voters (Wilkinson says that’s high). Although they don’t directly discuss demographics, it’s pretty clear from their indirect comments (at least it’s clear to me) that many if not most of the bad voters these guys have in mind are: a) uneducated, and b) poor. That’s okay, though, because Brennan figures that he’ll make better decisions for these people than they would for themselves. Even Wilkinson finds that notion breathtakingly presumptuous: to which Brennan’s response is more or less to give a gimcrack grin and shrug his shoulders. Yeah, what’re we gonna do? Someone has to look after these rubes.

The problem with this kind of elitism is not that it underestimates the wisdom of the people, who are every bit as narrow-minded and ignorant as it assumes. The problem is that it overestimates the wisdom of elites. And it seems to me that Brennan’s argument exaggerates the intelligence especially of a particular segment of the American elite: the professoriate. I say this not to disparage that class, of which I am a proud member. We are no worse than any group, all things considered. We are also no better. We have a role to play in a democratic life and public debate, and when we ignore that role, democracy suffers. But people like Brennan strike me as being wondrously unaware of how restricted their lives are, how narrow their range of daily experience (and no, I don’t care if he was raised by a single mom on food stamps. He’s an Ivy League professor. I grew up amidst grain fields in Southern Alberta. That’s not where I live now). The ways that we make choices in our lives are not appropriate for everyone. Again, this is the potential genius of democracy, if it works right: different kinds of people arriving at their decisions in different ways.

In the end, an argument like Brennan’s does what all ideology does. It takes a specific perspective—which may be perfectly fine on its own terms—and then universalizes that perspective, so that it becomes the right and natural one for all people. Such behavior is inevitably, and profoundly, undemocratic.

Why You Should Vote in the Upcoming Election (even if you're a dummy), part 1

A Brown University professor named Jason Brennan has recently come out with an argument opposed to the popular catechism that everyone has a kind of moral duty to vote. Brennan’s position, on the contrary, is that some people have a moral duty not to vote. Although I doubt it will have much of an effect, I want to put forward my own two cents on this issue. For one thing, I think that idea is just wrong, and for another, I think that it could eventually have pernicious consequences. (Since Brennan’s paper on this subject is not published yet, I am not going to quote directly from it, but instead draw on a conversation that he had about the idea with Will Wilkinson on Bloggingheads TV (if you go to the Bloggingheads video, it has a link to a draft of the paper.))

Brennan’s argument goes something like this. As citizens, we have a moral duty to do what is best for our country, if not in the positive sense of doing good (ie., picking up trash on the highway, working at a soup kitchen), then at least in the negative sense of not doing harm. In the case of voting, however, many of us often do harm to the common good, because we don’t understand the issues very well, and we don’t reason very well. Because of that we favor bad policies and vote for politicians who enact those bad policies (unsurprisingly, Brennan says his idea was sparked by Bryan Caplan’s book, The Myth of the Rational Voter.) Therefore, those of us who lack knowledge and or proper reasoning skills have a moral obligation not to vote.

In the discussion with Wilkinson, Brennan uses two analogies to help illustrate the point. First analogy: let’s say a group of six people decide to go out for dinner. One person in the group (me, let’s say) is from out of town. While I may have a right to put forward my choice, it wouldn’t be a very good idea for me to do so. I should rather defer to the other five people, who live in that city and know the restaurant scene. By refusing to exercise my right, everyone (including me) ends up better off. Second analogy: we don’t think that everyone has the right to be a surgeon, or an airline pilot. Only the people with the requisite skills should be doing the sorts of things that surgeons and airline pilots do. Why then do we assume that everyone should be picking the President (this is a pretty old argument, BTW. It goes back at least as far as Plato’s Apology.)

I think that Brennan has a number of problems here but the most important is that he uses the wrong model to understand what elections are and what they do. Elections are not simply the accumulated decisions of a set number of individuals (call them citizens), all striving to make the most rational choice. That model of voting has actually been in trouble for a long time, long before Caplan decided to write his book. One of its biggest problems is that it can’t explain why it makes rational sense for any individual to vote at all, since a single vote has almost no chance of making a difference to the end result. Elections are better understood as choices that a people make collectively. They serve as a feedback loop. As long as the situation is (more or less) okay, the status quo obtains. When things get too bad, the population bands together to throw the bums out.

The thing is, if this system is going to work for the benefit of all its members, and not just some of them, it needs input from all sectors of society. A basic assumption of democracy is that the best people to decide about whether or not a change is needed, seen from the perspective of a certain geographic area, or economic class, or any other social group, are members of that class itself. Poor farmers in Appalachia may not know what the Supreme Court does or who sits on it, and they may not know who their congressman is. They may make fundamental mistakes in economic reasoning. But what they do know, very well, is what daily life is like as a poor farmer in Appalachia. They are the only ones, in fact, who have that information. If the system is going to function in a proper—hell, let’s use a real word—in a just manner, then it needs to get that information from them. Remember too, that the only way the system ever pays attention to their information is when they vote. Policy papers from well-meaning social workers don’t cut it, because ignoring such claims has no real-world consequences for politicians.

Certainly, this feedback is imperfect, for the kinds of reasons that Brennan and Caplan and others point out. Voters are ill-informed, prejudiced, and cannot give convincing reasons for why they do what they do. And they do sometimes make bad decisions, as a group. American voters may be on the brink of making one of the most disastrous decisions in the history of the republic, IMO (though recent polling is reassuring on that score). But to paraphrase E.B. White, the leap of faith required for democracy (and it is very much a leap of faith, although I think in the end a justified one) is to believe that more than half the people are right more than half the time. While an individual may persist in choosing against his or her own interests, groups over time tend not to (see James Surowiecki’s The Wisdom of Crowds). Moreover, the cure implied by Brennan’s argument is even worse than the disease it purports to treat, since it would have a group of self-selected “good voters” deciding what is best both for themselves and for everyone else. This never ends up well, for reasons I will explain in my next post.