Sunday, October 5, 2008

Life and Risk

Risk, "the possibility of loss or injury" is something that has consumed inordinate amounts of capital in our society.  The current financial crisis is the latest issue having the government bailout failing institutions who are supposedly private enterprises.  But this is just an extension of peoples' desire to reduce or eliminate the risk in life.  Take laws for wearing seat belts.  Helmets for bicycle and motorcycle riders.  Laws against smoking.   We either have laws that protect citizens from each other, or just even from themselves.  Where does common sense come into play?  People who are our elected officials or citizens on community boards take it upon themselves to "protect" their fellow citizens.

And what about actions that aren't prescribed by law but are undertaken by well meaning bureaucrats.  I noticed in one city that is affluent enough to spend money on all kinds of goodies, having crosswalks with traffic signals, and for pedestrians.  The pedestrians are warned by a multiplicity of devices, walking and standing figures that change color to accommodate color blind people and normally sighted people.  Beeping sounds that enable blind people to navigate the street.  Countdown numbers to let people know how much time is left before the traffic signal changes.  And all the while, some kind of arbitrary clock gives pedestrians time to cross allowing for "worst" case slowness while traffic must wait.  

In economics, the issue of diminishing returns plays a big part in making decisions.  How does someone judge that spending x amount of money is worth a marginal increase in something like safety.  Again, where does common sense come into play? 

I noticed once while taking an airport shuttle from the plane to the airline gate, which was all of 100 yards away that "safety" was on display in an astounding array of technological solutions.  Not only could a person not walk the 100 yards to the gate, but the shuttle had a "beeper" to let anyone behind this monstrosity know that it was backing up and could pose a danger.  And the driver was also equipped with a tv monitor in the cab relaying the picture from a camera mounted on the rear of the shuttle just in case the "beeping" somehow failed to heed the warning.

While providing safety is a good thing, economically, there comes a point of ridiculousness.  Our society, in large part because of it's litigious nature, tries to protect against the "n"th degree of risk.  And these costs are hidden and expensive.  What happened to personal responsibility?  Why must the state endeavor to "protect" us to such an extent?

Now we see the government bailing out failing companies and institutions.  It even now deems to protect the earth from some future destruction caused by, you guessed it, us.  Government and it's minions feel they can justly reduce the risk inherent in living because they have an unlimited bankroll called the taxpayer.  Oh, their "intentions" are good, even noble.  But who makes the decisions that the marginal benefit are worth the cost.  Even when the existence of the problem cannot be confirmed or the cause of the problem defined, these minions claim that without immediate action, life as we know will end within the next decade.

I was  taught growing up that I should endeavor to make good decisions and learn from my mistakes so as not to repeat them.  Learning from bad judgement can come with serious pain and consequences.  However, again, our society seems to want to be protected from any negative consequences.  How do we make corrections if our mistakes are just "papered" over and the "pain" is diffused over the entire taxpayer base?  Those who make bad decisions, judgments, investments should be allowed to suffer from their mistakes.

In my mind the answer to regulation of our capitalist markets is to apply the law of the land.  Those with fiduciary responsibility to shareholders, employees, customers, and business partners, should be brought to justice.  Swift, strong application of the law and it's penalties would go a long way toward "regulating" the games people play with other people's livelihoods, futures, and investments.  Bigger government is not the answer.  It is popular right now to claim that this mess occurred because of a lack of oversight and that the solution is more government regulation.

Regulation comes in the form of auditing, business results and to a lesser extent government regulation.  When corporate executives run their company into the ground, they need to be rewarded with investigations and possibly fines and jail time.  They have at their disposals the management team they assemble, the board of directors, shareholders, and the ability to hire consultants who can advise them of the feasibility of a course of action.  There is no reason they cannot make "good" decisions.  Maybe they are not reckless and do act in good faith.  Then they can be fired and their reputations impacted negatively.  And certainly poor performance should not be rewarded with a "golden" parachute just because they held a "C" level post.

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