Mar 25 – Uncertainty & Politics Elusive Truth in an Uncertain World
The Ghost Map
“[William] Farr was a man of science, and shared snow’s belief in the power of
statistics… But he also shared many assumptions with the miasma camp, and he used
the number crunching of the Weekly Returns to reinforce those beliefs. Farr thought
that the single most reliable predictor of environmental contamination was elevation:
the population living in the putrid fog that hung along the riverbanks were more likely
to be seized by the cholera than those living in the rarefied air of, say, Hampstead”
Steven Johnson p.101
A financial tsunami
How could we have allowed this risk proposition to happen again?
Value at Risk (VAR) model
o All the banks use this
o VAR of $100million with 99% confidence
Measurement of market confidence
o Spread and became the standard operating unit
o How accurate is that model?
What about the 1%?
Politically speaking, what is the appropriate response?
Politics & Uncertainty
We make decisions all the time in the context of uncertainty
We make decisions today which will impact the future…
o We make these decision under uncertainty
o Aging society
Cost > benefits
o Financial regulation
o Preventative health care
o Lessons learned from SARS
Risk & Politics
Risk is the (im)probability of a certain outcome
Unknown – but sense of probability
The insurance industry has been quite accurate about their probability of
As a result, California doesn’t have home insurance b/c they
live along the fault line probability of earthquake Mar 25 – Uncertainty & Politics Elusive Truth in an Uncertain World
Nuclear Waste Management in Canada
Atomic Energy of Canada Ltd.
o 1952 counted for 15% of all of Canada’s energy force
o Created 31k jobs
Three Mile Island (1979) & Chernobyl (1986)
Focus on safety
1980s and 1990s – risk analysis
o What to do with the nuclear waste?
o What is the probability of there being a nuclear accident?
o If there were an accident, how many people would be affected?
o What kind of economic implications would occur
o Probability of disaster
Technical risk analysis – science
o The lowest risk would be to store the nuclear waste
o By storing, we would have the lowest probability of there being an