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Mar 25 - Uncertainty & Politics lecture.docx

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University of Toronto St. George
Political Science
Jeffrey Kopstein

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 Global Finance  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  Risk analysis o VAR of $100million with 99% confidence  Measurement of market confidence o Spread and became the standard operating unit  Systemic equilibrium 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 risk  Probability distribution o Data o Knowledge o Reasonableness  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 Mitigating Risk  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 accident, lowest
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