Articles Contained in SIRS Enduring Issues 2006.

Originally Published: A Meditation on Risk, Oct. 3, 2005; pp. 50+.

"Katrina is an especially poignant study in risk because the catastrophe was so widely foreseen. The Army Corps of Engineers told anyone who asked that the chance in any given year that a storm would inundate New Orleans was between one in 200 and one in 300. Over the 77 years of the average American's life expectancy, one-in-200 annual odds snowball to one-in-three. Or try this simple (and oversimplified) cost-benefit analysis: If the cost of a flooded New Orleans is $100 billion, and the annual chance of that flood is one in 200, then it would pay to spend up to $500 million a year (one-200th of $100 billion) to keep such a flood from happening. It would also more than pay, probabilistically speaking, to undertake a forced evacuation whenever a Category 4 or 5 storm threatens the city. Yet nothing of the sort was done." (FORTUNE) The article discusses risk and "how we cope with the realities of risk, uncertainty, and crisis. Often we simply don't: Risk taxes the wiring of our brains, which evolved at a time when reacting to a tangible present was far more important than planning for an uncertain future. Risk overwhelms the decision-making capabilities of our elected officials, who also have incentives to focus more on today than tomorrow. Markets and corporations may be the greatest risk processors mankind has yet devised, but that isn't to suggest that corporations can or should supplant government."

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