Let’s summarize this week’s headlines with an eye toward the moral hazard now acceptable in every consequential context. The Masters of the Universe have disavowed risk entirely, so, apparently, are we asked to forgive and forget the debts to humanity owed by the amoral 1%.
Lagarde says with respect to Greece “I am not in a negotiation or renegotiation mood at all.” The IMF has nothing to negotiate, reality will take over.
LIBOR-gate: Local Governments Which Entered Into Interest Rate Swaps Got Scalped And our officials probably knew interest rates were going lower (I sure did), so they were forced by financial culture to buy swaps that were manipulated, which resulting additional payments beyond interest broke community budgets and destroyed US jobs.
JPMorgan Chase Manipulation Scandal Raises Specter Of Enron What else is new? Is every thinking American worn down too much to even care?
Should hospital CEOs willing to sacrifice safety (and accept a “just above average” standard of care) be held accountable for endorsing malpractice? Or is this acceptable management practice now, as it cannot be argued against statistically?
Responsible agents of societal institutions have ignored the public’s right to risk management. They have obliterated the custodial requirement of the protection of value, of the accounting entries that we used to call money. Fiduciary prudence has been criminally corrupted, in every case, from Bear Stearns to AIG, to the Fed’s bailing out foreign primary dealer banks as well as the TARP banks. There may be no exceptional institutions remaining, even in Canada. All were in on the fix, making none culpable. What are you going to do, arrest everyone who runs a bank?
What is our collective response? Why do we have nothing better than proposals to fix business as usual? Can’t social thinkers and the practices of strategic foresight create something better?
We can never can collect sufficient knowledge of the future to eliminate uncertainty. In fact, our “reduction” of uncertainty is merely playing games with the known. Even with perfect foresight of events, our own actions are humanly motivated, they produce new unforeseen changes and introduce and compound new risks for ourselves and others. But we do have imaginative capacity to invent something better, and for those of us not in the financial world, a moral imagination is still possible.
English economist George Shackle died in 1992, too soon to experience and comment on the coming hyper-connected Internet Age. It is not only likely he would have warned of the late-cap bubbles, as other humane economists did, but he would have helped us re-envision a better economy and ways of getting there. Shackle’s 1983 paper The Bounds of Unknowledge is quoted in an inspiring memorial by Mark Perlman where we are asked to imagine …
“where possibility reaches its limits, … a boundary-fence beyond which, given his resources, given his time-horizon for reaping the fruits of his action, no action of his can reach. In a sense which has some degree of paradox, his knowledge is of the non-possible. It is beyond the fence that everything can be tagged with effective certainty as not belonging to the attainable. Unknowledge for him consists in the plurality of rival possibilities. The bounds of the possible are bounds of unknowledge.”
Risk is just a term we use to measure the gap of unknowing. When we can see events unfolding clearly in the fullness of their hazard – any of these listed – our gap is not with risk and uncertainty, but with the imaginative capacity to respond sufficiently to the events. My own tendency is to plan a good getaway and wait out the storm. How can we maximize the effects of our personal interventions in the unfolding of hazard in the new economic revolution which is making itself known?
