Catastrophe unforeseen – as usual

Just heard Paul Krugman on BBC Radio 2. Standout quote: “I was never a big fan of the Euro, but I never foresaw this catastrophe.”

‘Catastrophe’ means to ruin and/or overturn in ancient Greek. It was the word used to describe a tragic dénouement to a drama – a disastrous one.

The piquancy in Greek tragedy derives from the audience’s awareness of that imminent disaster – contrasted with the characters’ ignorance and/or refusal to contemplate it.

We know it’s coming. They don’t. We wince.

It’s odd how such an effective device – so old, so well used and well known in so many cultures – fails utterly to inform human beings’ response to the real world around them.

You would think we would stand back more often and wonder whether catastrophe might, in fact, be around the corner. We so rarely do.

Very, very few people ever foresee catastrophe. Those that do are studiously ignored or ridiculed.

I’ve written before about optimism, and our preference for it. This is a related phenomenon, deriving from a riff on the Appeal to Tradition fallacy. Things have always been this way, goes the thinking, so they will likely go on being this way.

My favourite analogy (with thanks to Nicholas Taleb) is the farmed turkey on December 20th. It’s lived for about 8 weeks. In that time, it’s been fed every day, the same amount, at the same times, by the same people. It has eight weeks of experience of things being predictably comfortable and uncatastrophic. On December 20th, the turkey feels entitled to believe – on the evidence so far – that tomorrow will be the same as all the other days.

Catastrophes are rare (though not as rare as we think). Non-catastrophe is the daily ‘standard’. It is, and it seems, overwhelmingly normal. Catastrophic events are highly unusual. We even have a special adjective for them: “Unthinkable”.

The important characteristic of a catastrophe, though, is not its rarity. The important thing is its absolutely revolutionary, transformative effect (remember: it’s a ‘ruinous, overturning’ event).

We don’t remember catastrophes for their rarity. We remember them for their destructive consequences – consequences that can reverberate for years, decades or millennia to come. Some catastrophes have permanent, apocalyptic results.

Catastrophe, therefore, should figure more prominently in our imaginings. Instead of saying “That’s not worth considering – it’s unlikely'” we should instead ask: “If this did happen, how far-reaching might be the consequences?”

Sure, it’s unlikely. Perhaps very, very unlikely.

But if it does crop up… by God, things will never be the same again. The insane, the absurd – all will start happening.

Thus I mused as I listened to Mr Krugman on the radio. He’s an engaging fellow, full of useful and worthwhile insights.

But I did find myself wondering why one of the world’s brightest economists – a Nobel prizewinner, no less – hadn’t been able to imagine what a Eurozone bank/sovereign debt/fiscal catastrophe might look like.

Sure, it looked unlikely on January 1, 2002, when the Euro launched. It looked very, very unlikely indeed.

By 2007, I’d argue, it looked a lot less unlikely. By 2009, it was looking vaguely possible. By this time last year, money markets were betting on it.

But great economists still hadn’t – and still haven’t – imagined it.

You gotta ask: just what the fuck is wrong with human beings?

One Response to “Catastrophe unforeseen – as usual”

  1. Tom Says:

    There are people who predicted catastrophe. It’s not a science so the exact timing of the 2007/8 crash wasn’t calculated.

    There’s too much debt to be paid off. So there will be a reckoning which will send shockwaves in all directions. A disorganised collapse of the Euro following Germany’s exit could lead to the end of the EU. A massive contraction of the European economy could clobber the US and China.

    What will be left of Europe after this, I have no idea. Whether I’ll have a home or any money at all, I do not know.

    The debt addled our brains. We led each other on. We knew it defied logic but everyone including the politicians and formerly staid bodies like banks said it was ok. It wasn’t.

    The creditors were greedy too: they are utterly complicit. Credit went on the wrong things. Houses, and things to go in them – misdirected investment which didn’t develop the economy.

    Very big changes lie ahead, in my view. We haven’t heard any British politicians raise this idea.