The illusion of individual risk

Every society attempts to determine which risks will be borne by the individual and which will be borne by the community. It is certainly not an exact science, and there are many situations in which risk is presumably blended, some being shouldered by the individual and some by the group, either the community in general or a specified group such as a pool of policyholders. An example would be deductibles or co-pays for various kinds of insurance. The policyholder is at risk up to a certain amount. After that, the insurance company, which really means the policyholders in the group, bear the risk.

But my task is to convince you that the idea of individual risk is flawed, and that to the extent we organize our society around it we are being hoodwinked by a false libertarian ideology, one that tells us there are choices available to the individual the consequences of which will fall only to that individual. I am going to discuss this in the context of energy and resources later, but first let me offer another kind of illustration.

Controversy continues to rage over mandatory helmet laws for motorcycles, scooters, and bicycles. Two states require no helmet for any of the three. (They are Illinois and Iowa.) Many states require helmets only for those under a certain age--ranging from 17 to 20 for motorcycles and 14 to 17 for bicycles. No state requires adult bicycle riders to wear helmets.

I am not trying to argue here for or against specific helmet requirements. You can certainly find many sites on the Internet that will argue that wearing a helmet ought to be an individual choice. But do the consequences of not wearing one fall merely on the individual?

Long ago during two separate time periods, I did marketing work for two rehabilitation hospitals, the kind that treat head injuries from motorcycle and other accidents. Yes, these hospitals compete for the very lucrative task of treating traumatic head injuries as well as other types of injuries requiring extensive rehabilitative stays in a hospital. So, now you have at least one clue about how the consequences of such injuries are actually distributed.

If you are insured, your insurance picks up much of the tab which means other policyholders are picking up your bill; that's how insurance is designed. But, if traumatic head injuries are more numerous than the insurance company anticipates, look for a rate increase to pay for the very costly treatment.

Okay, so what happens if you aren't insured? Well, in my state the state government picks up your bill, and that, of course, means all taxpayers do. What is the logic behind this? The state figures that without rehabilitation a trauma victim with severe injuries will become a long-term burden on the state and the local community through other programs that serve low-income citizens in the areas of housing, employment, home health care and transportation. It's much cheaper to bring the injured person back to his or her fullest capabilities than to treat ongoing disabilities resulting from an accident. It's also the right thing to do for that person.

But there are all sorts of other consequences of a traumatic head injury that can affect the individual and his or her family and community for years afterwards. For those who never fully recovery there can be a lifetime of follow-up services, not all of them covered by insurance and many paid for with tax dollars. Some patients who appear to have a full recovery develop subtle deficits in higher reasoning functions and find that the speed with which they formerly thought through problems, say, simple calculations, is not there. These ongoing deficits take a toll on those around the injured person even though he or she appears healed.

I've used this illustration because I am so familiar with it. But I want to apply the same logic to the way in which we use resources, particularly energy. Most Americans feel that they have a right to use as much energy as they choose so long as they can pay for it. The perceived risk is that you may not be able to pay for it, not that its supply could become scarce, something that would affect myriad systems in society, not just the individual.

In an era of rising supplies of just about everything including energy, the marketplace solution to allocating resources functioned reasonably well with occasional shortages and disruptions and, of course, with the attendant steep inequality of distribution. But, running low permanently was not considered a risk. The marketplace would always magically bring on new supply or at least substitutes.

As we face a future of constrained resources, the risks are increasingly shifting from the individual person or company to society as a whole. My resource use no longer simply drives up prices which will then cause mining companies and oil and gas companies to produce whatever society might need at ever higher rates. Instead, my profligate use of resources threatens to destabilize the very social, economic and governmental systems I depend on. Should I merely be entitled to all that I can pay for?

So much of the freedom of action we take for granted today is, in fact, a product of the availability of huge amounts of energy. Of course, not to allow the individual some range of action to take risks would indeed make our lives exceedingly frustrating and dull and our societies stagnant. But as we head down the slope of energy and resource constraints, we as a society are going to have to rethink the idea that the risks associated with access to resources are an individual risk. They are increasingly going to become a societal risk to which we will need to apply some restraints regardless of the ability to pay in order to insure the stability and integrity of society as a whole.