Sunday, August 22, 2010

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.


Donal said...

This is a good article, but the problem is the restraints, and how they are applied. I still recall an angry letter to the editor from a fellow in DC. He got a ticket because he was already pulling out of a parking space while putting on his seatbelt. He noted that there were crack dealers operating around the corner, unmolested by the police. An acquaintance in Baltimore gets tickets when other people leave bagged trash next to his house. His complaints have no effect. And everyone complains about the difficulty of recourse against parking and traffic tickets in the cities.

Even if people were amenable to conservation,they certainly won't welcome another layer of bureaucracy hassling them about it.

Anonymous said...

That argument already exists for water.

I saw an article last week in a local newspaper about how water restrictions were so tight, watering was prohibited.

Anonymous said...

This is incredibly stupid, because it does not question HOW THE BOUNDARIES OF THE "community" ARE DEFINED (and enforced...)

Kurt Cobb said...

Perhaps anonymous missed my references to several communities. I explicitly mentioned two: policyholders and states. Policyholders are a community of sorts inasmuch as they share a common interest with the insurance company in keeping people in the group healthy so as to keep rates down. That community can extend to just one state or several states or across national boundaries. Insurance companies have statutory powers and policyholders have rights and an opportunity to enforce them through the courts and the state insurance commissioners.

I mentioned my state, Michigan, which, of course, is a well-defined community with card-carrying residents (I mean I. D. issued by the state) who share a common government and common interests. The state, of course, has many avenues of enforcement.

As for energy, while I was not explicit, energy policy is generally the purview of the state and federal governments in the United States though localities have some powers as well.

Given all this I am puzzled by Anonymous's reaction. I think a closer read would have satisfied his concern.

Step Back said...


Yours is also a good example of the illusion of another resource that appears to go to infinity and beyond, namely, the faceless "them" (e.g. premium payers, taxpayers) who are expected to foot the bill for these various "risk shifting" schemes (private health insurance, medicare).

As long as there is no face, name, financial background check or specific census of the 1, 2, many others out there who will pay for my bungee cord jumping thrills, it feels as if "they" and their ability to pay stretches out to infinity and well beyond. That is the illusion.

Of course we bungee corders know deep inside that no cord stretches forever without snapping. However the tease of winning the "lottery" so to speak in this regard "feels" irresistible that we can easily 'suspend' our disbelief and accept its false premises.

neil21 said...

I appreciate that you simply chose the most readily accessible example of individual risk / collective cost, but your decision to focus on two-wheeled transport is very unfortunate in the larger context of your argument.

In absolute terms, more head injuries occur annually to drivers of four-wheeled vehicles than two-wheeled. If collective cost of care is the issue, that's what to target. Mandatory helmets for drivers. At the very least drivers of convertibles.

(Also mandatory helmets for the over-65s at home, another major source of head injuries.)

Alternatively, do whatever you can to make two-wheels the easier choice. Allocate as much road space for two wheels as for two feet, for example. Certainly don't put barriers up (such as mandatory safety gear) that might sway the marginal commuter to choose four wheels over two.

neil21 said...

Just realised my last paragraph was a bit of a non-seq.

My point was collective cost could be reduced by discouraging individual four-wheeled transport.

For the collective good, a bus every two minutes and a bike in the garage surely make the most sense.

Weaseldog said...

I'm with you Neil21.

Side impact collisions in automobiles are the number one cause of TBIs in transportation.

In contrast, though head injuries from cycling accidents are reduced by helmets, TBIs are unaffected.

That's because scratches count as head injuries, and a helmet can protect you from a nasty scrape.

Bicycle helmets are only rated to 14mph. So if you're impact is harder than that then the extra kinetic energy is going to your head. And the energy is related to the velocity squared.

I agree it's unfortunate to have picked cycling as an example. But it is a good example of how perceived risk and perceived safety can differ remarkably from reality.

Kurt Cobb said...

Just to be clear. I do most of my errands via bicycle, and as you might have guessed, I always wear a helmet. As I said in the piece, I'm not making any specific case for helmet requirements. But it is a fairly clear cut example of how perceived individual risk doesn't match up with reality.

I'm not trying to discourage anyone from riding a two-wheeled vehicle and doubt that I could. A good number of people on scooters, motorcycle and bicycles are wiped out by, you guessed it, cars! If we provide more and more space to the two-wheeled kind of traffic, I think it would be a step in the right direction.

I'm sticking with my bicycle though. Much more energy efficient and I don't feel the need to go any faster than I can pedal on a two-wheeled vehicle.

Anonymous said...

Given all this I am puzzled by Anonymous's reaction. I think a closer read would have satisfied his concern.

No, I am not that dumb, you are far far away of understanding my point.
What I mean is, nobody is 100% a member of one community and one community only.
Requiring that anyone be 100% a member of one community and one community only is... totalitarianism!
Your "brilliant" post is just a blatant case of a spherical cow.

Kurt Cobb said...

But, Anonymous, I have shown precisely that people are members of multiple communities at various levels, each with different expectations and rules. Nowhere do I advocate anything like totalitarian control over people's lives. I'm not requiring anyone to be a member of any community, not that I could.