Sunday, September 6, 2020

The Age of Fear


We live in an era characterized by fear as a dominating narrative and influence. The beginning of this era can be formally dated to September 11, 2001, but it began developing years prior. It continued and strengthened with the Great Recession. The fear of inequality drove both the Tea Party and Occupy movements. No proposed public policy solution escapes this phenomenon.  The Patriot Act, Sarbanes Oxley, the Affordable Care Act, Dodd-Frank, Trump's immigration actions and policies, are but some of the most notable examples. The Fed along with the macroeconomics profession and finance upper echelons has so feared inflation that we regularly get stagnant and slow recoveries.

At each turn we increasingly choose safety and security over the obvious risk and potential opportunity. Insurance in all forms is overvalued and desired especially at the expense of someone else. Bastiat's apt observation that "The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else" has evolved into the state as the fictitious entity whereby everyone's risk is absorbed and destroyed at the expense of no one.

Now COVID-19 dominates our decision making. And the opportunists are always there to fulfill their portion of the bootleggers and Baptists story. 

Tyler Cowen has seen this developing for some time. We are not the little engine that could. Where are the people not just chanting but demanding that "the show MUST go on"? 

I am not arguing that fear and risk should be ignored. And it is not lost on me that our growing wealth and well being has dramatically changed the risk calculus for society--this is a good thing. But all risk analysis must be properly constructed, weighted, and continually reconsidered. Otherwise, costly errors will occur and compound.

As always, the future belongs to those willing and able to take and bear risk.

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