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September 08, 2008

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Next Gen Politics

Great article. One question though. What do we do to prepare for a storm we have never seen,(i.e. global warming). We are in a stage of complacency of epic proportions when it comes to global warming. Like the frog that slowly boils without jumping out of the pot as Al Gore would say.
Again, great article. Keep up the great posts.

Jerame Clough
-Next Gen Politics

The Financial Philosopher

Jerame:

The "storm" of global warming is beyond my expertise. With that said, it does provide an interesting example that parallel's the financial aspects of risk management.

For example, most agree that global warming is a threat but there is an idealogical line drawn between those who believe it is "man-made" and those who believe it is a "natural" or "cyclical" phenomenon.

Personally, I do not pretend to "know" with certainty either side is correct. Instead, I ascribe to the philosophy found in the wisdom of "Pascal's Wager."

Blaise Pascal's idea of "risk management" pertained to the existence of God:

"Belief is a wise wager. Granted that faith cannot be proved, what harm will come to you if you gamble on its truth and it proves false? If you gain, you gain all; if you lose, you lose nothing. Wager, then, without hesitation, that He exists." ~ Blaise Pascal

Of course, if you "wager" that God does NOT exist and you are wrong, then you lose everything...

Pascal's Wager, in my humble opinion, is an exercise in the inter-related aspects of risk, uncertainty and consequences.

I try not to get political, but the current administration used this logic with going to war with Iraq. The risks were uncertain (no "smoking gun") but the consequences in failing to act were potentially high.

The disconnect, however, is that this logic is not used by the same administration with global warming. The risk of global warming, arguably, is uncertain but the consequences in failing to act, if it is a man-made phenomenon, are potentially high or even "epic" as you said...

If we wager that global warming exists and we are correct, we gain all. If we are not correct, we lose nothing (except what we have wagered, some well-spent resources) but stand to gain a better place to live.

If we wager that global warming does NOT exist and are NOT correct, then we lose all...

As you may agree, Pascal's Wager works in religion, investing, insurance, war, global warming or any risk management application.

What do you think?

Thanks for provoking thought, once again, Jerame.

For more on Pascal's Wager, please visit my previous blog post, called "Finding God in Behavioral Finance:"

http://financialphilosopher.typepad.com/thefinancialphilosopher/2007/10/finding-god-in-.html

Next Gen Politics

That is a great response. I am familure with Pascal, but have never thought about connecting his wager to global warming. I will of course argue that the Bush administration "used this logic with going to war with Iraq. The risks were uncertain (no "smoking gun") but the consequences in failing to act were potentially high."

As we have seen with subsequent evidence, this was never about WMD in Iraq, and terrorists were never welcome in Sadam's Iraq. Enough with the Politics. You are right to connect Pascal's logical thought experiment to global warming. It's a perfect analogy.

Anyway, great post. Keep up the good work. You always leave me thinking. Great site!

Jerame Clough
-Next Gen Politics

jimcos42

Two comments:

1. I live in the San Andreas (as well as several other potentially dangerous) fault zones. Is earthquake prep a commonly discussed theme of popular contingency planning? I'm afraid not. Complacency, big time.

2. I wish people would use the term "climate change" rather than "global warming." CC has been around since Day One of planet Earth. GW-- natural or man-made-- is a sub-set of CC. A more dispassionate, less politicized treatment would better serve all and help us make a better bet.

The Financial Philosopher

jimcos42:

Both of your points speak to complacency with regard that humans tend towards laziness in their thinking and behaviors (the path of least resistance) as well as their language:

1. Preparation for the eventual and inevitable catastrophic event of major earthquake is a great example. In Charleston, SC, I live near the third largest fault in the country. We have not had a "major" earthquake in 222 years but are "due" for another big one at any time...

2. The use of language and attaching certain terms, such as Global Warming, to a natural phenonema that may or may not be within our control, when another term, such as Climate Change, may be a more useful and more dispassionate term, is also a form of laziness. We tend to accept terms that are commonly used without stopping to think of their meaning or if another term would better serve the particular object of definition and even the greater good...

"Man acts as though he were the shaper and master of language, while in fact language remains the master of man." ~ Martin Heidegger

Thanks for the thoughts, as always...

Kent @ The Financial Philosopher

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