& like all consistent lessons from history, we haven’t seemed to have learned this lesson and seem to be determined to repeat it.

Towards that end, the Wall Street Journal online published two articles on Friday, under the shared title, Undressing the Terror Threat. The first article by Paul Campos & Nate Silver explains correctly:

…The world’s greatest nation seems bent on subjecting itself to a similarly humiliating defeat, by playing a game that could be called Terrorball. The first two rules of Terrorball are:

(1) The game lasts as long as there are terrorists who want to harm Americans; and

(2) If terrorists should manage to kill or injure or seriously frighten any of us, they win.

These rules help explain the otherwise inexplicable wave of hysteria that has swept over our government in the wake of the failed attempt by a rather pathetic aspiring terrorist to blow up a plane on Christmas Day. For two weeks now, this mildly troubling but essentially minor incident has dominated headlines and airwaves, and sent politicians from the president on down scurrying to outdo each other with statements that such incidents are “unacceptable,” and that all sorts of new and better procedures will be implemented to make sure nothing like this ever happens again.

Meanwhile, millions of travelers are being subjected to increasingly pointless and invasive searches and the resultant delays, such as the one that practically shut down Newark Liberty International Airport last week, after a man accidentally walked through the wrong gate, or Tuesday’s incident at a California airport, which closed for hours after a “potentially explosive substance” was found in a traveler’s luggage. (It turned out to be honey.)…

The authors make a very good point here, though I do object to the term “rather pathetic aspiring terrorist”… as I saw on a blog somewhere in retort “What you really need are suicide bombers with experience!”.

Beyond that, they then try to take some statistics too far.  Using murder & suicide rates to show how are fears aren’t lined up with a real assessment of risks, they write:

…The country’s homicide rate is approximately six times higher than that of most other developed nations; we have 15,000 more murders per year than we would if the rate were comparable to that of otherwise similar countries. Americans own around 200 million firearms, which is to say there are nearly as many privately owned guns as there are adults in the country. In addition, there are about 200,000 convicted murderers walking free in America today (there have been more than 600,000 murders in America over the past 30 years, and the average time served for the crime is about 12 years)….

Taking those numbers, they conclude that which doesn’t follow:

…Given these statistics, there is little doubt that banning private gun ownership and making life without parole mandatory for anyone convicted of murder would reduce the homicide rate in America significantly….

& Even though they aren’t advocating such a policy, they basically state that the number of guns in private hands necessarily affects either homicide or suicide rates.

I think this ignores the historical evidence that governments typically ban weapons prior to mass murdering their own citizens, but it also isn’t proven by the numbers they give.  Because regardless of how people kill themselves or others, removing the primary instrument doesn’t necessarily means those actions will halt.  Lastly of course, even that assumes the government has the ability to remove the primary instrument in question, which is highly unlikely.

Either way, overall they use the example that is hysteria over terrorism to show parallels to the war on drugs, traffic accidents, and other risks to conclude:

…What then is to be done? A little intelligence and a few drops of courage remind us that life is full of risk, and that of all the risks we confront in America every day, terrorism is a very minor one. Taking prudent steps to reasonably minimize the tiny threat we face from a few fanatic criminals need not grant them the attention they crave….

The thing is that I agree with the authors’ basic premise, or what seems to be their basic premise, that fear based policies are wrong, even though I disagree with the facts they’ve lined up and think that using terrorism as too narrow an example has severely undermined their case.

First, while it’s certainly true that the gap between objective terrorism threats and hysterical policies seems large, there are valid reasons for that.  They discuss one, which is we need to focus money on preventing mass catastrophes such as a nuclear detonation, but they fail to mention the organizations themselves and how they differ from murder in general.

It’s true, that in any free society, a lone nut, bent on killing others, will have the opportunity to do so and there’s little we can do, while maintaining a free society to prevent that from happening.

However, were terrorism and even gangs, the mob, and other criminal organizations differ is that we have to attack those organizations directly.  Dealing with each instance of terrorism as non-related criminal events is exactly what allows their organizations to gain grounds on operational abilities.  Ignoring the organization therefore, seems to dictate a increase in the likelihood of a major incident.

Outside these specific critiques however, I think our society has become very easily motivated by fears instead of reason and logic.  When we allow victims of drunk driving incidents dictate the driving laws, or say a murdered victim’s family members to seek emotional healing through a policy of revenge, or use those in the most destitute of scenarios to control medical policy… whatever it is, if  we allow fear to take a hold of our government policy, new legislation, or even on a personal level, allowing fear to control our own lives… if we allow this, we should at least be doing so with the knowledge that it’s not conducive to freedom.

Detailed Abstractions has more articles about fear based policies here, here, & here.

…This seemingly paradoxical view is based on several overlapping strands of research in economics as it pertains to development, history, technology, business expansion, and new-firm formation. According to this view, entrepreneurs at work in the economy – in finance, high tech, manufacturing, services, and beyond – are constantly experimenting, creating new business models, techniques, and technologies that upend the established order of things.

Some new technologies and innovations are genuine improvements and are long-lasting welfare enhancers. But others are the basketball equivalent of pump fakes – they look like the real deal and prompt market actors to leap hastily into action, only to realize later that their bets were wrong.

Given this dynamic, markets are unpredictable, prone to booms and busts, characterized by bouts of exuberance that are rational or irrational only in hindsight.  But markets are also the only reliable mechanism for sorting out this messy process quickly. In spite of the booms and busts, markets drive genuine long-run innovation and wealth creation.

Not as eloquently as they did, I wrote about this earlier in the year (here):

…the dynamic system of the United States might have felt more pain that other countries during this crisis, but due to the mostly decentralized economic model, we will recover more quickly than most…

It then seems for most people to become a question of risk adversity.  Do we allow for individual freedom and understand that sometimes failure is a part of the process?  Or do we constantly attempt to control individual behavior for fear of potential negative consequences?

Only if we first believe in the premise that by trading freedom for stability, we actually get stability.  The CSMonitor article continues:

…When governments attempt to impose order on this chaotic and inherently risky process, they immediately run up against two serious dangers.

The first is that they strangle new innovations before they can emerge. Thus proposals for a Consumer Financial Protection Agency, a systemic risk regulator, a public health insurance plan, a green jobs policy, or any attempt at top-down planning may do more harm than good.

The second danger has to do with the nature of political economy. Politics creates its own kind of innovators who can be as destabilizing to markets as market actors themselves – but in far more pernicious ways.

Economists call these political entrepreneurs “rent-seekers.”…

…This gets to the key difference between markets and governments. When innovation-driven excesses and imbalances are recognized in the marketplace, the system can correct itself quickly. This is less the case when government policy failure occurs.

Because political failure is less publicly tolerable than market failure, the temptation becomes for policymakers to avoid acknowledging their role in creating or perpetuating problems.  Or they double down on bad bets. So rather than recognize the government’s central role in the housing boom and bust and quickly changing its ways, we see the federal policy apparatus continuing to throw good money after bad in the mortgage market and on Wall Street….

I wrote about this “doubling down”  (here):

…For those playing the home game, this means we are taking a problem caused by excessive credit and government incentives and trying to fix it by:

1. Preventing the normal contraction that needs to happen by artificially propping up failed business and bad home purchasing decisions.
2. Keep money cheap by keeping interest rates very low.
3. Then, repeat the same process that got you to the recession in the first place by incentivizing the market to buy a commodity (housing) which is still overvalued in some places….

…I’m not really into prediction making as it’s obviously fraught with so many problems, but I’ll never understand how the solution to cheap money and an over investment of housing, is to keep money cheap and incentivize home buying…

As historically known, the vast majority of centralized government intrusions into free markets and free people has led to disastrous consequences.  NBER research suggests that two of the reasons for the current global economic crisis are due to unfree markets:

…The inability of emerging economies to absorb savings through domestic investment and consumption due to inadequate national financial markets and difficulties in enforcing financial contracts; the currency controls motivated by immediate national objectives;…

Everywhere we look objectively, freedom gives us more of everything.  Do you want to fix healthcare?  Using the government will likely lead to higher rates and more control, using individual freedom however doesn’t cost much as has been proven in other avenues such as food.  Something I think is just as important as healthcare, but been left to the market unlike health care.

& the market has responded.  Food costs as a percentage of disposable income has decreased from 23.4% in 1929, to just 9.6% in 2009 (here).

Meanwhile health care costs continue to increase with government regulation.  In just the past 5 years spending on health care as a percentage of GDP has continue to go up and is projected on that trend still.  In 2005 spending was 15.9% of GDP whereas in 2009 is it 16.9% and projected to be 19.5% in 2017  (here).

It seems that the overwhelming majority of evidence suggests to honestly help the most needy, freedom is not only a moral good, but a requirement for anything approaching success…. yet what seems to be an irrational fear of “economic crisis” many people can’t see the forest for the trees.