Archive for the 'Risk' Category

Cavalcade of Risk: The Spamalot Version

May 20, 2009


It’s our turn to host the “Cavalcade of Risk,” which is what they call a “blog carnival.”  Blog carnivals are collections of linked posts around a common theme.  In this case, that theme is “risk” – its concepts, theory, and applications.  Risk topics can include economics, insurance, public, policy, and health.  Unfortunately a lot of people seem to have found the “Risk” heading and decided it would be a good target for posts that sell their services in the area of personal finance.   So it’s turned into a Cavalcade of Spam.

Some of these “submissions” are from”cash loan” sites.  Others are headlines “Stock Trading Riches.”  Some have only one post on the entire blog.  One isn’t even about personal finance.  It reads:  “Our team of designers came up with the ultimate wedding limousine and party ride that you can rent out for your night out in new york, new jersey, or Connecticut for a very low hourly rate. ”

This is a carnival, people, not a circus!

End of rant.  Some postings from respected friends, colleagues, and new but clearly well-informed people were buried in that torrent of spamvertisements, and we happily cite them below (some other worthy posts were only marginally relevant, or repeated well-known ideas, and were cut for space reasons):

Jason Shafrin presents Why the CDC ignored Swine Flu warnings: Type I vs. Type II Errors posted at Healthcare Economist, saying, “Why did the CDC and WHO ignore early warnings of a flu outbreak in Mexico? The concept of Type I and Type II errors may help to explain their thinking.”  Good stuff.

Michael F. Cannon’s take on the Obama Health Summit in Cato At Liberty is that the misunderstanding about the industry commitment to health savings was the Administration’s fault. He writes that “…the event was a fraud.  And the industry got burned.”

John Leppard at Health Care Manumission wasn’t psyched about that summit, either.

I (Richard Eskow) wrote in The Sentinel Effect about a risk management (and Bono-like “one world”) perspective on the swine flu – as a personal vs. collective threat – in “The Swine Flu, The Universe, and Everything.”

The Loreen blog reports that certain mental health meds may increase one’s risk of cardiac death.

At Mostly Economics, blogger Amol Agrawal discusses risk management issues.

Bob Vineyard at Insureblog suggests that proposed new taxes actually mean the government will come to depend on risky health behaviors like smoking and drinking for income. (Or, I suppose, the behaviors will diminish and costs will go down.) He also challenges the spurious-sounding assumption that HSAs encourage overconsumption of resources.

Jaan Sidorov of the Disease Management Care Blog shows how much he likes (or at least respects) actuaries in this review of a Milliman report on how to reduce the health care cost trend.  He supplements their recommendations with observations on how the Milliman suggestions can make a big difference.

David Williams at the Health Business Blog celebrates the progress demonstrated by the fact that people with AIDS can now buy life insurance.

Nancy Germond at – Risk Management for the 21st Century looks at how health reform could impact small business, reflecting on the cost-benefit of wellness programs (although small business health care tends to be fully insured and therefore less sensitive to these interventions).

And speaking of risk! Jon Coppelman of Workers Comp Insider looks at texting while operating motor vehicles on the job.  If U R texting U R crazee.  But I have to go now.  I’m posting this while operating my car, and I need both hands to downshift now.

Texting while driving would be so hard if it weren’t for all that freakin’ spam.

The Meaning of Swine Flu, the Universe, and Everything

May 20, 2009


Wait a second. First we couldn’t get away from that swine flu story, although we were told that it had affected less than 100 people in Mexico and only a handful here in the US. It was getting round-the-clock high decibel coverage on all channels. Twitter, our new electronic central nervous system, was going ballistic. Andy Borowitz seemed to be on to something when he wrote, “CNN Warns Swine Flu Could Continue Through Sweeps.”

By May 7 the Associated Press and others were writing stories about the overhyped flu. It seemed resolved in a lot of people’s minds: Just another overplayed media story.

But wait. Now the World Health Organization is reporting nearly ten thousand cases of the virus worldwide, with more than half of those occurring in the United States. “We are not out of the woods,” a CDC director said (on CNN.) 16 schools have been shut down in New York after an assistant principal died of H1N1. Cases are “ballooning fast” in Japan and elsewhere, says Forbes. UN Secretary General Ban Ki Moon alled for international solidarity, which includes ensuring that “all have access to drugs and vaccines.”

We went from apocalypse to afterthought in about two weeks, and now we’re swinging back. It’s hard to know what to think. Here’s a way to reconcile some of the different and seemingly contradictory perspectives we’ve been hearing, which include:

It’s no big deal. The CDC estimates that 36,000 people die each year as the result of regular flu. Very few people have died from swine flu, but it’s all people can talk about. It’s an overhyped phenomenon, a distorted perspective caused by media sensationalism.

It’s an emergency. An assistant principal dies in New York. 103 students at nearby schools develop flu-like symptoms. Then a toddler dies in Queens. Forget the statistics: Death is a singular tragedy for the deceased and everyone who loved them. Why take chances?

It’s unlikely I’ll get it. 5,000 people have it in the US. Even if that number increases a hundredfold my chances of getting it are still only one in six hundred. And it probably won’t be worse than any other flu.

I should take serious precautions.
I should carry disinfectant and wash my hands regularly. I should stay home if I’m not feeling well, and should look for instructions from my local health authorities.

Let’s take the last two statements first. Which is correct? The answer, based on what we know now, is: Both. It’s unlikely you’ll get it, but you should take precautions anyway. You should be taking some precautions already to avoiding getting routine illnesses. But you should be even more careful with swine flu.

Why? To use Homeland Security symbolism, our individual threat level is “yellow” but our collective risk is “orange.” Your chance of getting it is low, and you don’t need to be too concerned about your own health right now unless you have other complicating conditions. But you should be concerned about all of us. As more people get it, the chance of pandemic increases. And a pandemic is a catastrophe. So even though your individual risk is low, our collective risk level is high enough that you should take precautions – for humanity’s sake, if not your own.

Concepts from risk management should help. Your risk of contracting it is low, and the outcome if you got it probably wouldn’t be severe. The chance this could become a pandemic is also low – but the outcome would be catastrophic. So we need to treat the possibility of pandemic very seriously.

Tyler Cowen does a good job of summarizing the way this kind of risk analysis should be conducted:

A one percent chance of one hundred million deaths is, in expected value terms, one million deaths and that is a big deal. Probably the United States is less vulnerable than it was in 1918, but how many people would die in China, India and many other locales? How much disruption to trade, travel, and the world economy would take place? Even in the United States, our public health systems would break down quickly and render many modern medical advances useless (e.g., when would the Tamiflu run out?)”

Expected value calculations are a good way to look at problems of this kind. The fact that the United States is less vulnerable than it was one hundred years ago does not mean it isn’t vulnerable at all. What’s more, the deaths of millions abroad should concern us for both selfish (e.g. economic) and altruistic reasons.

This kind of risk analysis should be standard operating procedure in the business community. That’s why it’s still surprising when business-friendly politicians strip money from the budget because they think bad events aren’t likely to happen (e.g. Bobby Jindal’s mockery of volcano monitoring, or Susan Collins’ removal of flu pandemic money from the stimulus budget). Remember: A low-probability event plus a high-loss outcome = cause for concern.

To sum up, based on what we know today: Swine flu is not that grave a threat to us as individuals, but it’s a serious danger for all of us – collectively. Think of it as an exercise in interconnectedness, a real-world and scientific example of that “one world” talk we’re always getting from pop stars and movie actors.

Because we are interconnected: A farmer coughs while tending livestock in Mexico. At lunch he shakes hands with his cousin the policeman, who writes a ticket for a visiting tourist later that day. The tourist goes home to Belgium, where his colleague leaves the next day to visit his cousin the day-care worker in New York. A week later a 16-month-old child dies in Queens.

It could have happened that way. We don’t know. And washing your hands today might save thousands of lives in Bangladesh or West Africa next month. We don’t know. But we do know that, in a a very literal sense, that “one world” business is real. It’s a good reason to take health precautions. It’s a good reason to support flu management and other risk management funds in the Federal budget. And it’s a good reason to care what happens anywhere and everywhere in this interconnected world.

(originally written for The Huffington Post)