Literacy is essential to a well-functioning democracy. But the ability to read and write is no longer enough. Exploding technology and economic complexity have made risk literacy as indispensable as reading and writing. Risk Literacy is the ability to deal with uncertainties in an informed manner. Unfortunately, most Americans and certainly our Government have been risk illiterate for a long time and it’s getting worse.
John Allen Paulos pointed out the problem in his book Innumeracy (1988). A decade later, James Walsh wrote True Odds – How Risk Affects Your Everyday Life (1998). The last chapter of that book is titled “Lotteries are a tax on the stupid”. Well, two more decades have passed and America continues to move backward in risk literacy as technological innovation grows exponentially (ever heard of Moore’s law?) and economic relationships fundamentally change. Read Tyler Cowen’s book Average Is Over (2013). If you’re intelligence and economic worth is average, you’re screwed.
It’s now critical to develop well above average wealth and risk awareness. Writer Gerd Gigerenzer believes that “risk literacy requires emotional rewiring – rejecting comforting paternalism and illusions of certainty and learning to take responsibility and to live with uncertainty. Daring to know.” Gigerenzer points out that 76% of American adults and 54% of Germans do not know how to express a 1 in 1,000 chance as a percentage (0.1%).
Without risk literacy, people jeopardize their health and money – and it then becomes our burden (we taxpayers) to support them. Stupidity costs you and it’s a formidable enemy in this war. Financial, legal and medical matters are replete with uncertainty. Yet people cling to the belief that professionals can predict the future. People don’t bother signing estate planning documents even though the probability of death and disability are 100%. The forecasting industry collects $200 billion a year for “illusory certainty”.
Our inefficient, bloated Government is exacerbating the problem. Federal agencies will spew out tons of regulations at any cost, as long as there is some benefit without regard to alternative uses for those resources. For example, laws on formaldehyde exposure cost an estimated $80 million per life saved. Far more lives could be saved at a fraction of the cost by spending that money on inoculations, cancer screening or public information campaigns on nutrition/anti-smoking/exercise.
As I enjoyed St. Patrick’s Day corn beef and cabbage, I was reminded of an economist statement on the costs of misguided, risk illiterate Government regulations:
The Lord’s Prayer is 66 words, the Gettysburg Address is 286 words, there are 1,322 words in the Declaration of Independence, but Government regulations on the sale of cabbage total 26,911 words. Thomas Hopkins (1992).
Happy St. Patrick’s Day. Save a spot in your Estate Planning War Chest for awareness of the idiocracy in which we reside.