On certainty

One of the great motive forces in man’s action is the desire to reduce uncertainty.  Almost everything we do can be viewed as “insurance”.  We eat now in case we are unable to eat later.  We build a roof over our head on a sunny day so that we might be dry in case it rains.  We save money for the same reason.

But though these personal examples are completely natural and sensible, when taken to extremes, can the concept of insuring against future consequence become dangerous?  Just such extremes are being taken-to today, in virtually every aspect of our lives.  Our livelihoods are assured by unemployment and disability insurance and workman’s compensation programmes.  Our health is not ensured, but the cost of maintaining it – within a very western-centric model of health-maintenance –  is insured.

Our banks provide us with an assurance that we will be able to withdraw our deposits on demand – a form of insurance for which we are charged an interest-rate differential – and the banks are further assured against default on that obligation by the Canadian Deposit Insurance Corporation and other provincial guarantees.

The most recent type of insurance is made in the derivative markets, and it is insurance against the default by debtors on their debt.  This type of insurance is known as a credit default swap, where risk of default is removed from the creditor and assumed by another party, who is paid to take on the risk of default.

Given that our modern lives are dominated by insurance with much of our energy devoted to reducing the likelihood of future hardship and calamity, it is reasonable to ask: does it work?  The answer given us by the most modern science of complexity theory tells us that while it is possible that we might get lucky and have it all work for a while, the more we try to ensure certainty, the more uncertainty we create.

I hope to add more to this…

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