Markets not only things that crash

Posted to the web on: 16 July 2008
Markets not only things that crash
John Kay

THIS month marked the 100th anniversary of the Tunguska explosion in Siberia. If you weren’t celebrating, you should have been. The incident was probably the nearest we have come to extinction in modern human history — and we survived.

A large object — presumably an asteroid or meteorite — collided with the Earth. If it had landed in Manhattan, it would have destroyed New York. A bit bigger, and it would have been calamitous wherever it landed. A similar event at Yucatan, 65-million years ago, wiped out the dinosaurs and most other species.

There are many catastrophes graver than meltdown in the markets. The road to oblivion has many unexpected turnings. Environmental catastrophes, such as meteorites or seismic events, may do us in. Something even more devastating than the Yucatan object is on its way, but it may be tens of millions of years before it reaches us.

Two hundred million years before Yucatan, the Permian extinction was even more devastating. We do not know the cause. It may have been a meteorite, but another theory blames the “clathrate gun”, a massive release of methane from the ocean floor. Global warming could cause large methane release from permafrost or trigger another shot from the clathrate gun. But the environmental damage that humans cause is modest relative to the damage the environment can impose on itself.

Many other potential apocalypses are of our own making. The Frankenstein problem of technology run amok is beloved by science fiction writers. The world may be taken over by man-made objects, such as robots, or mutations . It may be submerged in grey goo from nanotechnology. The fiction genre survives because no one can say categorically that any of this is impossible.

MADMEN have always been a threat to humanity and technological advance increases their capacity to do damage. Hitler, Stalin and Mao bear direct responsibility for the deaths of 30-million people. Hitler might have destroyed the world if he had had the means.

The influenza pandemic of 1918-19 was, with AIDS, the most devastating plague of modern times. The Black Death killed 30% of Europe’s population. Still, 70% of our ancestors survived and therefore we do also. We may not always be so lucky. A mutant virus may wipe out humankind and leave the world to less sociable species. The spread of the Black Death across Europe took years, but airlines could carry the disease everywhere within hours.

Martin Rees, who engages with a litany of catastrophes, gave his book the provocative title of Our Final Century? But while technology causes many problems, it also fixes many. The Black Death was probably bubonic plague and, if so, we could now cure it. Even the asteroid can be deflected if we see it coming.

It is difficult to think about these issues in a dispassionate way. In his book Catastrophes, Richard Posner proposes a cost/benefit analysis of all possible disasters. But the attempts to model the end of the world are mostly bogus. We have good data on frequencies of near-Earth objects but there is no meaningful way to attach probabilities to these other calamities.

The best way of dealing with grave uncertainties is to buy options against them. For each potential catastrophe, we should undertake research to ascertain what we might do if a remote possibility becomes a plausible reality. Instead, we talk endlessly about less dangerous issues that give more scope for moral and political posturing. Speeches about man-made environmental damage and terrorism arouse audiences, but asteroids and grey goo elicit only a chuckle. Our actions against more catastrophic threats are few, ineffectual and sometimes counterproductive.

In the meantime, mark February 1 2019 and April 13 2029 in your diaries. These are the next dates on which a very large object from space may land on your head. Financial Times

http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A801794