Are Our Lives Riskier Today than in 1979?

Posted by: Michael Mandel on May 25

Okay, let’s throw this question open to everyone. In what ways are our lives (working/home) more risky than they were in 1979, and in what ways are they less risky?

I’ll play honest broker here and highlight the best/most interesting suggestions on both sides. Please have numbers to back up your arguments—no anecdotes. For example, the risk of being a victim of violent crime was almost twice as high in 1979 as today (violent crime rate = 51.7 in 1979, 22.3 in 2003)

(Note: I changed the year from 1980 to 1979 to make it a cyclical peak).

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

Jack Krupansky

May 25, 2005 05:08 PM

This is a tough question to answer since there is really no shared and robust definition of "risk" or "risky". Unless of course you merely meant to ask "Do our lives *feel* riskier than in 1979?", but I'll presume that you meant to ask what you literally asked.

When evaluating risk there are four steps: 1) identifying and enumerating the events that may harm us, 2) understanding the potential magnitude of the consequences of each event, 3) judging the probability of each event so that we can weight the consequences, and 4) summing up all those weighted consequences. That's a tough job and I'm afraid that the average citizen, including myself, does not have the analytical tools or even the raw data to do the analysis.

I would note that the risk of a terrorist mega-attack was the same on September 10, 2001 as on the morning of September 11, 2001 and the same on September 12, 2001. The perception changed (for some people, not me), but the actual risk was the same.

Similarly, the risk of a nuclear meltdown was the same on January 1, 1979 as on the morning of March 28, 1979 and the same as on the morning of March 29,1979 after the Three-Mile Island "incident". Actually, it was a little less since one nuke core had already melted. Since TMI and 9/11 a variety of measures have been taken that reduce the probability of various events, but it's not possible to say whether those risk reductions may be balanced by the emergence of other possible events (e.g., 9/11-style attack on a nuke plant) now requiring event and risk analysis in the overall risk equation.

And what is the "risk" of an "Extinction-Level Event" (large asteroid impact)? What would we rate it today versus at the beginning of 1979? But has the actual risk of such an ELE changed in the past 25 years? Nope.

That said, my answer to your question is simply: Our lives are no more or less risky than before the TMI incident.

I await hearing comments from the insurance industry (including Warren Buffett) as to their technical evaluation of risk relative to 1979. Note that for an insurance company the risk is the ratio of dollars that they will pay out relative to dollars of premium collected, not the risk of an event occurring. Nonetheless, they care very much about both the consequences (and costs) and likelhood of events.

-- Jack Krupansky

Kartik

May 26, 2005 12:29 PM

OK, I'll bite.

Look at the UN Human Development Report.

http://hdr.undp.org/statistics/data/indic/indic_10_1_1.html

The US went from a score of 0.866 in 1980 to 0.939 today. While the US score in 1980 was the 3rd highest in the world at the time, today a 0.866 score is achieved by the Czech Republic at #32.

Look at how so many countreis have progressed from 1980 to today. At the same time, note that two countries with per capita incomes greater than $5000/person have rarely ever gone to war with each other.

In 1975-1985, the world was in the midst of so many wars : Khmer Rouge, Iran-Iraq, Falkland Islands, Syria-Lebanon, etc. The Berlin wass was still up.

Overall, we have MUCH less risk today than we did in 1979, simply as many more people in the world have a stake in the stability of the system.

Kartik

May 26, 2005 12:35 PM

Look at the UN Human Development Report

http://hdr.undp.org/statistics/data/indic/indic_10_1_1.html

The US had the 3rd highest score in 1980, of 0.866. Today, 32 countries have a score higher than that, which teh US itself has risen to 0.939.

When countries cross $5000/yr in GDP per Capita, they rarely go to war with another nation with an income also above $5000/yr.

In 1975-1985, we had many wars among nations : Khmer Rouge, Iran-Iraq, Lebanon-Syria, Falklands, Granada, Panama, etc. Today, war between nations are much rarer.

Thus, risk is MUCH less than in 1979.

bhaim

June 23, 2005 04:51 PM

Peter Gosselin wrote a 3-part series that tackled a subject that's probably the key economic story of the past 30 years: the steadily increasing risk and income volatility of the American middle class. In the years since 1970, quietly but inexorably, life has gotten increasingly precarious for an increasing number of people.

It's pretty widely understood that average incomes have stagnated during the past three decades, but as bad as that is in a country as rich as America, what's worse — and less widely understood — is how much riskier life has become: income volatility has skyrocketed, the minimum wage is down, the number of people with company pensions is down, average job tenure has dropped from 11 years to 7, and the number of people with health insurance has fallen seven percentage points.

Michael Mandel

June 24, 2005 09:01 AM

Yes, Peter Gosselin did a nice job on that story. But he only looked at income volatility. My point is that there are plenty of other types of risk as well (see this piece that I wrote at http://www.businessweek.com/bwdaily/dnflash/jun2005/nf20050613_3339_db084.htm)

Thank you for your interest. This blog is no longer active.

 

About

Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

BW Mall - Sponsored Links

Buy a link now!