Risk Pushed Down onto Us

Within a day I was twice alerted to Bruce Schneier’s recent essay, “Our Newfound Fear of Risk.” Schneier meaningfully and regularly contributes on security issues. He deserves our appreciation. However, I disagree with his connotation that “Our Newfound Fear of Risk” is our fault, for that’s how the essay reads: “We’re afraid of risk”, “We’re bad at accurately assessing risk”, “We need to relearn how to accept risk.” The examples given about our implied overreaction to risk are policing, control and, terrorism.

For millennia we’ve lived with risk, mostly within communities where risk and its avoidance were shared. What is different now is the extent of risk transfer, what Jacob Hacker calls “The Great Risk Shift.” Over the past 30-plus years the powerful have pushed risk or harm down onto us, onto our jobs, families, education, retirement, income, debt, freedom and homes. We are now at risk within our communities. That’s not a fantasy or something we have to relearn how to accept. It stems from willful policies and propaganda by the powerful. What Steven Lukes would denote as the third face of power, where the intent is to control us from afar.

Consider just two examples of how risk has been pushed down onto us.

The Housing Bubble and Financial Crisis
The Great Recession resulted in bad things for many of us. Take housing where currently about a quarter of people with a mortgage are underwater. That came about largely because of the powerful and their hires: specifically by their expressly ignoring evidence, by inaction and control fraud. Here’s a 2004 Federal Reserve economic letter that looks at the run-up of the home price-to-rent ratio. The report is written with plenty of economist waffling yet still shows that by 2004 there was clear evidence of a housing bubble. Using my neighborhood as an example, look at this timeline of Seattle house and rent prices.

HomePricesRentSep13Taken from: http://seattlebubble.com/blog/2010/09/22/big-picture-week-price-to-rent-ratio/

Additionally economists like Dean Baker were beating the drum that house prices were unsustainable, while Alan Greenspan and his colleagues were less than enthusiastic regulators.1 Recently Joseph Stiglitz wrote: “Regulatory failures were at the core of America‚Äôs crisis.” And if you’d like to know just how bad control-fraud was leading up to the 2008 crisis, read Bill Black’s essay. These are all examples of housing-related risk being pushed down onto us.

The Carceral State
The costly emphasis on broad imprisonment began in the late 70’s along with the change in thinking that government’s role is more about market efficiency than about people. In addition to mass imprisonment, the penal strategy changed from rehabilitation to exclusion and control.2 For 50 years or more the U.S. incarceration rate was steady till 1978 when there were about 300 thousand inmates in state and federal prisons. The number of inmates then increased annually, peaking in 2009 to approximately 1.6 million.3 Crime rates do not adequately explain the impetus to imprisonment. However, part of what drives this policy is the concept of market efficiency. Here’s Richard Posner promoting that idea:

The major function of criminal law in a capitalist society is to prevent people from bypassing the system of voluntary, compensated exchange-the “market”…Market bypassing in such situations is inefficient…4

The burden of this thinking affects us all. In terms of total incarceration costs, 90% is borne by state and local government.5 Nationwide, the average annual cost for one prisoner is over $30,000, money that could be better spent. This too is about harm that we endure.

There’s risk for sure, as it’s always been. But now much of it is foisted onto us. The most recent that we’ve learned is the NSA scandal. Our current relationship to risk is not about being afraid of it, or about relearning how to accept it. It’s about realizing we’re being put upon and trying to protect our own.

Addendum of Sept. 13, 2013
A day after posting this essay, Dean Baker had a post that further supports the contention of fraud associated with the housing and financial crisis.6 His post is definitely worth reading.


  1. See Alan Blinder’s “After the Music Stopped” regarding the role of regulators, especially the chapter, “The House of Cards.”
  2. Reflect on this quote: “Still, it is the length of sentences that truly distinguishes American prison policy. Indeed, the mere number of sentences imposed here would not place the United States at the top of the incarceration lists. If lists were compiled based on annual admissions to prison per capita, several European countries would outpace the United States. But American prison stays are much longer, so the total incarceration rate is higher.” Found here. This surely speaks to policies of exclusion and control; not rehabilitation.
  3. Since the 2009 peak there’s been a slight decline in the prison population with a suggestion of policy changes. However, cost reductions elicited by the Great Recession also contributed to the decline. See, e.g., this New York Times article. Regardless, so far the reductions in imprisonment are small compared to the scope of the problem.
  4. Richard A. Posner, “An Economic Theory of the Criminal Law,” Columbia Law Review 85(6) Oct 1985: 1195.
  5. John Schmitt, et al., “The High Budgetary Cost of Incarceration,” Center for Economic and Policy Research, June 2010: 10.
  6. Excerpting from page xxii of the Financial Crisis Inquiry Commission (FCIC):

    Lenders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities. As early as September 2004, Countrywide executives recognized that many of the loans they were originating could result in “catastrophic consequences.”…

    They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators. Nonetheless, they sold those securities to investors.

    The “They” in the paragraph immediately above refers to major financial institutions. The FCIC report can be found here.

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