Robert Reich on the Learned Hand Rule

Reasonable precaution means spending as much on safety as the probability of a particular disaster occurring, multiplied by its likely harm to human beings and the environment if it does occur.

That's Robert Reich today using the Learned Hand rule to slam corporations. Citing GE's questionable Mark 1 boiler reactor (the same used in TEPCO's Fukushima Daiichi plant), Reich argues in favor of more regulation.

Profit-making corporations have every incentive to underestimate these probabilities and lowball the likely harms.

I'm not really sure why he thinks regulators have the all the right incentives. After all, they're not getting paid very much compared to private sector workers so they should be pretty easy to bribe.

If companies are taking too many risks (and to be sure it would be the company which bought and used the reactor who's taking too many risks, not the company which sold it), then it sounds like they are not internalizing the costs of their recklessness. Maybe regulators are the way to go, maybe stronger negligence rules are. Maybe nothing is needed at all since nuclear accidents are incredibly rare and it took a major earthquake to create one. Just because the most recent natural disaster caused problems doesn't mean companies are under-estimating the probability of the problem.

Update The size of the earthquake was completely unprecedented. Hard to blame the Japanese power company for not predicting the future.

Social Insurance and aSTG

Lately I've been reading William Rosen's The Most Powerful Idea in the World, about the history of the steam engine. But that's not the most powerful idea: the notion that people have a right to profit from their invention is. (At the dawn of the Industrial Revolution, this was a new idea.)

Rosen takes the time to explain the biology of how we get invention. In other words, when people have that eureka moment, what happening in the brain? The key, researchers Mark Jung-Beeman and John Kounios, found is that when there's a flash of insight, blood flows to the anterior Superior Temporal Gyrus (aSTG) in the right hemisphere. When you daydream, this is part of the brain that's responsible. Most of the time, the brain works to inhibit the flow of blood to this region. This makes evolutionary sense: daydreaming gets you killed because blood flowing to aSTG is blood that's not flowing to the parts of your brain which will tell you there's a lion about to kill you. This is also why you get flashes of insight when you're relaxing (taking a walk, in the shower).

So far, so good. But what does this have to do with social insurance? It occurs to me that if you are constantly concerned about survival, you have no time for flashes of insight (note to get these eureka moments, you also have to know the material...daydreaming is not a substitute for reading). I see this as a potential barrier for income mobility. If there's a safety net loose enough to encourage hard work but strong enough to allow people to relax everyone once in a while, then you're more likely to get new ideas (not just inventions, but things from small business ideas to solving everyday problems).

It should be stressed that this can easily be justification for more aid to the developing world and I tepidly agree. All things being equal, yes. But I must return to the thesis of Rosen's book: allow people to profit from their ideas. In the developing world, where it is nearly impossible to start a (legal) business, secure a loan, etc, having great ideas isn't enough to pull a country out of poverty.

But it's a start.

The Listeners of What Is This Person Referring to?

Since then, I've grown to hate these listeners. Oh, I hate them, hate them, hate them. Every time one of their narrow-minded, classist letters makes it on the air, I contemplate burning my tote bag in protest.

Answer here.