Epidemiologists, Hyman Minsky, and Forest Fires in Yellowstone

Why do crises happen, and how can we stop them? This is the question asked in many a field, from economics, to epidemiology, to research on forest fires. The problem is, as Minsky has explained, epidemiologists fear, and forest fires in Yellowstone Park have illustrated: the safer we make things, the worse potential they have for damage.

The best way to illustrate this is with a very visual (and uncontroversial) example: forest fires in Yellowstone. In the early part of the 20th century, officials in national parks began to suppress any and all forest fires that developed. This seemed to make sense, since forest fires could be very destructive to the forest and dangerous for people visiting it or living nearby, as well as for some endangered species living in the park. For years, every small fire was extinguished. The problem, we now know, is that this led to a buildup of dry, dead wood in the forest -- an enormous pile of fuel waiting to be ignited. The fires soon became harder and harder to control until a fire in 1988 destroyed 36% of the park's forested land. With that much fuel, it was just a matter of time before a drought (like the one in 1988) and other environmental conditions set the stage for a nearly unstoppable fire. Eradicating small fires over years made a really big one not only possible, but essentially inevitable.

Epidemiologists have the same fears. They know that the first time a disease strikes a "virgin population" (i.e. one that has never been exposed to the disease before), the effects are devastating. This effect contributed in no small part to Europeans' success in conquering the Americas: diseases like smallpox, brought by Europeans who were resistant to it, killed and weakened vast proportions of the native populations there.

Throughout human history, infectious diseases have been among the leading causes of death. Cities, in fact, were unsustainable because so many people died of diseases there; they required a steady stream of immigrants from the countryside to persist. By the middle of the 20th century, scientists in America and Europe began to declare that infectious diseases would soon be a thing of the past. They were wrong. Just as humans can build up a resistance to disease (actually largely via natural selection: those who have no resistance die), diseases can adapt to various treatments such as antibiotics, insecticides (for Malaria), etc. Last year, for the first time, a larger proportion of the world's population lived in cities than in rural areas. As mentioned above, cities are a great place for pathogens to live. On top of this, the lack of infectious diseases over the past 60 years means that our bodies may be "out of shape" when it comes to combating disease. The question, then, is if we will be able to stay ahead of diseases with vaccines and other measures. We must constantly adapt and must not allow a virgin, non-resistant population to build up.

This brings us to Minsky. He posited that free markets would always be prone to financial crises because long periods of stability would lead investors to take on higher risks (as their memories of past crises fade or as new generations with no memories come onto the scene). Eventually, debts would pile up to an unsustainable level, requiring only a trigger to set off something akin to a financial forest fire. He believed government regulation was the key.

I will take this one step further, combining with theories of evolution and epidemiology, and say that regulation will probably be unsuccessful in the end as well. For example, one reason the recent crisis has been so bad is that central banks have done such a good job at smoothing the business cycle. Securitization seemed to be doing a good job at spreading, assessing, and pricing risk, and government guarantees, whether explicit (FDIC) or implicit (Fannie Mae and Freddie Mac) seemed to take care of the rest. This lowered people's perception of risk and raised their appetites for it. It can therefore be argued that by hauling out the fire hose and stopping all the previous fires (like the dot-com crash of 2000-2001), the Federal Reserve allowed a pile of "dead wood" to accumulate that needed only a trigger (declining house prices coupled with rising commodity prices) to ignite it. Voilà! Financial meltdown!

But don't stop here, these lessons can be applied to many other areas as well. This is just a hypothesis, but I bet Americans do more foolhardy things abroad than some other people because they are so used to everything being safe back home (e.g. "do not place house pets in your microwave"). The drive, often via lawsuits, to make everything safe in America could very well lead Americans to walk brain dead into dangers they no longer see. Here in Austria, I have another example. Austrians are so used to waiting for the light to turn green before walking across the street, and to cars stopping when the light is red (something I also expect in America), that they also no longer bother to look before crossing the street as long as the light is green. The typical response is "well, they have to stop. If they don't they'll go to prison." My response? A nice thought for you in the afterlife, I imagine.

The challenge now seems to be to control risks that are harder for individuals to see coming, while returning personal responsibility to those slammed by risks they really ought to have seen coming. What does this mean for the Viennese? Nothing, really, I'm certainly not advocating letting people who drive through red lights and kill people off easy. What does it mean for Americans? If you injure yourself by sitting on your folding chair after opening it incorrectly, it's your problem. What does this mean for the financial system? Look to Yellowstone. We need more small forest fires (recessions) and fewer explicit and implicit guarantees that give false security. Where guarantees are given, conservatism (as in low risk and low returns) needs to be enforced.

I'm sure there are more lessons. If you think of some, please comment.

The Road to a PhD Program: Update 1

All right, just a quick progress report: moving along on steps one and two. I've gotten the latest Cracking the GRE from the Princeton Review and have begun reading it. I also downloaded the program CueCard, which is a program that allows you to make computerized flash-cards. I'll be using it to study vocabulary, as that's a big part of the verbal test.

I took the online practice test today to get a baseline score, which I'm not going to share with you. Suffice it to say I didn't realize what I was supposed to be doing (the directions weren't displayed, which I think was a program error) and was trying to associate words rather than find their antonyms. First question (the most heavily weighted one) was therefore wrong! I also suck at basic math even though I can do calculus, apparently. So I'll be studying up on all that and now have minimum score goals in mind to work towards.

I've also already talked to a professor about Chicago. He suggested asking the admissions depts. there if there's a PhD student I could talk to. I should ask him/her about the experience there, then consider talking to my possible future professors as well. He also had some personal opinions about the schools, but I'll be keeping those to myself.

In sum: I've been making progress.

Next step: make an appointment to take the GRE in mid June.

Also: starting to fish around for a thesis adviser and make serious thoughts about my proposal, which must be turned in by July.

That's all for now. Glad to have a plan with goals and steps along the way!

Goodnight!

Soon to come: thinking about entries on Iran's nuclear program (already started a draft on that) and on East Jerusalem (Israel's facts on the ground). Stay tuned!

The Road to a PhD Program

Hi everybody (both of you). Today it's time for a "real issue" of a different variety: my real-life road to a PhD program. I'll be finishing up my coursework for my master's in international relations this spring, finishing the thesis this fall. In December, my applications for PhD programs are due. Even though that seems like a long way away, I'm still a bit overwhelmed. So I decided to start writing about the experience, because perhaps some others out there will find it beneficial (unlikely) and because it has a calming function for me to get this mapped out and "out there" (the real reason).

I'm looking at applying to PhD programs in political science at the University of Chicago and Northwestern, perhaps also at Illinois University at Chicago. I have a rather unusual restriction in that I'm not applying all over the place and then just going where I get in (which would be wise). Instead, because my partner and I are probably moving to Chicago next year, and because he has to go there because he'll have a visa to work for only that company, I'm applying only to schools in Chicago. That limits my options. Thank god for antacids and Valium, right? Just kidding. Fatty foods and alcohol suffice as well. JK again.

So here's my plan:

1. Start practicing for the GRE (it wasn't required for my master's program because this is Europe)
2. Talk to my professors here and ask them for advice and if they know anything about Chicago universities specifically (like, am I fooling myself thinking I can get in there?)
3. Take the GRE sometime this summer (there's a test center in Bratislava, apparently, which is a mere hour away by train).
4. Talk to program directors at the University of Chicago and Northwestern and ask them about the program and what they're looking for in a candidate. This seems like a suicide mission to me, but I think I read it was actually a good idea. It's probably true that having made contact with them, they might remember you when they look at your application, which might make them more likely to say yes. Unless or course you made a complete ass of yourself on the phone, in which case I heard that Wendy's is hiring -- in Canada.
5. Turn in my applications in December (U of Chicago is due on Dec. 28th, not sure about Northwestern).
6. Find religion.
7. Hopefully get accepted in the spring
8. Move to Chicago (one way or the other)
9. Hopefully start the grueling, several year task that is getting a PhD. Hopefully also transferring in as many classes from my master's as possible (the programs in Chicago are combined master/PhD programs).

So that's "it." Luckily, I've already ordered a GRE book from the Princeton Review on Amazon. Just 8 simple steps to go, on top of finishing my last master's class and writing my thesis.

Ahh, I feel more relaxed now, just as expected. No, wait, I feel worse...

To be continued...