Risk Assessment and Its Politicization – Part 1
A brief history of understanding probability.
With lives full of choices, gauging risk as accurately as is reasonable should be a priority for people. Peter Bernstein, in his book Against the Gods: The Remarkable Story of Risk, describes the history of our understanding of risk and what it means for us today.
At first, ancient cultures, including those of ancient Greece, tended to believe a whole variety of gods and demigods controlled individual aspects of life and nature. With so many deities controlling so many different things, and with the intentions of those deities opaque at best, there was no incentive for believers in those deities to try to discern and make sense of larger patterns in life. After all, it was all in the hands of whimsical gods. But things began to change when more recent cultures began to believe in just one God who ruled everything. As Bernstein writes:
As Christianity spread across the western world, the will of a single God emerged as the orienting guide to the future, replacing the miscellany of deities people had worshiped since the beginning of time. This brought a major shift in perception: the future of life on earth remained a mystery, but it was now prescribed by a power whose intentions and standards were clear to all who took the time to learn them. As contemplation of the future became a matter of moral behavior and faith, the future no longer appeared quite as inscrutable as it had.
And as Larry Siedentop writes in Inventing the Individual:
[I]n the midst of what have been called the “dark ages”, the church initiated a process that began to strip intentionality from the physical world – leaving it ultimately as just that, the physical world. Legislation by church councils was directed against seeing different parts of the physical world as the habitations of spirits or demigods. To be sure, the habit of interpreting events in nature, especially natural disasters, as evidence of divine “anger” long persisted. Nor was the church always above taking advantage of that habit. Indeed, the purging of intermediate beings or demigods may have intensified the habit at first.
Still, clearing the field of a large variety of “demigods” ultimately paved the way toward an understanding of a “clockwork universe” that could be understood as a unified whole, designed by a single entity.
Bernstein rightly recognizes the achievements of the Arabs in the use of numbers (especially their use of the zero in place numbers to make calculating easier), but points out their own fatalistic religious world view hampered their progress in the science of prediction:
The impressive achievements of the Arabs suggest once again that an idea can go so far and still stop short of a logical conclusion. Why, given their advanced mathematical ideas, did the Arabs not proceed to probability theory and risk management? The answer, I believe, has to do with their view of life. Who determines our future: the fates, the gods, or ourselves? The idea of risk management emerges only when people believe that they are to some degree free agents. Like the Greeks and the early Christians, the fatalistic Muslims were not yet ready to take the leap.
The elusiveness of the discovery of rules of probability is especially puzzling in light of the ancient nature of games of chance involving dice, where money was gambled, providing an incentive to better understand the odds. But as Bernstein writes:
[T]he Greeks and the Romans played games of chance by rules that make no sense in our own times. Consider the games played with astragali, the bones used as dice. These objects were oblong, with two narrow faces and two wide faces. The games usually involved throwing four astragali together. The odds of landing on a wide face are obviously higher than the odds of landing on a narrow face. So one would expect the score for landing on a narrow face to be higher than the score for landing on a wide face. But the total scores received for landing on the more difficult narrow faces— 1 on one face and 6 on the other— was identical to the scores for the easier wide faces— 3 and 4 … Though people played these games with insatiable enthusiasm, no one appears to have sat down to figure the odds.
Even when six-sided die were developed, these older die were crudely made, and the edges of their sides weren’t perfectly uniform, either, so the chances any particular number would come up wasn’t precisely equal. But as the production of dice became more uniform during the Middle Ages (when dice-making guilds standardized the size, shape, and weight of dice) people began to finally notice and appreciate the mathematics of precise probability:
By the time of the Renaissance, however, everyone from scientists to explorers and from painters to architects was caught up in investigation, experimentation, and demonstration. Someone who threw a lot of dice would surely be curious about the regularities that turned up over time.
One such person who threw a lot of dice was a sixteenth-century physician named Girolamo Cardano:
Cardano’s credentials as a gambling addict alone would justify his appearance in the history of risk, but he demonstrated extraordinary talents in many other areas as well … He was probably the first person in history to write a serious analysis of games of chance.
Cardano wrote a book (“Liber de Ludo Aleae” or “The Book on Games of Chance”) around 1564 that first set out the laws of basic probability as we know them today, including how 1/6 times 1/6 defines the odds of the same number coming up on both dice when two are thrown.
Bernstein continues:
Liber de Ludo Aleae appears to have been the first serious effort to develop the statistical principles of probability … Above its original insights into the role of probability in games of chance, and beyond the mathematical power that Cardano brought to bear on the problems he wanted to solve, Liber de Ludo Aleae is the first known effort to put measurement at the service of risk. It was through this process, which Cardano carried out with such success, that risk management evolved. Whatever his motivation, the book is a monumental achievement of originality and mathematical daring.
In 1662, a group of monks made another daring observation:
[They] published a work of great importance, La logique, ou l’art de penser (Logic, or the Art of Thinking), a book that ran to five editions between 1662 and 1668. Although its authorship was not revealed, the primary— but not the sole— author is believed to have been Antoine Arnauld … The last part of the book contains four chapters on probability that cover the process of developing a hypothesis from a limited set of facts; today, this process is called statistical inference.
As important as these mathematical insights were, the author’s psychological insights were just as valuable:
The author admits that the games he has described are trivial in character, but he draws an analogy to natural events. For example, the probability of being struck by lightning is tiny but “many people … are excessively terrified when they hear thunder.” Then he makes a critically important statement: “Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.” Here is another major innovation: the idea that both gravity and probability should influence a decision.
Later, Edmond Halley, who also discovered Halley’s Comet, converted probabilities into tables in 1693 showing the odds of mortality during certain age ranges. Getting probabilities of loss as accurate as possible was essential to workable insurance, because if premiums aren’t matched to probabilities accurately, the insurance company will go bankrupt. And without workable insurance, few would have wanted to take the large risks of loss involved with long-distance trading ventures:
Without the venturesome, the world would turn a lot more slowly. Think of what life would be like if everyone were phobic about lightning, flying in airplanes, or investing in start-up companies. We are indeed fortunate that human beings differ in their appetite for risk.
The development of more accurate risk assessment did much to usher in an era of optimism, in which people were less fearful of what could now be understood as low-probability events, and conscious efforts, based more on science and logic and less on superstition, could be made to increase the probability of better results. As Bernstein writes, “The Enlightenment’s optimistic philosophy of human capabilities would show up in the Declaration of Independence and would help shape the Constitution of the newly formed United States of America.” Alexander Hamilton, regarding the “parade of horribles” opponents of ratifying of the Constitution imagined, noted in the Federalist Papers the need for a “rational calculation of probabilities.”
How well has that “optimistic philosophy” fared in recent years? That will be the subject of the next essay in this series.