The recent book Antifragility by Nassim Nicholas Taleb (2012) provides an interesting analysis of the concepts of ‘fragility, robustness and antifragility’. Antifragile entities tend to improve, even thrive under the stress of extreme events. Of interest in this blog entry, however, are some of the comments made concerning extreme events and the transfer of fragility and the implications of these for the ‘relaxation’ or ‘simplification' of planning (depending on your viewpoint) outlined in the ASC Report published last year and increasingly being acted upon.
Taleb’s comment about ‘the worst case scenario’ being based on what we already know is an important one. The tables on page 28 and 29 of the ASC report, as noted in a previous blog, provide estimates of the stock at risk based on modelling of flood risk that is based on extrapolating existing data. This provides information of the risk based on current information about extreme events. These events are known, but as Taleb points out that it is the events beyond these that will become the ‘new’ extreme events to be incorporated into the next set of predictive models. Planning for the worst-case scenario that we know of or can model (unless way into the extreme tails of the modelled distribution) is likely to mean that the next, new ‘extreme’ event will be of a higher magnitude than the last extreme event.
The locking-in of long-term investment into development in areas already protected by flood defences could be seen as increasing the fragility of development. As the magnitude ‘new’ extreme events emerges these will force the continued investment of funds into protecting the increasingly vulnerable developments behind these flood defences. The focusing of development in these supposedly protected areas increases the potential impact of these new extreme events, as there is increasingly more development capable of being destroyed. The ASC Report states that for every £1 spent on flood defences there is an expected reduction in long-term costs of flood damage of £8. Does this cost-benefit ratio hold once an extreme event breaches the defences? Does the concentration of such value behind a single defensive barrier mean that there is more value to lose in one single event even if the long-term average seems to be reasonable? Is the magnitude of the losses from a single event so great as to render discussions of averages irrelevant?
It could be argued that focusing development in these protected areas is a responsible approach to the uncertainty of future environmental change but the question needs to be asked for who is it a responsible approach? Who is at hazard from this development and who effectively transfers the potential fragility of the location? Simplifying the situation dramatically, it could be argue that builders and local authorities have a ready-made infrastructure to use in these areas and can quickly build new housing, so benefit from such concentration. They also have defences against flooding in place that they can point to as providing protection for these developments (and can improve over time as the cost-benefit aanalysis dictates). House buyers may have little choice but to buy where new housing is built. The moral hazard becomes theirs. Fragility is transferred from the builder and authorities to the individual, to the householder. The focus after any event is on the individual and their lack of insurance, their misunderstanding of the risk, their need to recover, the need for the community to rally together. The fragility inherent in the system is transferred to the home-owner is not even thought about as being a historically constructed thing that invovled the builders and the authorities. Is this a similar view to that taken by the banks after the banking crisis? Taleb makes the comment that Roman engineers were often made to sleep under the bridges they built so that they had some ‘skin in the game’ (another favourite Taleb phase). If the bridge failed the Roman engineers suffered for it, they had something to lose – is it an idea we should extend to development and all the actors in it?
Taleb’s comment about ‘the worst case scenario’ being based on what we already know is an important one. The tables on page 28 and 29 of the ASC report, as noted in a previous blog, provide estimates of the stock at risk based on modelling of flood risk that is based on extrapolating existing data. This provides information of the risk based on current information about extreme events. These events are known, but as Taleb points out that it is the events beyond these that will become the ‘new’ extreme events to be incorporated into the next set of predictive models. Planning for the worst-case scenario that we know of or can model (unless way into the extreme tails of the modelled distribution) is likely to mean that the next, new ‘extreme’ event will be of a higher magnitude than the last extreme event.
The locking-in of long-term investment into development in areas already protected by flood defences could be seen as increasing the fragility of development. As the magnitude ‘new’ extreme events emerges these will force the continued investment of funds into protecting the increasingly vulnerable developments behind these flood defences. The focusing of development in these supposedly protected areas increases the potential impact of these new extreme events, as there is increasingly more development capable of being destroyed. The ASC Report states that for every £1 spent on flood defences there is an expected reduction in long-term costs of flood damage of £8. Does this cost-benefit ratio hold once an extreme event breaches the defences? Does the concentration of such value behind a single defensive barrier mean that there is more value to lose in one single event even if the long-term average seems to be reasonable? Is the magnitude of the losses from a single event so great as to render discussions of averages irrelevant?
It could be argued that focusing development in these protected areas is a responsible approach to the uncertainty of future environmental change but the question needs to be asked for who is it a responsible approach? Who is at hazard from this development and who effectively transfers the potential fragility of the location? Simplifying the situation dramatically, it could be argue that builders and local authorities have a ready-made infrastructure to use in these areas and can quickly build new housing, so benefit from such concentration. They also have defences against flooding in place that they can point to as providing protection for these developments (and can improve over time as the cost-benefit aanalysis dictates). House buyers may have little choice but to buy where new housing is built. The moral hazard becomes theirs. Fragility is transferred from the builder and authorities to the individual, to the householder. The focus after any event is on the individual and their lack of insurance, their misunderstanding of the risk, their need to recover, the need for the community to rally together. The fragility inherent in the system is transferred to the home-owner is not even thought about as being a historically constructed thing that invovled the builders and the authorities. Is this a similar view to that taken by the banks after the banking crisis? Taleb makes the comment that Roman engineers were often made to sleep under the bridges they built so that they had some ‘skin in the game’ (another favourite Taleb phase). If the bridge failed the Roman engineers suffered for it, they had something to lose – is it an idea we should extend to development and all the actors in it?
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