As Dan Alesch has pointed out, we designate disasters by their triggering events, but we recognize them by their impacts. Thus, we know Katrina and Sandy by the devastation they created; had they exhausted their energies over the Atlantic, their names would be forgotten. In years to come, COVID-19 will cause all of us to shudder, even though we’ve experienced many decades of influenza outbreaks.
But why were these disasters so impactful? And, for all of them, why were there such great disparities in those impacts, even among neighboring countries (Taiwan vs China) and even communities? My answer – Minsky Moments.
A Minsky Moment is a crisis paradoxically born of stability (It takes its name from Hyman Minsky and his financial instability hypothesis). Minsky believed that a long period of stable financial markets led to ever increasing risk tolerance (and often risk-taking) which in turn led to a sudden collapse in the market. His ideas have been used to explain both the crisis in Asian markets in the late 1990’s and the Great Recession that we were slowly climbing out of.
But we see this same behavior occurring over and over again, leading to other kinds of disasters. For example, the hurricanes in Florida in 2004 and 2005 were the first major storms to hit south Florida since Hurricane Andrew in 1992. Individually, each was weaker than Andrew, but collectively their impacts were much greater (For example, Wilma – a Cat 3 hurricane – did almost as much damage as the Cat 5 Andrew even after Ivan and Charley had already done so much.). Over time, people forgot Nature’s devastation – many let their insurance policies lapse; many didn’t properly protect their homes; virtually no effort was made to strengthen buildings built prior to the more stringent building codes put in force after Andrew. People became so risk tolerant that even common sense precautions (such as properly functioning storm shutters) were ignored.
Similarly, even after the devastating effects of this coronavirus in China became apparent (in spite of the Chinese government’s efforts to hide them) in January, the President and many governors and mayors tried to downplay its potential impacts. People were encouraged to “party hearty” – Chinese New Year, Mardi Gras and others. Spring Breakers beached it even into March, and for some, sadly, it was their last Big Wave. We had not had a major epidemic in 100 years; the false alarms of the last two decades (SARS, Ebola, et al.) conditioned us to believe that the party would never end – until it did.
We take action immediately after a disaster and then as its devastation slowly fades from our memories we become more and more tolerant of risk and eventually engage in increasingly risky behavior. Almost invariably, this behavior leads to a Minsky Moment.
Sadly, there can be Minsky Moments in any and every aspect of our lives. Certainly AIDS took so many lives in the 1980s because of the risk tolerance and risky behavior that were the hallmarks of the sexual revolution and drug use in the ’60s and ’70s. We had conquered polio in the ’50s; antibiotics seemed able to cure even STDs; there was no real risk – or so we thought. And yet a virus that apparently had been lying in wait since the ’20s pounced on our risky behavior to become a pandemic that continues today.
The levees of the Sacramento River Valley provide the basis for a potential Minsky Moment in the making. Originally built to provide water for reliable irrigation of farm land, the levee system has led to unrestrained development. This residential and commercial development is occurring in an area that has seen at least six massive floods (When Leland Stanford became Governor of California, he had to use a rowboat to get to his inauguration.). When the levees breach (one estimate indicates a 64% chance in the next third of a century), the drinking water for 25 million people will be contaminated, millions will be left homeless and tens of thousands will die. All because we have forgotten the lessons of the Great Mississippi flood of 1927 (John Barry’s Rising Tide provides an excellent explanation of how bad management and engineering contributed to this event. His The Great Influenza is a worthwhile reference on the Spanish flu pandemic.). Similarly, had we remembered the lessons that Nature tried to teach us with the Long Island Express of 1938 (a massive meat cleaver – compared to Sandy’s butter knife – that carved up the Long Island Sound) much of the devastation of Hurricane Sandy would have been avoided. While some communities had wide beaches and recently constructed berms and dunes that protected them from the worst of the storm, many more of their neighbors went unprotected into that good night. And those still rage over the blight that is strangling their communities.
In too many cases, the impacts caused by extreme events – especially the human suffering – can be attributed to Minsky Moments like these. It is all too human to want to forget the bad things that have happened to us. It is all too human to believe that since no crisis has happened recently, none lies lurking in our future. But to be resilient we must go beyond our human failings – we must ensure that fading memories do not give rise to tolerance of risk, then risky behavior, and then the inevitable Minsky Moment.