Tag Archives: Risk aversion

The Red Flag Act, by Eric Peters

The human race never has and never will achieve “absolute safety,” and that’s a good thing. From Eric Peters at ericpetersautos.com:

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It can be hard to push back against Sickness Psychosis.

People who know it is a psychosis are social-pressured to comply with such outrages as being expected (and increasingly required) to dress up as if it were Halloween every day for reasons that are exactly the same in principle as driving their car no faster than 5 MPH with the flashers on at all times because someone fears “speeding” cars. That they might get run over – or run into – if cars were allowed to go any faster.

Such neurotics temporarily got their way more than 100 years ago, when the first cars appeared and threatened the delicate nerves of the velocity averse.

The Red Flag Acts (including the Highways and Locomotive Act of 1878) imposed a 4 MPH maximum speed limit in the country – 2 MPH in the city –   and required that the vehicle be preceded by a man walking at least 60 yards ahead of it waving a red flag to warn all in the path of the vehicle that it was coming . . . very slowly.

They got their way again in the early ‘70s, when the maximum lawful highway speed – which had risen to an alarming (to the velocity-averse) 70-75 MPH – was temporarily throttled back to 55 MPH. This was initially presented to a public terrorized by propaganda about artificial fuel scarcity as a necessary fuel conservation measure that oleaginously morphed into a saaaaaaaaaafety measure . . . very much as “flattening the curve” greasily morphed into “stopping the spread,” the latter having no end.

The common denominator being the weaponization of fear.

The difference being that the velocity averse were overruled by those who wanted to get places in hours rather than days and minutes rather than hours and – the key thing – rejected the neurotics’ assertion that their fear of movement gave them the moral right to restrict it so absurdly or even at all.

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Why We’re So Risk-Averse: “We Can’t Take That Chance”, by Charles Hugh Smith

How has risk aversion become the American way? From Charles Hugh Smith at oftwominds.com:

If our faith in the future and our resilience is near-zero, then we can’t take any chances.
You’ve probably noticed how risk-averse Hollywood has become: the big summer movies are all extensions of existing franchises–mixing up the superheroes in new combinations, or remaking hit films from the past–all safe bets.
The trend to “playing it safe” is not limited to Hollywood:–we see risk aversion in every sphere of the economy and society.
The unfailingly stimulating Ben Hunt of the Epsilon Theory newsletter has been highlighting the connection between super-easy-money financial policy and the avoidance of risk that’s so apparent in Corporate America: rather than take a chance that an investment in new technology, worker productivity etc. will increase sales and profit margins, corporations are borrowing super-cheap money and using this “nearly free money” to buy back their own shares in the stock market. ( Gradually and Then Suddenly).
This reduction of outstanding shares boosts sales and profits per share, creating higher earnings per share without actually boosting sales or profits.
Hunt’s point is that easy-money policies actually reduce the incentives to take risks to improve productivity/ profitability, and this ends up crippling our economy, as growth and productivity require taking on some risk. No risk-taking = no productivity gains and thus no gains in wealth, prosperity, social mobility, etc.
I agree with Hunt’s description of the perverse incentives created by easy-money policies, but I don’t think that’s the only driver of risk aversion, or even the primary driver.
We see this pervasive avoidance of risk in other areas as well–for example, in what college students are choosing as majors and what policy makers at the highest levels (the Federal Reserve, for example) are saying, in word and deed, “We Can’t Take That Chance.”