All days travel toward death, the last one reaches it.
—Montaigne, Essays 1.20
For better or for worse, Economy is propelled into the future by the force of self-transcendence. When Economy succeeds in going beyond the pitiable condition of mere managerialism, letting itself be carried away by the transcendent power offered to it by politics, it is for the better. But when it drags politics down to its own level, and converts leaders into servants, Economy loses the exteriority it must have in order to flourish and signs its own death warrant.
Capitalism can avoid extinction only by persuading economic agents that an indefinitely long future stretches before them. If the future were to be closed off, a reverse domino effect would abolish all economic activity from the moment its end point became known. With the approach of the end, trust would be impossible since there would no longer be any time to come in which debts could be repaid, and money would lose all value since no one would accept it in payment of outstanding obligations. This argument may be extended backward from the ultimate to the penultimate moment, and then to the one before that, and so on all the way back to the present moment. But what would happen if it were believed that the world will soon come to an end—without either the day or the hour being known?
The Time That Is Left to Us
Belief in the Apocalypse appears to be more widespread just now, in the early part of the twenty-first century, than ever before. The only difference—an enormous difference, it must be conceded—from earlier, almost forgotten ages is that in our age it is not, or not only, members of gnostic sects who warn that the end of time is drawing near, but also scientists, engineers of various kinds, even a far-sighted statesman or two. So many clouds have gathered on the horizon by this point, it is difficult to say that their pessimism is unfounded. The way forward has now been hidden from view, if it is not actually blocked.
Human beings have traditionally destroyed themselves in one of two ways, either through civil strife, war, or other forms of conflict (the very idea of which, as Clausewitz observed, entails an escalation of violence to the point of mutual annihilation),1 or by making the physical conditions of survival unsustainable. The difference between these two types of threats is now being eroded, along with other distinctions that humanity has long taken for granted as points of moral reference. Once there was a clear separation between natural catastrophes, catastrophes caused by the evil that man deliberately visits upon his fellow man, and catastrophes caused by technological or industrial accident. The weather, for example, still occurs in the writings of economists as a metaphor for randomness, something that is immune to human intentions, desires, and plans. Today, however, we know that human activity affects the weather as a result of climate change. If we destroy nature, is it because we hate nature? Of course not—we merely hate one another. The furious dynamic unleashed by what economists are accustomed to call growth, assuming it is always and everywhere something to be desired, is responsible for what might with equal euphemism be called the collateral damage of progress now that nature has become one of the victims. But the first serious manifestations of global warming will not be random fluctuations in weather patterns (including local episodes of cooling), nor rising sea levels, the thawing of glaciers in the Andes and the Alps, the disappearance of the permafrost layer in Siberia, the melting of the Arctic ice floes, the expanding reach of drought to some of the world's most productive agricultural regions, the increasing frequency of so-called extreme events (typhoons, cyclones, tornadoes, flooding), and so on; instead, the first manifestations will be large-scale population movements provoked by the anticipation of these disasters. Population movements will in turn beget conflicts and wars, as violence and the destruction of nature become caught up in a self-reinforcing loop.
The accidental emblem of this growing inability to make what used to be familiar distinctions is the catastrophe at Fukushima that plunged Japan into mourning on the fateful day of 11 March 2011. In calling it a “second nuclear disaster,” the writer Haruki Murakami, one of Japan's most prominent intellectuals,2 unmistakably linked this event to Hiroshima. What is more, the catastrophe itself unleashed a chain reaction of calls for an end to reliance on nuclear power. In the absence of massive and coordinated investment in renewable energies, however, rising worldwide demand for energy in the decades to come ensures that any move away from nuclear power could only further aggravate the threat already posed by climate change. Earlier I recalled Günther Anders's amazement more than fifty years ago on discovering, during his visit to Hiroshima and Nagasaki, that the survivors of the catastrophe apparently felt no resentment toward the human beings who had caused it. They regarded the disaster as a natural catastrophe—as a tsunami.3 What an irony of fate! At Fukushima it was an actual tidal wave, the most tangible and unmetaphorical wave imaginable, that awakened the nuclear tiger. In this case, of course, the tiger was caged. An electronuclear reactor is not an atomic bomb; indeed, it is in a sense the opposite of one, since it is meant to control a chain reaction that it itself has triggered. In the realm of the imagination, however, a negation affirms what it denies. In reality, the other realm that we inhabit, the tiger escapes from its cage from time to time. Fukushima was all at once a natural, industrial, and technological catastrophe—and, owing to the associations it conjures up in the mind of an entire people, a moral catastrophe. Fukushima was the herald of a new age.
In recalling Hiroshima, Fukushima reminds us that the gravest threat weighing upon the future of humanity remains the military threat: the atomic bomb. The conditions that once made deterrence effective, or at least apparently so, are no longer satisfied in an age of nuclear proliferation and terrorism, with the result that the taboo against using the bomb grows weaker with each passing year. Advances in miniaturization and ballistic technology trivialize atomic weapons, so that they now seem to be a weapon like any other. Under these circumstances it is hard to imagine that the explosion of such a device in a city somewhere would not have the effect, sooner or later, of letting the genie out of the bottle. No one can say what then would happen.
All this leaves the vast majority of economists completely unmoved, of course. A few of them spend their time analyzing what they are pleased to call “risks,” refining the conceptual tools described in textbooks in the chapter devoted to rational choice under uncertainty and occasionally permitting themselves a brief skirmish over some aspect of the precautionary principle. But there are not many even of those. It is still possible today to describe oneself as an analyst of economic growth without causing other economists to double over in laughter, much less anyone outside the profession who is incapable of making the least sense of elaborate mathematical models that amount to nothing more than intellectual camouflage, a way of giving an air of authority to exercises that are as pointless as they are abstruse. Each time a crisis seems to have been brought under control, the members of the economic establishment hasten to congratulate themselves that the worst did not come to pass—scarcely suspecting that the very rails on which capitalism rides once more, owing to their selfless and tireless efforts, will soon carry it back to the edge of the cliff. Their smugness is intolerable, their self-satisfaction ridiculous, and their optimism obscene.
But why do businessmen, industrialists, bankers, financiers, investors, and all the others who make the global economy work seem to show no interest in taking apocalyptic prophecies seriously? Presumably for a reason that is exactly the opposite of Pascal's wager: betting on apocalypse carries with it the risk of missing out on investment opportunities—possibly fabulous opportunities—if the apocalypse does not in fact occur; if it does occur, everything goes down the drain, and the world with it. Either way, one stands to lose. On closer examination, however, the premise turns out to be false: capitalists do in fact take the apocalyptic perspective seriously, even if they are not really aware of it. Curiously, it is because they do take it seriously that they exhibit a form of optimism that the former chairman of the U.S. Federal Reserve, Alan Greenspan, famously denounced in warning against the “irrational exuberance” of markets. What explains this apparent paradox?
The puzzle arises from the peculiar temporal structure of a certain kind of expectation, the feeling we experience in awaiting the occurrence of a catastrophe that is bound to occur, only we do not know when, neither the hour nor the day. The outstanding example of such a catastrophe is our own death. How much time we have left to live is wholly unknown. Why else are we so haunted by the problem of time, if not because we know that our death is inevitable? It is not death in general that is our chief worry, but our own death—the death that is ours alone, death in the first person: my death!
Experiencing my death would not be possible were it not for the fact that every human life is punctuated by a series of what might be called little deaths—interruptions, breaks marking the end of a period, a cycle, or a phase of existence that often seem catastrophic to us, in the original sense of the word, the conclusion of a story: vacations that come to an end, a love affair that is broken off, a job that is lost. One's own death is the supreme example of a catastrophe foretold, but there are many others. The time we are confronted with here is the time that elapses while we wait for a catastrophe to occur that is inevitable, but whose precise date cannot be named, whether the catastrophe is my own death or the death of capitalism.
Economy and Death
Nothing more plainly reveals economists' astonishing insensitivity to the most basic aspects of the human condition than the way they treat matters of life and death. Since economic theory is defined for the most part by its method, rather than by its subject matter, economists suppose there is no subject to which this method cannot profitably be applied. The death of a person is just another topic for analysis, no less suitable than inflation or unemployment. It may nevertheless well be the fatal stumbling block of Economy, the snare and delusion that brings it face-to-face with its own final collapse.
The branch of applied economics in which death figures as an object of analysis is better known as health care economics. Let us begin by considering the remarkable fact that a very substantial share of individual medical expense in developed countries is incurred during the last year of life.4 As a recent study put it, with an air of detachment bordering on apathy, a person's “proximity to death has a considerable impact on the level of health care expenditure.”5 Note that it is not the patient's age that interests us here. Since the probability of dying normally increases with age, there is no need in principle to assume that expenditure increases directly with age, all other things being equal, in order to detect a positive correlation between age and spending on health care. As an empirical matter, however, both age and the approach of death do appear to contribute to the level of expenditure.
However this may be, economists and physicians who cite the study's finding seldom do so without qualification. While acknowledging that end-of-life care undoubtedly has some palliative effect, they argue that its chief value is symbolic, and that its effects on mortality and morbidity are negligible. Enormous amounts of scarce resources would therefore be saved by preparing patients to meet their certain end by traditional methods that allow them to live out their days in the company of family and friends, and by restricting costly medical procedures to demonstrably effective interventions. More than one medical expert has bluntly asked whether it makes sense for a country to manage its health care budget in a way that encourages older people to refuse to accept the reality of dying at the expense of programs aimed at improving access to health care and education among the young.
My early research on medicine and health policy, strongly influenced by the thinking of Ivan Illich, with whom I collaborated throughout the 1970s, was concerned with many of the same questions. We began by asking why it was that France then led the world in consuming prescription drugs. The most alarming figure, at least from the point of view of the government health-insurance system, which commissioned our study, was the annual rate of growth in such consumption (more than 17%), more than half of which was due to the rate of growth in the average price of prescription drugs (roughly 10%). The rise in drug prices was itself the result of unnecessarily frequent updatings of a compendium of officially approved pharmaceutical preparations. On average, new drugs cost much more than the ones they replaced; indeed, almost half of the gross revenue of the pharmaceutical industry came from products introduced within the past five years. What disturbed public health officials most, however, was that fewer than 5% of these allegedly new medicines could truthfully be said to augment the existing stock of approved drugs. The majority of them were combinations of known substances or derivatives of previously patented molecules, when they were not actually identical to a product already brought to market by another manufacturer under a different name.
The question therefore arose whether wastefulness of this sort was solely the result of a lust for profits on the part of pharmaceutical companies, or whether consumers were not partly to blame as well. This raised a further question. Who is the consumer in this case? The one who takes a drug, without paying for it; or the one who prescribes the drug, without paying for it either? It seemed to me at the time that the willingness to recommend a new medicine is a sign that the doctor communicates to the patient, but also, and especially, to himself—a sign that he has heard the plea for help that the patient has addressed to him, even if the plea has not been put it into words.6 The philosopher Jean-Claude Beaune later expressed the same idea this way: “The doctor will never really answer the question—the only question—that the patient puts to him, which amounts to this: ‘Tell me that I'm not going to die.’ He cannot answer it, but he cannot help but hear it.”7 It is by means of a technological sign—a new medicine—that the doctor attempts to deal with a question that is not in the least technological.
The rationality of end-of-life medical care is not without its defenders within the economics profession. Gary Becker, at the University of Chicago, became famous for extending economic analysis to domains that appear to be the furthest removed from the world of the market. Deciding whom to marry and how many children to have, how often one goes to church, whether to park one's car in a no-parking zone or to kill one's mother-in-law with arsenic—all these things can be analyzed in economic terms, which is to say weighed in terms of costs and benefits. Whoever weighs something assumes the existence of a common measure or standard of weight. But what unit of measurement are we to choose when it is a matter of comparing a fine levied in a certain currency with the time needed to carry out a given task or the leisure time of prisoners, or comparing eternal life in heaven and in hell, or comparing sex for money and romantic love? The answer, of course, is the dollar. All human values—not only ones having directly to do with health, but also those associated with the pursuit of happiness, the desire to receive an education, the freedom to live as one pleases, and so on—are reducible to a single question: how much are you willing to pay for this value? The explanations contrived by Becker and his many epigones are baroque, sometimes grotesque. But this has not prevented the profession from awarding him its highest honor, the Nobel Prize, in 1992, and the U.S. government from awarding him the National Medal of Science eight years later.
What price is a bedridden old woman on death's doorstep willing to pay to have her life prolonged by a few months? Her entire life savings, quite obviously, since they will do her no good at the bottom of her grave. The price her family and friends are prepared to pay is even greater, Becker says, for one must not forget the immense sorrow they will feel on having a loved one taken away from them before her time. Comparing the monetary value of staving off death a bit longer with the cost of keeping the patient alive, one arrives at the comforting conclusion that “under these circumstances, a high level of expenditure for terminal care may be considered consistent with collective preferences and therefore efficient according to the criterion of economic rationality.”8
I leave it to the reader to reflect further upon this deeply humane sentiment and turn now to a more difficult problem. When one talks about the medical expenses that are “incurred during the last year of life,” this predicate can scarcely have any economic implication, for in the majority of cases the end point of this last year is—and can only be—known in retrospect, that is, after the patient's death. Hora incerta, mors certa…
Statistical Death and Counterfactual Death
An evil genie paid a visit to the president of a certain country and made him the following proposal: “I know that your economy is sluggish. I desire to help you strengthen it. I can place at your disposal a fabulous technological invention that will double your gross domestic product and increase the number of jobs by the same amount. But there is a price you will have to pay. Each year I will demand the lives of 20,000 of your people, a high proportion of them young men and women.” The president recoiled in horror and dismissed his visitor at once. He had just rejected the invention of—the automobile.
This allegorical fable is familiar to many law students in the United States. What does it show? That if modern societies so readily accept the evil of highway fatalities, if it does not seem to them to pose any particular problem of conscience, it is precisely because they never think of it in these terms. The fable allows us to perceive the presence of a classic moral dilemma, involving the sacrifice of innocent victims on the altar of the collective good. Traditional moral philosophy, although it is obsessed by this type of problem, has never succeeded in satisfactorily dealing with it. And yet one has only to naturalize the elements of the dilemma in order to make it completely disappear. Once the flows of automobile traffic are subsumed under the laws of hydrodynamics, the resulting statistical regularities take on the appearance of fate. It is only on this condition that health care policy in the broad sense (including everything that comes under the head of public safety) can be formulated; that budgetary choices can be rationally justified; that the “value of human life” can be discussed in economic terms without provoking public outrage.
Let us suppose that we have available to us a budget of ten million dollars that is to be allocated between two activities, the aim of which in each case is to save human lives—say, medical research on cancer and the improvement of roads and highways. Let us also suppose that the return on investment in each case is decreasing: the more money that is invested in either cancer research or road repair, the higher the cost of saving an additional human life.9 Let us suppose, finally, that the point of the exercise is to maximize the number of lives saved. Given this much, it is a simple matter to demonstrate mathematically that when this maximum point is reached, the cost of the additional human life that one has given up trying to save as a result of placing a cap on the total budget is the same in the two domains. If this were not so—if the cost were higher, for example, in the domain of health than in the domain of safety—then transferring resources from the first domain to the second would increase the total number of lives saved. It is exactly this cost that economists call the value of human life. The recognition of such a value entails at least two things: first, that life has a price—a finite price—since in each domain one is obliged to abandon the attempt to save human lives for the simple reason that resources are finite; second, that the finite value thus assigned to human life satisfies an optimality requirement with regard to the allocation of resources among the various domains in which action is contemplated.10
In all of what I have just said, one thing must be kept in mind. The human lives that are added and subtracted as though they were so many tomatoes or leeks are mostly, though not always, statistical lives in the sense they have in the fable that I quoted at the outset. As an empirical matter, what does one observe? In the first place, unsurprisingly enough, that efforts to save additional lives in each domain where action is possible are curtailed beyond a certain point: in the one case, heroic measures are restricted and end-of-life care is limited for the most part to the relief of pain and suffering; in the other, effective but very costly antiterrorist security systems go unfunded. After a certain point the search for possible survivors in the rubble of a town leveled by an earthquake is called off. Meanwhile, aid programs to the third world are unable to pay for relatively inexpensive ways of fighting malaria.
The second thing one observes from experience is that the criterion of optimal resource allocation, on which the concept of the value of human life ultimately rests, is massively violated. The discrepancies between the implicit values of human life in the various domains in which governments and private agencies can intervene are simply gigantic, in some cases approaching ratios on the order of 1:10,000. Can reality really be this irrational? It is more likely, I believe, that the concepts we use to understand it are hopelessly inadequate.
When I was a student at the École Polytechnique in Paris I wrote a paper about the optimal management of the fleet of jeeps maintained by the French army. This was the heyday of what was called operational research, an American invention during the Second World War that involved the application of rather elementary mathematics to problems of management and organization. I do not believe that I was wrong in concluding, rather obviously as it may seem, that beyond a certain period of service it becomes necessary to retire old jeeps and replace them with new ones. My practical recommendations were more sophisticated, since they were illustrated by a curve showing that the optimal maintenance schedule varies with a vehicle's age: the closer one comes to a programmed end, the less point there is going to the trouble of repairing major breakdowns and the more sense it makes to anticipate having to replace the vehicle.
Again, I leave it to reader to imagine the horrified reaction that economic logic of this sort would elicit if it were to be applied to a fleet of human beings. It would counsel us to give up caring for patients after a certain age, and to leave the dying to their fate. I am well aware that Nietzsche, in The Twilight of the Idols, proposed a “morality for physicians” that advocated exactly this policy: “A sick person is a parasite on society. Once one has reached a certain state it is indecent to live any longer. Vegetating on in cowardly dependence on physicians and their methods, once the meaning of life, the right to life, has been lost, should be greeted with society's profound contempt. The physicians, for their part, ought to convey this contempt—not prescriptions, but every day a new dose of disgust at their patient.”11 When Nietzsche wrote these words, however, he was himself on the verge of madness.
The considerations that lead economists, in the name of rationality, to allocate resources in such a way that the value of human life is the same in every domain of public policy are the very ones that prevent us from telling jeeps and human beings apart. The statistical life that one saves is no more human than a motorized vehicle. It has no personality, no name, no age, no sex. This is what makes it substitutable for any other statistical life. Indeed, it is doubly absent from the world of actual human beings: in the first place, precisely because it is a statistic—no one has ever seen an “average man”;12 but also because the statistical life that is saved has only a virtual—or, as we should rather say, using the technical term, a counterfactual—existence. What would have happened if one had refrained from acting to prevent illness or fatal accidents? People would have died, real persons with singular personalities. But if one does act, no one can say who would have died if one had not acted.
Depending on the population sample in question, and particularly on its size, one statistical life may be interpreted as having more or less weight than another. It is this fact that explains, at least in part, the considerable differences one observes in the implicit value of human life assumed by policymakers in giving or withholding their approval of various lifesaving measures. What is more, the counterfactual character of a statistical life means that the dissolution of personal identity in calculations aimed at maximizing the number of lives saved may be more or less complete, depending on the circumstances. The thirty-three miners trapped for more than two months during the summer of 2010 at the bottom of a mine in the Atacama desert in Chile may perhaps have taken some consolation in seeing that a considerably higher value was now placed on their lives than had implicitly been attributed to them beforehand, when they were still no more than numbers in an undifferentiated population of miners. But for people throughout the world who sympathized with their agony, and probably also for the Chilean government, which had staked its reputation on getting them out alive, their individual identities were merged with that of the group to which they belonged. One may well imagine that if 90% of them had been rescued, the world would have joined the government in considering that, under the circumstances, it had fully discharged its duty. The families of the three miners who would have perished no doubt would have felt differently.
The statistical dissolution of personal identity assumes another form in the case of preventive (or, as it is now more common to say, precautionary) action. This is explained not only by the counterfactual character of the lives saved, but also by the indeterminacy of the future. And yet here again we find ourselves faced with a question of more or less, and it is this gradation that explains, if it does not justify, the enormous discrepancies that one observes between the implicit values of human life from one policy domain to another. Consider the problem of deciding how best to spend a given amount of money for the purpose of preventing transportation-related fatalities. Although highway accidents each year account for a considerably greater number of deaths than airplane crashes, the circumstances of each highway accident, as compared to the circumstances of each airplane crash, lead us to assign a much greater moral weight (if I may be permitted such an expression) to the statistical life one has given up hope of saving in the case of airplane crashes than in the less spectacular case of highway accidents. On the highway one dies alone in one's car, or perhaps with a few passengers. The victim of a crash of an Airbus 380, on the other hand, has some eight hundred companions in misfortune. It is not surprising that the implicit value of a human life should be considerably higher in the second case than in the first.
It is plain, then, that the enormous observed differences in the cost that society refuses to bear in order to save an additional life are a result of discrepancies in the value attached to human life that arise from the dissolution of personal identity, to one degree or another, in the realm of the statistical and the virtual. But not to health care economists, who continue to defend the usual methods of cost-benefit analysis on grounds of rationality—as though they were incapable of distinguishing between a human being and an army jeep. In the professional literature one sometimes encounters a distinction between death in the third person (“his” or “her” death) and death in the second person (“your” death). The fact that the physician, in relation to his patient, finds himself faced with this second-person situation may seem to suggest that human life, from the medical point of view, has no price; that is, its value has no upper bound. But everything we have just considered shows that this way of looking at the matter neglects a whole range of intermediate situations that need to be taken into account.13 It will perhaps not come as a surprise that not even death in the first person—“my” death, the most intimate relationship to death we can have—has escaped the tender mercies of statistical analysis.
Expecting Catastrophe
When I was a child, I thought that death was a continuous passage from one state into another, a gradual crossing over into unconsciousness: the senses grow dull, the body loses its strength, the faculties slowly dim. There is no radical break in this transition, no discontinuity, no catastrophe—no more than when water, the moment it reaches a critical point, passes without any discontinuity from the liquid to the gas phase. Today I believe that nothing could be more false. One dies at the very moment when one wishes most to live. Jean de la Fontaine expressed the same idea marvelously well in his fable “Death and the Dying Man.” The moral of the fable is just this: “Most loath to die are those most close to death.”14
Death is a catastrophe foretold. Atropos, the inexorable fate of Greek mythology, the one who cuts the thread of destiny, merely neglected to tell us the hour and the day. Our ignorance has incalculable consequences. Some people welcome it, believing that it permits them to live more freely, for they liken an unknown end to an indeterminate end, and so to the absence of an end. “Whatever certainty there is in death,” La Bruyère remarked, “is mitigated to some extent by that which is uncertain, by an indefiniteness in time that has something of the infinite about it.”15 Others are troubled by the thought that this indeterminacy may keep them from knowing themselves. One thinks of the story told of Jorge Luis Borges, on being asked yet again by an interviewer to say something about himself. “Say something about myself? But I know nothing about myself—not even the date of my death!” Knowing what we know now, we may imagine having been there when the interview took place and, availing ourselves of the future perfect—that miraculous tense that transforms the future into the past—saying to ourselves, “When Borges dies, seven years and three months will have elapsed since he made this memorable remark.” But this is a luxury that was not available to Borges himself.
It is this waiting period, the time that stands between us and a catastrophe whose occurrence we know to be inevitable but whose exact date is unknown to us, that I wish now to examine more closely. Paradoxically, although the catastrophe will come as a surprise the moment it occurs, the fact that it will come as a surprise is not, or should not be, a surprise. We are aware of heading inexorably toward the end, but since its precise location is not known, we can always hope that the end is not yet near. Then, suddenly, without warning, it sneaks up on us when we least expect it. The most interesting case involves a traveler who finds that the farther he advances along his route, the greater the objective reasons he has for supposing that the time that remains before he reaches his destination is increasing—as if the end point of his journey were moving away from him more rapidly than he is approaching it. In this case, in other words, it is when, without knowing it, one is nearest to the end that one is justified in believing that it has never been farther away. The surprise is total. And yet since one already knows all of this, it ought to be nil. Time therefore pulls in two opposed directions: on the one hand, we know that the longer we travel the nearer we draw to the end; on the other, since the moment when the end will be reached is unknown to us, we find it difficult to regard this end as being fixed. In the cases to which I now turn, the longer one goes on without seeing the end, the sounder are the reasons one has for thinking that fate, or perhaps a lucky star, has pushed back the final moment.
The first example concerns a person's life expectancy at a given age, which is to say the average number of years that someone of that age has left to live. It is tempting to say that the time left diminishes as one grows older, but this is not necessarily true. The life expectancy of a child of a certain age, which is to say the average number of years he has yet to live,16 may increase with age. The fact that he has managed to survive the critical stage of the first years of life is a sign that his constitution is robust and therefore that he will live a long life. Here again, the knowledge that in growing older one inexorably draws nearer to the end tugs on the thread of life from one side, and the inference that the end is receding faster than one is approaching it tugs on the thread from the other.
Infant mortality is a quite particular case. In developed countries it long ago ceased to be a serious public health problem (though it is true, alas, that the richest among them, the United States, scarcely does any better in this category today than a third-world country such as Brazil). Consider the more general case of an adult in the prime of life who suddenly learns that he is suffering from a grave illness, cancer, say, or neurovascular disease. He may find some reassurance in consulting mortality tables, not for the population as a whole, but for the subset of those who have suffered from the same illness in the past. The further the date of the original diagnosis recedes into the past, the smaller the probability of a recurrence and the greater the average number of years of life that remain—until, of course, a turning point is reached.
There is something puzzling, then, about the kind of temporality we are considering here. A mathematical concept, “fractal” shape, will help us make better sense of it. A figure is said to be fractal if it is self-similar on every scale of observation. The late Benoît Mandelbrot, certainly one of the most powerful and original minds of our time, to whom this concept is due, showed that it applies to a whole class of shapes found in the natural world, the best known of which may be snowflakes and the coastline of Britain. Not incidentally, perhaps, the concept first occurred to Mandelbrot in the course of analyzing probability (or frequency) distributions.
The most familiar such distribution is what most people call a “bell curve.”17 If I toss a coin two thousand times in a row, the number of heads will, on average, be a thousand. Probably it will not be exactly a thousand, but it will very likely be located within a relatively narrow range lying on either side of this number. Extreme events—only a few hundred tails, or more than fifteen hundred tails, out of two thousand coin tosses—cannot be excluded, of course, but the bell-shaped curve assigns an exceedingly low probability to them.
Individual trials (in this case successive coin tosses) are observed to converge upon a normal distribution when they are causally independent of one another. The probability of the next toss being tails will always be equal to one-half, even if the preceding tosses have overwhelmingly been tails. All this is well known, at least tacitly, even by those who are bored to tears by statistics. In modern democracies, where no issue can be decided without a sampling of public opinion having been made first, statistics are unavoidable. But now things become both more complicated and much more interesting.
For several years now, another type of distribution has occupied the attention of specialists. It is found everywhere catastrophic natural events threaten to occur: raging rivers in Europe and North America, hurricanes in the Caribbean basin and the Gulf of Mexico, volcanic eruptions and tsunamis in the Indian Ocean, forest fires in California and along the Mediterranean. It is also found in the world of finance, with the expansion and bursting of speculative bubbles. Although this type of distribution attaches a relatively low probability to extreme events, the chance is nonetheless considerably higher than the one assigned by the bell curve. The statistical weight of a random event, as we have seen, is the product of its magnitude and its probability. If events of very great magnitude are assumed to have a small—but by no means infinitely small—probability, the prospect of a major catastrophe, though it remains comparatively unlikely to occur, cannot help but weigh heavily in our assessment of future risk. Inevitably, the shadow cast by its very possibility darkens our outlook.
A simple thought experiment will make it clear why this distribution (which I have so far refrained from identifying by one of its several names) should be, if not universal, then at least characteristic of the events that are of most pressing concern to us today. Imagine that ten thousand coins rain down from the sky, falling uniformly over an area in which a hundred buckets have been placed to catch them. If coins are assumed to land independently of one another, the distribution of coins per bucket will conform to the bell curve. The number of coins landing in most of the buckets will be close to the average, which is to say a hundred; only a few buckets will contain several dozen coins or, by contrast, several hundred of them. Let us now change the conditions of the experiment, and assume that the larger the number of coins found in any given bucket, the greater the chance that more coins will fall into it. Under this assumption, the distribution of coins over the set of buckets as a whole now takes on an entirely different appearance: the deviations from the mean allowed by the bell curve become amplified by a self-reinforcing dynamic, with the result that the probability of extreme events occurring is considerably increased.18
This distribution takes one of its names from the sociologist Vilfredo Pareto, who together with Léon Walras formed what came to be known as the Lausanne School, the cradle of neoclassical economics. Pareto was interested in comparing national patterns of personal income distribution. In every country, and on every scale of wealth, he observed that the ratio of the expected value of individual incomes above a given level to that level is constant. Let us assume the ratio is 1.3. This means that the expected value of incomes higher than the minimum wage, for example, is equal to 1.3 times this wage; and also that the expected value of incomes greater than the salary of a trader at a Wall Street investment bank, for example, is equal to 1.3 times this salary. If, as the Stiglitz-Sen Commission's report on the indicators of happiness rather unsubtly suggested,19 money brings happiness only as a consequence of its relative value, this means that happiness is equally distributed over all social classes. Our thought experiment more vividly illustrates the same principle of distribution: the more coins a bucket already has, the more new ones it will attract. Similarly, in the case of a Pareto distribution, the wealthier you are, the greater your chance of becoming wealthier still.
A Pareto distribution is fractal, which is to say self-similar on every scale of observation—in this case, for any value above which the distribution is observed. This is why the average of the values higher than a given value exhibits a constant relationship to this value. The case I considered earlier, of the distribution of life expectancies in a country where many children die at birth or in the first months of life, illustrates this property.
Mandelbrot sought to convey some sense of the special character of fractal distributions by means of a very fine parable.20 Imagine a land that is permanently covered by disorienting mists and fog, and which contains a great many bodies of water. Some are no more than ponds; others resemble lakes, still others seas. An expedition of surveyors and cartographers is sent out from a neighboring land of lakes whose distribution with respect to size is fractal. Coming upon what appears to them to be a lake, they set out to cross it in a boat. Owing to the fog it is impossible to see the far shore. They assume from their experience of their own country that the size of the body of water they are rowing across likewise obeys a fractal distribution.
The longer the explorers row across the lake without reaching the opposite shore, the larger they are justified in believing the remaining distance to be—as if the horizon were receding faster than they were approaching it. They reason in the following way: the already considerable amount of time that has gone by without the opposite shore coming into view suggests that we are crossing one of those extremely large expanses of water to which the fractal law assigns a sizable weight; therefore it is likely that there is still a much longer way to go than we had thought at first. The idea of an eternally receding horizon is an illusion, of course, since the explorers cannot doubt that the lake has a definite size and that the distance separating them from their destination is a fixed quantity. They know that sooner or later the opposite shore will come into view. Yet when they pause to compute the expected value of the distance still to be covered, they are bound to conclude that they are further away than the last time they estimated this distance.
The explorers' confusion reaches its height just as they are on the verge of seeing the opposite shore, for it is then that they believe they have never been further away. What is more, the longer they have been rowing, the more startled they will be when this moment actually arrives. The fog in Mandelbrot's parable of the receding shore is the equivalent of what Günther Anders called “the blindness before the Apocalypse.”21
Surely this, or something very much like it, must have been Bernard Madoff's state of mind as he sailed the high seas of financial banditry. The broader the base of his pyramid scheme became, with the increasingly successful recruitment of new clients, the greater his confidence that the rewards would continue to grow—so long, of course, as he was not caught. And yet he could not be unaware that one day the end would come, and that his scheme would collapse like a house of cards. The longer the scheme worked, the more terrible the surprise was bound to be.
It is not by chance that I take the example of financial speculation. No one doubts for a moment that Madoff was dishonest. But it would be both unfair and misleading to place special emphasis on a single swindler. Mandelbrot, quite early in his career, had studied what might be called honest financial speculation, and showed both as a theoretical and an empirical matter that speculative phenomena generally are governed by a fractal law. In the euphoric “boom” phase, as the bubble begins to expand, the more optimistic investors are, the greater their reason for looking forward with still more optimism. Indeed, it is just when the bubble is about to burst that the euphoria reaches its highest point.22
The theory of extreme events that I have just sketched is hardly new, and it has been confirmed by experience many times over. What is more, it is known to many influential figures in the financial world. Anyone who is not acquainted with it should be ashamed of his ignorance.23 If we assume that informed economic agents are a majority, the question arises whether awareness of the theory would change their behavior. This is a vexed question, fraught with doubt and difficulties. Prudence therefore dictates a maxim: the greater one's reasons for optimism, the more one owes it to oneself to fear catastrophe and to guard against it, for the end is undoubtedly near. As a theoretical matter, this double bind is resolved by recognizing that, while optimism is rational at one level, doomsaying is rational at another, which transcends the first, for it looks out upon the future from the point of view of the end of the voyage that lies ahead, and not of the voyage as it unfolds. I call this form of prudence “enlightened doomsaying.”24 It involves an act of imagination by which one looks ahead, to a moment after the extreme event has occurred, and contemplates the path leading to it from a perspective that combines surprise at the event's occurrence with foreknowledge of this same surprise—which is to say, the recognition that the event is certain to occur.
For a philosopher, the idea of telling someone he is going to be surprised calls to mind a famous paradox.25 Here is one of its forms. On a Sunday a man is sentenced to death and told that he will be hanged one morning in the coming week, without the day being named. This warning is accompanied by a prediction, which will turn out to be a diabolical trap: on the day chosen for the execution, when the executioner comes at dawn to bring him to the scaffold, the condemned man will be surprised. He is then taken back to his cell, where he racks his brain in the poisonous hope of discovering when his existence will come to an end. It seems obvious to him that it cannot be the following Sunday. For in that case he would still be alive at noon on Saturday, and therefore in a position to deduce that his hanging will take place the following morning—in which case he would not be surprised. He therefore crosses Sunday off the list of possible occasions. But now it is Saturday's turn to be dismissed. Since Sunday is no longer a candidate, the very same logic will hold good at noon on Friday, assuming the condemned man is still alive then. On applying this reasoning to each of the remaining days of the week, he becomes convinced that none of them can be the day, and therefore that he will not be executed. And so when the executioner comes to get him at dawn on Thursday, he is completely taken by surprise—just as he had been told he would be.
Whatever may be the logical virtues or defects of this argument, it plainly depends on the existence of a known end or term: the life of the condemned man will not last longer than the next Sunday. But it is precisely this condition that does not obtain in the capitalist world. Torn between hope and despair, Madoff expected nevertheless that the stream of new clients would continue to grow. Speculators, for their part, counted on the subprime bubble to go on expanding forever, and the desperate Americans who mortgaged their entire future in order to buy a house looked to the unlimited increase in its value in order to be able to pay for it. What makes capitalism possible is the belief that it is immortal. What may be called the original sin of capitalism lies concealed in the fact that the future must endlessly stretch out before it if, at any given moment, it is to be able to deliver on its promises. This is the source of the cult of growth. For the capitalist system to function satisfactorily at any given moment—which is to say, for full employment to be achieved—agents must anticipate that its expansion will go on indefinitely.26 The lesson of Mandelbrot's parable is that the longer the final reckoning is postponed, the more surprising its inevitable occurrence will be.
The world's leaders have, as I say, succeeded in putting the capitalist locomotive back on track. For the moment its progress is halting; but as it picks up speed, the more hopeful they will become and the more firmly they will believe in a radiant future. It is at precisely this moment that they ought most to distrust their reasons for optimism. For catastrophe may be lying in wait for them just around the bend.
Economy at the Apocalypse
We have just seen that optimists owe it to themselves to be catastrophists, precisely because they are optimists. Conversely, there is good reason to believe that the wild optimism displayed by economic agents during the most recent financial crisis, and not least of all by government officials, was fed by a catastrophism that dares not speak its name.
The argument I am about to present is due to one of the most insightful commentators on the crisis, the financier Peter Thiel.27 A cofounder of PayPal, the world's largest e-payments company, Thiel went on to become a principal investor in Facebook while still a young man. His perspective is that of an enlightened doomsayer. Unlike armchair philosophers such as myself, however, he has put to the test of experience investment decisions that are based on explicit assumptions and rigorous analysis (and not, it should be added, on mathematical models so complex and so opaque that they have acquired something like an autonomous power of decision).
Thiel was impressed in the first place by the wholly novel character of speculative bubbles over the last twenty years or so, considering both the circumstances under which they have formed and the violence with which they have burst, one after another. The euphoric phase, no less than the crash itself, displays the characteristic features of extreme events—so strikingly, in fact, that even the laws of fractal distribution seem incapable of explaining them. Just before the Japanese real estate bubble burst in the late 1980s, the Tokyo Stock Exchange accounted for half the world's market capitalization. The Land of the Rising Sun seemed destined to rule the earth, or so many believed. The brief reign of Japan, Inc. was followed by the still vaster Internet bubble of the late 1990s—the most enormous boom the world had ever seen. No one could have imagined that it would be succeeded in its turn, five years later, by a global real estate bubble of even greater magnitude.
Some analysts see such events as the result of the irrational exuberance of markets; many more blame the greed of traders and their love of profit—as if this were something new. On all sides, intellectual laziness and incuriosity take refuge in moral indignation. We will be better served, I believe, by trying instead to uncover the deeper causes of our current predicament.
In the kingdom of money, as Thiel is well qualified to observe, the apocalyptic perspective has few champions; indeed, there is still less sympathy for it there than in society as a whole. What appeal could the idea that capitalism is mortal possibly hold for an investor? If capitalism were to die, nothing would any longer have value. If its end were to be predicted, and the date of its demise announced, the prophecy would be immediately falsified, for in that case, the possibility of an indefinitely long existence having been denied, catastrophe would strike at the time of the prediction and not at the predicted time. The alternative, a far more attractive one, is to act as though capitalism is immortal. And yet as Thiel shows, while at the same time introducing a new paradox, this does not mean that the apocalyptic perspective has not exerted an immense influence on the calculations and behavior of investors. Quite the contrary.
The survival of capitalism is today indissociably linked to the success of globalization. But what would the failure of globalization signify? That the forces of antiglobalization had triumphed after all? Thiel dismisses this suggestion, for in his view antiglobalization is part and parcel of globalization, and cannot exist apart from it. Paraphrasing Tocqueville, one might say that globalization draws its strength from everything that opposes it. Globalization bears the marks of a providential dispensation: it is universal, it is enduring, it escapes human power at every turn; events, no less than human beings, all serve to promote its development. If globalization fails, this can only be the result of a major catastrophe, whose collateral damage will include the end of capitalism. This catastrophe would resemble more or less closely the one whose broad outlines have been sketched by doomsayers such as myself.28 The human destruction of nature and the ceaseless escalation of organized violence conspire to cast the very survival of humanity in doubt. The most terrifying threat of all, widespread nuclear conflict, continues to be the greatest threat of all.
Thiel does not believe that economic and financial agents permit themselves to contemplate the prospect of catastrophe directly. They eliminate it from their calculations, on the ground that it is too horrible to bear close scrutiny. But it is precisely in removing it that they give it a place; in fact, a quite considerable place. In trying to make sense of this second paradox, it will be instructive to make a simple calculation. Imagine an investor who is keenly aware of the threat to humanity, but who nonetheless does not wish to factor it into his assessment of future outcomes. Intuitively he understands that the path capitalism must travel in order to survive is like the crest line in an alpine landscape, beyond which lies the abyss. Let us suppose that the probability this investor tacitly assigns to the optimistic scenario—the survival of commerce under successful globalization—is 10%. If he anticipates that a certain business will one day be worth $100 per share, as long as the optimistic scenario comes to pass, what price should he be willing to pay for it today? Presumably 10% of $100: multiplying probability by magnitude, he arrives at a valuation of $10. Note that this calculation completely neglects the other branch of the alternative, which implies disaster for all investors. If a 90% probability of global catastrophe were taken into account, not only would the expected value of the share be negative; the anticipated loss would be infinitely negative! This deliberate neglect lies at the heart of Thiel's paradox. During the most recent great bubbles, investors have not valued such shares at $10, but at much higher amounts, no doubt in many cases close to $100. Indeed, disregarding the catastrophic scenario altogether has the consequence that in any possible world in which investors survive, the share price will turn out to be $100. In that case its anticipated value should logically be $100 as well.
This sort of reasoning calls to mind a humorous advertisement for the French national lottery some years ago that cited a statistical study showing that 100% of past winners had bought a ticket. Thiel insists, however, that one must not lose sight of the psychological context surrounding the formation of recent bubbles. If investors risked so much of their money on the success of Internet firms in the late 1990s, it is because the alternatives seemed to them frighteningly bleak. If America's new class of paupers, all those who were to see their savings vanish with the collapse of share values, rushed to take advantage of subprime mortgages, it is because they saw this as the only way to avoid certain destitution in old age. Could it be that these people, in conducting their own optimistic thought experiment, showed more foresight than their neighbors? That in projecting themselves into the only conceivable future that was not catastrophic, and thereby granting it the probability of a sure thing, they did what had to be done in order for it to have a chance of coming about?
We are now in a position, then, to appreciate the full implication of Thiel's paradox. Ultimately, it was the apocalyptic perspective that drove investors to desperately embrace an attitude of unrestrained optimism. I very much fear that the analysis I have proposed here confirms the wisdom of enlightened doomsaying: the desperate embrace of unrestrained optimism grows out of a diffuse, unreflective catastrophism; and this, in turn, justifies us in adopting a rational form of catastrophism.