Skip to content

Unfortunate choice of words….literally

July 17, 2012

Stability in most situations is a good thing. You can’t plan for the unknown – you can only plan around “anchors” – things that are knowns.

Stability in other situations is bad. If we didn’t know how to monetize, value and reward risk taking, well, we’d be a very different world.

Against the Gods” is a book that I started (and I admit, never finished) that talks about the development of probability theory. You see, without a way to measure, assess and predict risk – we’d lack a lot of things we take for granted.

Probability theory, pioneered by 17th-century French mathematicians Blaise Pascal and Pierre de Fermat, has made possible the design of great bridges, electric power utilities and insurance policies. The statistical sampling methods invented by dour Swiss scientist Jacob Bernoulli undergird diverse activities such as the testing of new drugs, stock-picking and wine tasting

Acceptance of the dynamic nature of the world, the fact that taking a chance in some cases pays off (and knowing when it’s likely to NOT payoff) are all critical concepts to the development and funding of the modern world as we know it. In fact, many fortunes started with monetizing the concept of “probability of risk”

in 1662, a 42-year-old British button merchant, John Graunt, began to digging into the birth and death records of the City of London and became the first person to use statistical sampling to estimate the expected age of death by probability, an approach further refined by a young Edmund Halley (of Halley’s comet fame) in the late 1690s. This innovation in statistical analysis found its way to Lloyd’s coffee house on the wharves in London where denizens began to offer insurance for the various ships that sailed from London…and Lloyd’s of London was born.

Here’s the “poor word choice” piece. Obama’s new major accomplishment?

Stabilizing the economy”

For someone favoring central planning, and distributing the existing pie more fairly – it’s a logical choice of words. Of course, probability theory implies that stability is a long term condition only when there is no potential for growth or change. Flatlines are stable – not much else really is that stable. The orbit of the moon, the trajectory of the earth, the global average temperature – none of them are “stable”. They’re “on average” a specific numerical range.

Many journalists – including those at Big Government imply that the economy has non existent stability. I would assert the economy from ’08-’12 has been pretty stable.

In fact, the economy is downright stagnant – making Obama’s word choice literally and figuratively “unfortunate” for us all.

Advertisements
One Comment leave one →
  1. July 17, 2012 7:52 am

    Well, based on less-scientific polling, the probability of the economy remaining “stable” is about 50/50…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: