“Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe” by Greg Ip

Ip worries that in our ever-increasing quest for complete safety, we are actually paving the way for larger disasters. He states that the safer we try to make things, the more we create moral hazard to push the boundaries. This might create the illusion of safety for a time, but will eventually lead to even greater dangers to follow. He cites forest and flood management and insurance protection programs as instances where, in an effort at risk mitigation, greater catastrophe eventually ensues. By dousing fires at birth, building taller levees by rivers, and insuring against risks, we actually push people closer to the edge of safety. He goes into great detail positing how the Great Recession was caused by trying to put stricter regulations on the formal banking sector, pushing financial contracts to new products in unregulated shadow banking instruments. He contrasts “engineers” who want to meddle and design safe systems to “ecologists” who want to prune at the edges, but let nature flow its course, because we can never know the unintended consequences of human meddling. “Ecologists” work on mitigating the next disaster, not preventing it. Whether it is not subsidizing housing insurance in flood plains, letting insolvent banks go bankrupt, or letting wildfires clear away dry kindling in controlled burns, Ip suggests that a little damage now might prevent greater catastrophes later. As Ip quotes the economist Hyman Minsky, “stability breeds instability.”