Joseph E. Stiglitz on global crisis mismanagement

Both the accident at Fukushima nuclear power plant and the global financial crisis have demonstrated poor global risk management, writes Economics Nobel Prize laureate Joseph E. Stiglitz in the business paper Diário Económico: "Both events provide stark lessons about risks, and about how badly markets and societies can manage them. Of course, in one sense, there is no comparison between the tragedy of the earthquake and the financial crisis. ... But when it comes to the nuclear meltdown at Fukushima, there is a common theme in the two events. ... Research in economics and psychology helps us understand why we do such a bad job in managing these risks. We have little empirical basis for judging rare events, so it is difficult to arrive at good estimates. In such circumstances, more than wishful thinking can come into play: we might have few incentives to think hard at all. On the contrary, when others bear the costs of mistakes, the incentives favour self-delusion. A system that socializes losses and privatizes gains is doomed to mismanage risk."

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