Dealing with "Fat Tail" Risks

In Tuesday's GOP debate in Las Vegas, Michele Bachmann said some crazy things that, if this were an episode of Survivor, would have gotten her voted off the island. Or did she?

After the jump, just how crazy is Michele Bachmann, really?

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Here's one of the things that Bachmann said that Unfair Park's Sam Merten said should make you "want to jab an ice-pick in your eye and beg for mercy."

[Obama's] taken his eyes off the No. 1 issue in the world: that's Iran obtaining a nuclear weapon. That makes all of us much danger. And the president of Iran is a genocidal maniac."

Source: Unfair Park.

Merten was irritated by the garbled syntax in the middle sentence. But, come on, if Bachmann's thesis is correct, picking on her syntax is an irresponsible distraction from a real and serious danger. If there really is a risk of a genocidal maniac obtaining nuclear weapons, does it really matter whether Bachmann tripped over her tongue warning us?

So, how likely is it really that her thesis is correct? When will Iran have a nuclear weapon? Is Ahmadinejad really a genocidal maniac? Even if he is, how likely is he to use nuclear weapons, knowing that a massive retaliation on Iran is a likely consequence? These questions don't have definitive answers, only estimated ranges of probabilities. How should we talk about risks that have uncertain probabilities but large consequences?

That reminds me of another threat to our country, to our planet, one that Bachmann is much more nonchalant about the risks. That's global warming. Brad Plumer discusses how "Climate Scientists Grapple with Uncertainty."

You'll often hear climate skeptics say "The science isn't settled." And, to an extent, this is true - though not in the way they're implying. There are lots of things climatologists know with a high degree of confidence: that the Earth is warming, that human activity is a major culprit. But, as scientists will readily concede, there are still plenty of aspects of the climate system subject to fervent debate, especially the scale of the risks involved in heating the planet. That's not necessarily comforting. Uncertainty, after all, can easily mean things might be much worse than we thought.

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Harvard economist Marty Weitzman has argued that climate projections often have large ranges, and the worst-case scenarios at the tail end can be really awful. Just pulling out one example: A 2010 paper in the Proceedings of the National Academy of Sciences concluded that there's a roughly 5 percent chance that rising temperatures could render vast regions of the planet - like the Eastern United States or most of India - utterly uninhabitable. How should we think about "fat tail" risks like that?

Source: Brad Plumer.

How, indeed. Just as Michele Bachmann dismisses the risks posed by global warming, many people are likely to dismiss the risks posed by a nuclear Iran. Our society is simply unable to deal rationally with risks that have low or uncertain probabilities, but very large, even catastrophic, consequences.

Even Michele Bachmann can't stay focused on the risk of a nuclear Iran, which should be her number one issue if she believes her own thesis. She spent as much time in the debate criticizing the President's aunt and uncle's immigration status as she spent on a nuclear Iran. Now, that really is crazy.