From risk to opportunity Lecture 4

1. From risk to opportunityLecture 4 John Hey and Carmen Pasca

3. The organisation of today’s lecture • We start with a 15-minute summary from a documentary on the famous trilogy The Matrix. • Then a lecture on the philosophers’ approach to risk. • We will finish with a 45 minute Cambridge Union style debate (or a discussion) on the motion “This House Believes that there are no certainties” • You should watch the whole documentary later.

4. Lecture 4 Philosophical approaches to risk: Overview • This lecture examines the work of the key philosophers during the modern and contemporary periods who wrote about risk: Descartes, Rousseau and Rawls. • Philosophical ideas include dealing with: cause and effect; uncertain knowledge; defining human values; measuring values; experts; the role of science in society; the role of judgment in human affairs.

5. Lecture 4 Philosophical approaches to risk: Descartes • Descartes built the paradigm of risk on the philosophical concept of doubt and developed from this concept the ideas of certainty and uncertainty. • In the Passions of the Soul (1649) he argued about expectancy and fear: expectancy of success and fear of failure(Art. 165. Expectancy and fear). • When expectancy is so strong, said Descartes, she eliminates the fear entirely. It changes its nature and is called security or insurance. (Art.166. security and hopelessness ).

6. Lecture 4 Philosophical approaches to risk: Descartes and doubt • Descartes: the act of doubt (1596-1650). • Descartes’ suggestion that to know what is true, and only what is true, we should try to doubt everything we believe. • That which can be doubted is not necessarily false, but that which cannot be doubted must be true. • In his first published work, the Discourse on the Method of Rightly Conducting the Reason and Seeking for Truth in the Sciences (1637), Descartes applied this method of doubt to his own beliefs and arrived at a very important (and famous) result, summarised in the phrase usually translated as “I think, therefore I am.”

7. Lecture 4 Philosophical approaches to risk: Descartes and certainty • René Descartes wanted to found philosophy and all the sciences on clear and distinct ideas. • For Descartes, the clarity of an idea was a sign of its truth, and he developed a method called the method of doubt. • Certainty, according to Descartes, is the absence of doubt.

8. Lecture 4 Philosophical approaches to risk: certainty and doubt • By methodological doubt, Descartes began inventing a certainty, a bedrock (foundation) of certainty. • He doubted all of things, included all sensorial data: “I can doubt anything, but that I doubt anything cannot be doubted”. • Extremely, if you try to say “I doubt that I exist”, in fact it can be proved that you do exist. • In brief, Descartes found the bedrock of certainty in the mind, and discovered its innate ideas: self, identity, substance, and even God.

9. Lecture 4 Philosophical approaches to risk: Rousseau • For Rousseau, risk depended on the consequences of things. • In Nouvelle Héloise he said: “being aware of the risks we incur certainly allows us to project, and to anticipate, but is also a barrier to action, because the risk always involves a form of unconsciousness”. • We pass to the act without regard for all the consequences.

10. Lecture 4 Philosophical approaches to risk: Rousseau • The philosopher argued about both concepts of risk and experience of risk. • According to Rousseau , the experience of risk is the experience of not knowing what we do not know, uncertainty about the uncertainty. • “Every man has the right to risk his own life in order to preserve it”.

11. Lecture 4 Philosophical approaches to risk: Humans and animals • His treatise built upon a fundamental distinction between two types of living beings: humans and animals. Human beings are animals in the eyes of Rousseau, but clearly animals of certain kind. • For Rousseau humans are distinct from animals by their ability to do harm to each other. • Human beings are among other things beings that hold the capacity and the ethical burden of understanding themselves as situation in time, an understanding of time as an horizon of multiple choices and outcomes.

12. Lecture 4 Philosophical approaches to risk: Descartes and the future • The uncertainty : it is first a constant awareness of the uncertainty of the future, of not knowing what will happen, what will be the product or outcome of our choices. • Humans do not see the future as fact, as reality or truth. The future is not a fact or set of facts around which we orient ourselves today in the here and now. It is a horizon of possibilities.

13. Lecture 4 Philosophical approaches to risk: Rousseau and experience of risk • To Rousseau's list of characteristic differences between humans and animals must be added the experience of risk. • For Rousseau the scene of the experience of risk is Nature . • It derives from the reality of what we commonly call the “laws” of nature.

14. Lecture 4: Philosophical approaches to risk: Rousseau and ethics • As there is no risk in nature (according to Rousseau), there is no risk in the lives of animals. • Risk is not only a physical necessity, but also it derives from the reality of what we commonly call the “laws” of nature. • In Rousseau’s approach to risk we find also the ethical dimension: risk is an ethical necessity, in that both the concept of risk and the experience of risk as ethical are unavoidable parts of human self understanding.

15. Lecture 4 Philosophical approaches to risk Rawls • The bridge between the modern philosophical concept of risk and that of the contemporary approach has both an ethical and an economic perspective . • In John Rawls’ Theory of Justice, risk becomes normative. • According to Rawls, risk is expressed through the veil of ignorance in the context of the original position.

16. Lecture 4 Philosophical approaches to risk: the veil of ignorance • In the original position, behind the veil of ignorance, one is denied any particular knowledge of one’s circumstances, such as one’s gender, race, particular talents or disabilities, one’s age, social status, one’s particular concept of what makes for a good life, or the particular state of the society in which one lives. • Persons are however assumed to be rational (in a particular Rawlsian sense*) and disinterested in others’ well-being. • *wanting to make as good as possible the worst thing that can happen to them.

17. Lecture 4 Philosophical approaches to risk: Rawls’ Principles of Justice • The principles that follows from the proposition that people in the Original Position, behind the Veil of Ignorance, would choose to regulate a society at the most basic level (that is, prior even to a Constitution) are called by Rawls, the “Two Principles of Justice”. (see later). • These two principles determine the distribution of both civil liberties and social and economic goods.

18. Lecture 4 Philosophical approaches to risk: The first principle • The First Principle states that each person in a society is to have as much basic liberty as possible, as long as everyone is granted the same liberties. • That is, there is to be as much civil liberty as possible as long as these goods are distributed equally. • This would, for example, preclude a scenario under which there was a greater aggregate of civil liberties than under an alternative scenario, but under which such liberties were not distributed equally amongst citizens.

19. Lecture 4 Philosophical approaches to risk: The second principle • The Second Principle states that while social and economic inequalities can be just, they must be available to everyone equally (that is, no one is to be on principle denied access to greater economic advantage) and such inequalities must be to the advantage of everyone. • (So one person can choose not to work and hence be poor while another person chooses to work and hence be rich: there are inequalities but people are happy – in the sense that they have chosen them.)

20. Lecture 4 Philosophical approaches to risk: The difference principle • The method of the original position supports this second principle, referred to as the Difference Principle, because when we are behind the veil of ignorance, and therefore do not know what our situation in society will be once the veil of ignorance is lifted, we will only accept principles that will be to our advantage even if we end up in the least advantaged position in society.

21. Lecture 4 Philosophical approaches to risk: Rationality • Describing the parties' choice as a rational choice subject to the reasonable constraints imposed by the original position allows Rawls to invoke the theory of rational choice and decision under conditions of uncertainty. • In rational choice theory there are a number of potential “strategies” or rules of choice that are more or less reliably used depending on the circumstances.

22. Lecture 4 Philosophical approaches to risk: Social Justice • Possible criteria of social justice: • “Maximin”: directs that we play it as safe as possible by choosing the alternative whose worst outcome leaves us better off than the worst outcome of all other alternatives. An alternative aim is to “maximise the minimum” regret or loss to well-being. • “Maximax”: we should “maximise the maximum” potential gain and choose the alternative whose best outcome leaves us better off than all other alternatives

23. Lecture 4: Philosophical approaches to risk • Rawls denies that the parties have a psychological disposition to risk-aversion. • He argues however that it is rational to choose as if one were risk averse under the highly exceptional circumstances of the original position. • Indeed, in the extreme position of the Veil of Ignorance, it is reasonable to portray people as being extremely risk-averse – perhaps as Maximiners - deciding on an option which makes the worst that can happen as good as possible.

24. Lecture 4 Philosophical approaches to risk: Contempory thoughts • The philosophical approach to risk in today’s society is strongly influenced by the complexity and the flexibility of lifestyles. • The greater diversity of the whole social life erodes the certainty with which people can map out their futures. • Risk and uncertainty have emerged as central themes.

25. Lecture 4 Philosophical Approaches to risk: Conclusion • Early philosophers did not try to quantify risk but merely to classify situations of certainty, risk, uncertainty and doubt. • Later philosophers tried to distinguish between objective and subjective risks. • Rawls, rather than try and quantify risk, specified how people should react to uncertain situations. • In contrast, Sen argued that we should take into account differences in risk attitude.

27. Lecture 4 Philosophical Approaches to risk • To finish this lecture, as you know, we suggested a short Cambridge Union style debate : • “This House Believes that there are no certainties” • We have called for 2 volunteers to speak on each side. Are there any? The rules are: one speaks for, one against, one for, one against. Five minutes for each speaker.Then we open it up to the floor. • If we have no volunteers we will have instead a discussion.

28. Lecture 4 • Goodbye!