CLEVER ELSIE, soon to be married to Hans, was sent down to the cellar by her mother to get some beer. She saw a pickaxe above her which had been forgotten by the masons. Clever Elsie was paralysed by the thought that “if I should marry Hans and we should get a little baby, and he grows up and we send him down to draw some beer, that pickaxe might suddenly fall down on his head and kill him”.
The clever Elsie of the Grimm fairy-tale was a case of extreme risk-aversion. In a recent speech, Tony Blair called for a “sensible debate about risk in policymaking”. Government, he went on, was under constant pressure to “act to eliminate risk in a way that is out of all proportion to the potential damage”.
The result was a “plethora” of overzealous regulations which prevented valuable activity. Teachers felt unable to take children on school trips for fear of being sued; the Financial Services Authority was widely seen as “hugely inhibiting efficient business”.
The debate is overdue. Of course, only an idiot would claim it is good to be injured, abused or defrauded. But there is a big difference between suffering harm and the risk of suffering harm. The debate is about what degree of risk it is sensible for people to accept for the sake of doing what they want to do, or what may be good; and about who decides this — how far the decision is made collectively or by people themselves. Over increasing swaths of activity it is the Government that decides.
Take the well-known case of school outings. The rules governing these are decided not by the children and young people themselves (which is understandable), nor by the schools, but by the LEAs acting as agents for the Health and Safety Executive and other government bodies. A pack of “Regulations and Guidelines” on how to conduct “Off-Site Activities and Educational Visits”, issued by my area’s county council, consists of 300 pages covering every type of school outing with its attendant hazards to be guarded against. These range from the serious to the trivial and extremely improbable. But each offsite visit requires a formidable exercise in risk assessment, form- filling and precautionary, supervisory and reporting activity.
Country rambles are full of perils: “changes in the weather”, wasp stings, sunstroke, dehydration, premature abortion (from contact with sheep), and, of course, child abuse. A ludicrous example is the requirement that the adult “explain clearly, in advance” why physical contact with a child may be necessary. One has a nightmare of the teacher not having time to complete his “explanations” before the child falls off the edge of the cliff. One hopes that most teachers would simply ignore the more lunatic injunctions. But over-anxiety on the part of the controllers inevitably communicates itself to those charged with obeying the rules — especially as indemnity against damages may depend on following them “to the letter”. Teachers know they will be blamed for bad things that occur, not for good things that are prevented. The controllers, too, are dominated by “worst-case” thinking, because they too may be held liable in the courts. This itself is enough to ensure that the cost of regulation will be disproportionate to the benefit secured.
The same is true of much financial regulation. The Prime Minister referred to the Sarbanes-Oxley Act in the US, passed after the Enron scandal, the compliance costs of which are estimated at $2.4 million on average for each company. Few dispute the need to protect investors against fraud. But little attempt is made, either in the US or here in Britain, to weigh in monetary terms the compliance costs of increased regulation against the expected benefit to shareholders from reduced fraud; nor, indeed, to weigh the benefit of improved investor protection against the loss of entrepreneurial energy and efficiency.
Framing precautions against the worst case is the lazy regulator’s dream, precisely because it removes the need for cost-benefit analysis — weighing the cost of making the world a little safer against the benefit from doing so.
So why has our society come to resemble clever Elsie? The main driver seems to be the increasing volume of legislation imposing a duty of care and vigilance on both public and private organisations, particularly with regard to health and safety, but also to less concrete forms of harm such as harassment and discrimination. The counterpart of this is the right to compensation by the victim if it can be shown that this duty has been neglected. This has led to a massive increase in the demand for insurance and legal services, the costs of which fall mainly on those subject to the legislation. Legislation has also given the mass media a much wider field for exposing harm. We don’t want a situation in which a hundred people can die of food poisoning, as they did in Nanjing, China, without a word in the press. The problem is that the duty to expose injury and abuse is distorted by the circulation war.
Tragedies make good stories, and competition for readers or viewers creates an incentive for journalists to make disasters or tragedies out of incidents. This creates pressure on governments to “do something”, even though the event is too rare to warrant taking precautions against it. Two matters at least should be considered in the “sensible debate” that the Prime Minister has called for. The Government should ask how much more riskaverse it should be than the people it is trying to protect. For example, how much more protective should schools be than parents? Secondly, we ought to try to sort out our ideas on how much freedom we are willing to give up to make our lives a little healthier, safer, less abused. Indeed, we could do worse than frame Tony Blair’s debate in terms of these two questions.
Robert Skidelsky 