Over the weekend, the president of Poland died in a plane crash that also killed many of the top officials of the Polish government, in a tragedy seemingly borrowed from Irving Wallace’s 1964 novel The Man. Wallace’s book was a best-seller at the time; a freak accident at a World War II memorial event gives a black senator the American presidency. If I recall correctly, Douglass Dilman did a fine job as president and was never asked to produce an imaginary ”long-form” birth certificate.
As strange as the Polish plane crash was, an accident that wipes out a layer of executive power had been imagined before. Plane crashes that kill high-ranking government officials have happened, too, such as the one that killed Commerce Secretary Ron Brown in Croatia in 1996. That’s why these events are risky, not uncertain.
Mathematically, there is a difference between risk and uncertainty, and it matters. Risk is an adverse event that you can quantify. One out of every two million people will die in a plane crash every year, or 1.9 deaths for every 100 million miles flown. So there’s risk, and we all share in it.
Uncertainty reflects things that might happen but that we have no way of quantifying, such as aliens invading from outer space. If you look through the fine print of your car or homeowner’s insurance, you’ll find a list of excluded events such as war and civil insurrection that veer close to uncertain territory. The line between risk and uncertainty gets really blurry at the far end of the list of all the things that could possibly happen. For example, is the U.S. really likely to have a civil war once every 46 years? We waged a civil war for four of our 234 years as a nation, so maybe we are overdue. Or maybe the risk of civil war is so far out that it’s really uncertain.
Once you have a calculated level of risk, you can include it in the price. If you have bad credit, you will pay a higher interest rate because the lender is taking on the risk that you won’t repay. This is true if you are a musician with too much credit card debt or the government of Greece. This week, for example, the Greek government issued 12-month bonds at an interest rate of 4.58%. Back in the United States, a 12-month Treasury security has a rate of 0.854%. We have nuclear bonds, and we have the ability to print money. Greece has neither of those, so it has to pay more to borrow.
Some countries have very different risks than others, but every country has the risk of its leader dying in a plane crash. I would imagine that Air Force One has greater safety features than a 20-year-old Russian-made plane, and I would imagine that the pilots for it are among the Air Force’s best, but stuff happens and planes crash sometimes.
Europe is in a state of uncertainty right now, so Poland’s sorrow adds to the stresses on the continent. A unified currency is a new experiment in the world, and we don’t know how it will work out. The Euro zone, which is those nations that use the euro, agreed to a €30 billion bailout of Greece last week. Poland is not on the euro yet, so it is not participating in the bailout. The plane crash and the Greek crash may delay Poland’s currency conversion, but if the euro is still around in a few years, then Poland will be on it.
The America that Irving Wallace imagined survived its black president; in fact, Fictional America accepted a dark-skinned person in higher office long before the real America did. I suspect that Poland will survive, too. Its risk hasn’t changed because the risk of losing so many of its leaders was always there.
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