Jay's November 15th Impression of Tom's Presentation

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I've heard a few mentions of Charles Perrow work, Normal Accidents, and he was one of the first people to sign the open letter to Chairman Alan Greenspan a couple of weeks ago. However, I have not had a chance to see the work. Is some part of it available on the internet?

A few things stand out about the Barnett presentation:

1) I was annoyed by the sound effects and flashy graphics. This may be because I work in an environment in which I often watch dull Economists make dull presentations about dull subject matter. However, I found the embellishments to be a real distraction. I have to assume that his main audience, military officers, need that kind of thing to stay alert during a briefing.

2) The content of the presentation, which I was familiar with having read it a few times off of the net, was compelling in its scope. He does a better job of putting both arms around Y2K than anyone else I have seen.

3) The conclusions he reaches were notable for the absence of any discussion of underlying analysis. For example, one conclusion was "Don't get in the way of people's will to party." What is that based on? What possible sociological study could he have conducted, or read about, that would inform us about the consequences of toning down, or canceling the millennium bashes being planned? What are the potential social consequences if these bashes run into problems and need to be canceled on the fly (or become fiascos)? If I had time to write an adventure story, it would begin with Clinton's Millennium bash on the Mall, and what happens when tens of thousands of stranded, drunk, revelers decide to convert the White House into a warming shelter. (FYI, I am pasting on to the bottom of this message an Op-ed piece I submitted to the Washington Post describing the lack of risk analysis going into local planning for the Mall event. Naturally, the Post chose not to run the article.)

3) Barnett is placing an extraordinary amount of confidence in his Wall Street panel. He went into that meeting believing that Y2K was really serious. The well dressed guys around the table at the top of the World Trade Center speak in reassuring voices that this will be the sort of thing that they deal with all the time. Maybe not even as difficult as the Asian financial meltdown last year. Barnett then leaves feeling a whole lot better and decides that the US will not be badly affected. He then proceeds to brief the world that Y2K will not be severe in this country.

However, there are two possible scenario to explain that meeting. 1) The Wall Street folks are on top of Y2K and have every reason to feel confident. 2) The Wall Street folks are clueless, dangerous idiots who nearly brought about a collapse of the financial system over the "bombshell news" that Russia was going to default on some of its bonds (the type of event that they are paid well to analyze carefully), and are now equally nonchalant about the risks of Y2K (something that is completely out of their normal realm and skill set). My suspicions are that the second description is more accurate. However, Barnett does not appear to have done any analysis to discover which is so. I would at least like to see a chart that lists on one side, all the ways that Y2K may be similar to the Asian financial crisis. On the other side it would list all of the ways that it could be different. My first entry for the similarity list would be that in both cases the actual situation was worsened by the overly complacent attitude of Wall Street in advance of the actual disruption followed by the panic of Wall Streeters realizing that they were about to lose very large sums of money.

Anyhow, those are my initial thoughts. However, I would like to say on Barnett's behalf, that, although I am critical of his conclusions about Wall Street, he has done more analysis of potential Y2K financial system breakdowns than has the FDIC. It happens to be the job of my colleagues here to do that type of study. However, when I circulated his paper and suggested that we invite him to discuss his research, invite the Wall Street panelists to discuss their thinking, or conduct similar work of our own, I received an underwhelming response. Most of the decision makers have read in the Washington Post that Y2K is largely solved. Therefore, they don't see any reason to put any time or effort into studying it beyond what our bank examiners are finding at the institution level.

* Jay Golter

-- Anonymous, November 17, 1999

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