Six weeks ago, marooned in Helsinki by a rogue Icelandic volcano, I noticed a strong divergence of opinion between those of my colleagues in a similar situation and those with no travel plans. For me and my fellow FT columnist Gideon Rachman, it was the end of the world – even if Gideon, who wasn’t rushing back for his wife’s birthday, accepted it with a sangfroid that I failed to muster. For those safely in the UK, the ash cloud was a minor distraction from important matters such as the Euro crisis and the British election.
My agitation wasn’t mere self-centredness (it’s important because I’m important) but an example of what psychologists and behavioural economists call the “availability heuristic” – that something must be important because it’s easy for me to call it to mind.
I might have blamed sleep deprivation and uncertainty for my lack of good cheer as I tried to work out how to get back home in time to hand my wife a bunch of flowers and resume my election coverage, but what really tipped me into an economists’ hysteria was trying to buy a copy of the FT and realising I couldn’t. (Presumably it is not printed within an easy drive of Helsinki.)
At that point, I started to muse on some dismal scenarios. What else depended on air travel? The FT, of course, can be read online. The Kenyan flower business depends on air travel but is far more important to the Kenyans than to us. Salads we can live without. But what else? I am reliant on my mobile phone – but what if the phone network developed a fault in Hackney and the system engineer who knew how to fix it was also stuck in Helsinki? What if production lines started to fail in Birmingham and the components to fix them were in Nagoya? It was starting to look like something more serious than a few grumpy frequent flyers, especially since Eyjafjallajökull is quite capable of erupting for years. Another, larger volcano, Katla, stands nearby and has tended to erupt not long after Eyjafjallajökull does, as explained by Lucas Laursen in this magazine article (May 22/23). I’ve just looked at a map of the nine “main volcanoes” of Iceland. Eyjafjallajökull isn’t one of them.
I started writing e-mails to my colleagues in London pointing out that there was a small chance that European air travel could be rendered completely unreliable for years, and if so there was a small chance of the world’s economy being dealt a shattering blow. This was potentially the biggest story of the decade rather than the third-biggest story of the week. A senior colleague wrote back, more politely than I deserved, telling me to calm down and get a sense of perspective.
He was almost certainly right. Even if the ash cloud returns often, market economies have tended to be surprisingly resilient. Terrible events such as the Kobe earthquake or the 9/11 attacks made little lasting impression on the world’s economy. While some sectors would suffer from sustained disruption to air travel, others would benefit. We’d substitute local vegetables for salads and read the FT online, while businesses would relocate essential staff and hold more inventory to allow for disruptions. We’d adapt.
Or would we? In a system as complex as the economy of Europe, it is hard to be absolutely confident about what impact any event would have – witness the damage wreaked by apparently small misjudgments about subprime mortgages. This is Nassim Nicholas Taleb’s message when he warns of “black swans”. Every now and then something unlikely but very important happens. Thanks to the availability heuristic, few people will have paid it any attention. Those who did will, as I did, have made fools of themselves in the interim.
Tim Harford’s latest book is ‘Dear Undercover Economist’ (Little, Brown)