Swine Flu: Overreaction More Costly Than the Virus Itself?

Posted on May 2, 2009. Filed under: Green, Uncategorized | Tags: , |

It is reassuring to see the press take a more modulated view of the swine-flu risks, especially as it becomes clear that both deaths and incidents have been overstated in the past week.  Our “instant on” media has an insatiable appetite for the scintillating story.  These days, you can actually sense the disappointment in the news anchor when a category four hurricane is downgraded to a category three.  album-def-leppard-hysteria

Some people rationalize that this hysteria serves a noble purpose, in that it prepares us for the worse.  This, however, ignores the fact that there are tremendous real economic costs to overreaction, and that sometimes overreaction has far reaching negative impacts which can be many times greater than than that of the original problem.  In the case of swine-flu, schools and universities are closing, countries are unnecessarily slaughtering animals, and travel and entertainment are being constrained in an already fragile world economy.  For Mexico, which already has enormous political and economic issues, overreaction is remarkably painful, virtually inihiliating all tourism – the third largest sector of it’s economy.

As participants in the economic life of Silicon Valley, we are all aware of positive effects of viral meme propagation.  But not all viral meme propagation has positive results, especially when it relates to this form of hysterical overreaction. One of the most critical examples of this is the U.S. reaction to Three Mile Island, and our country’s decision to eliminate all nuclear energy expansion for the past thirty years. Now, as greenhouse gasses are at the top of the agenda, everyone wishes we could rewind the clock and make this decision again. Instead, we remain ten years away from any substantial increase now that we have shelved this option for so long. All choices have consequences, regardless of (and perhaps at odds with) the intention behind those choices.  

The late Michael Crichton wrote a fascinating essay on this topic that looks at the far ranging ramifications of hysteria-driven decisions, especially in highly complex environments.  I highly recommend it.

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2 Responses to “Swine Flu: Overreaction More Costly Than the Virus Itself?”

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A great post.

It is clear now that Mexican government officials did little to verify the scale reported in initial claims – and have reduced their credibility to the point where further announcements will be even less relied upon, which may actually have the effect of increasing the hysteria feedback loop.

Many viewers of current media reports will no doubt conclude:

1. Because Mexico relies on tourism for 8.3% of GDP…

2. They cannot possibly be telling the truth this time around…

3. We should not believe them.

Note: It is perhaps indicative of the populism nature of the times that The Economist felt it necessary to devote this week’s cover story to the swine flu story.

Overreaction is in place to protect ourselves and our communities though. Cuba and Israel have placed bans on Mexico now, and with just cause. And government officials else ware have posted warnings and “recommendations” to not travel to Mexico unless absolutely necessary. I mean… would you yourself honestly want to travel there the way things are going? Sure, not every state in Mexico is currently affected, but would you honestly want to travel somewhere where you know you’ll get infected by a virus your body has no immunities to? Better safe than sorry.
But yes, it dose suck for Mexico. Their economy will suffer a great deal until they get ahold of their problem.
Mr.Leo
:: http://blogs.myspace.com/cypk


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    …focusing on the evolution and economics of high technology business and strategy. By day, I am a venture capitalist at Benchmark Capital.

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