Eliezer Yud­kowsky on plan­ning for the abyssal.

Never mind hind­sight on the real-estate bub­ble — there are lots of things that could poten­tially trig­ger finan­cial cat­a­stro­phes.  I’m will­ing to bet the Amer­i­can gov­ern­ment knows what it will do in terms of imme­di­ate res­cue oper­a­tions if an atomic bomb goes off in San Fran­cisco.  But if the US gov­ern­ment had any advance idea of under which cir­cum­stances it would nation­al­ize Fan­nie Mae or guar­an­tee Bear Stearns’s coun­ter­par­ties, this plan was not very much in evi­dence as var­i­ous gov­ern­ment offi­cials gave every appear­ance of try­ing to fig­ure every­thing out on the fly. […]

It’s ques­tion­able whether the gov­ern­ment should be in the posi­tion of try­ing to fore­cast the abyss — to put a prob­a­bil­ity on finan­cial melt­down in any given year due to any given cause.  But advance abyssal plan­ning isn’t about the prob­a­bil­ity, as it would be in invest­ing.  It’s about the pos­si­bil­ity.  If you can real­is­ti­cally imag­ine global finan­cial melt­downs of var­i­ous types being pos­si­ble, there’s no excuse for not war-gaming them.  If your brain doesn’t lit­er­ally cease to exist upon fac­ing sys­temic melt­downs at the time, you ought to be able to imag­ine plau­si­ble sys­temic melt­downs in advance.

This got me think­ing about plan­ning for our own abyss (be it employ­ment or health). Why don’t we have plans for the worst case sce­nario? After all, as the Finan­cial Times’ Tim Har­ford states, “[A] recently pub­lished research paper [shows] that most unem­ployed peo­ple are too cocky about their prospects of find­ing a new job. On aver­age, they expect seven weeks of unem­ploy­ment, but even­tu­ally endure 23 weeks. And this is using data from the mid-1990s, not reces­sion years”.

A case of the plan­ning fal­lacy?