The Value of Fear I

In the beginning there was man.
And man was all alone.
And he was very afraid.

And so he should have been, there were hundreds of natural things that could kill and/or eat him, but man was smart, and so for a while he was content to live as well as he could without being too greedy and subjecting himself to risks that could cost him too much, either in the form of his life in in the form of an injury that would reduce his efficacy as a hunter-gatherer. However, in the evenings, when man sat alone in his cave he thought about his fear, and he hated it, and he grew greedier and greedier.

So he found other men, and he brought them together and he called them a tribe. The tribe changed incentives. Suddenly each man could take bigger risks than he could ever have done on his own. As the risk of danger to the collective less outweighed the lust for ever bigger reward. Man had taken the first steps to his conquering of fear. Already there were side effects. Men were lost in swamps that a lone man would never set foot into, or gored by a beast that was many times the size of what an individual would dare take on, but the tribe as a whole thrived, and grew. The once insurmountable prey was conquered and the once terrifying forest was explored. Greed was sated. The tribe was content.

But still men had fear. Of lightning and earthquakes and death. So as the tribe huddled in their cave at night and grew more and more greedy, they thought of a way to overcome this fear. What if, they thought; when we die we don't just die? What if we are rewarded for our services to the tribe, for the struggle and the daily dangers, with a better life afterwards? And so the tribe invented religion. Religion changed incentives. Now men took greater risks, crazy risks. To kill some beast that would feed the tribe for weeks, to cross a swamp in search of a better home for the tribe. Great risks, but if each risk gave only a 50% chance of individual survival; heads you win, tails you win in the next life. So man attempted to conquer his fear. However, both tribe and religions need leaders, and leaders are but human, and humans are greedy. When the tribe looked to its leaders for reassurance of their greed that is what they were given. For leaders like being leaders, and the fearful leader does not last long, and so the regulators of the fear the tribe should have felt had perverse incentives to hide the true value from them and so bigger and bigger risks were taken. As greed grew strong and fear slipped away.

Millennia of wars, fought by men willing to risk anything because the regulators of their fear told them that there was no fear, that they could not lose, that they were on "the right side", and even if they personally lost, they would be losing their lives so that their tribe could conquer fear in whatever guise it had taken in another race, religion or philosophy and besides, they would be rewarded for it in the next life. Thus saw the age of theocrats and monarchs holding fear as a weapon to push on their followers and destroy their enemies. And when the tribes of the earth grew tired of these heavenly promises they grew afraid again, and they grew angry, and thus ushered in the age of dictators, with just as perverse incentives as the Godgiven rulers who went before them to sacrifice the people to remain in power themselves. Fear rules the lives of the elite, but those who suffer for it are the followers.

We saw an attempt to conquer fear in socialism, you need no longer worry about having enough to eat for all will be given the same, and we saw it fail, because fear drives innovation, fear is essential. Without fear we stagnate and like a shark once we stop moving we die.

And finally man realised he should not be avoiding fear, but embracing it. The capitalist free market was supposed to be this realisation of the battle in every man woman and child's mind between fear and greed. Greed for more from life, what your neighbours have or what your brother in law has, and that this is tempered by fear for what happens if you reach too far, as the mythical Icarus did, is not a bad thing, not something to be beaten or tricked out of people. It is instead and important factor and a useful one, weeding out the ideas that are too risky, not worth it. Fear adds worth.

In the wake of the financial crisis many economic commentators seem of the opinion that the balance is broken, that humans will always be too greedy and thus the market is destined to disaster and must be nursed like a child by the government, lest it hurt itself. Others, a minority, are of the view that it is that government, who like all prior leaders, created perverse incentives to remove fear from the equation and left only greed behind. We will examine the two opposing sides next time but for now I leave you with the words of Milton Friedman:

Capitalism is a system of profit and loss, and the second is just as important as the first.