Identifying, understanding and accounting for risks are some of the most significant tasks conducted by policymakers, academics and leaders. Risk—or the calculated probability that some undesirable outcome will occur—impacts nearly every aspect of our lives. From insurance to credit analysis, security and terrorism assessments to war gaming, from the burgeoning field of political risk analysis to the halls of our financial institutions, a surfeit of individuals and institutions are tasked with analyzing the risks that impact us every day.
When properly managed, risks can be relatively benign, diversified away in portfolios or countered with security measures. However, when risks are missed, ignored, or miscalculated catastrophe awaits. Economic collapse, as we are experiencing in the Great Recession, wars and regime change, such as the Arab Spring, and natural disasters that we are ill-prepared to respond to can wreak havoc on human life.
Since one of the key roles of government is to protect its citizens, policymakers must be well-equipped with the tools and insights to anticipate and mitigate risks. Yet managing risk is not a role just for the public sector. Businesses must also directly address risk, not just to protect their profits and investments, but in consideration of broader, systemic disturbances that might spill beyond the confines of the firm.
With this in mind, the SAIS Review of International Affairs seeks to foster a discussion on some of the risks that may be hidden, misunderstood, or woefully unaddressed by those who might be most affected by their realization. Some of these risks are more hidden than others. Some are novel. Some are rarely discussed. Others involve some of the biggest issues that face policymakers, but from a new angle or with a new conclusion.
We begin this issue with an interview of Ian Bremmer, the founder and president of Eurasia Group, a premier political risk analysis firm. In our discussion, Bremmer reviews the global outlook, focusing on the changing role of leadership in the international system. He highlights some of the major issues that will dominate headlines over the coming years, offering insight into possible responses.
Our essays begin with a discussion of procedures for policymaking. Risk analysis, at its core, is modeling. But different approaches consider disparate variables, can yield diverse results, and often lead to divergent policy recommendations. The methodologies policymakers use thus have enormous impact on the outcomes and must, a priori, be well thought-out before implementation. Michael F. Oppenheimer tackles this directly, arguing that policymakers must use alternate scenarios—“believable narratives describing how very different futures could emerge from current circumstances”—to effectively challenge implicit biases in policymakers’ assumptions and yield the best possible policy results. [End Page 1]
Paul Slovic, Daniel Västfjäll and Robin Gregory tackle psychological impediments to sound policy. Couching their argument in a discussion of genocide, the authors argue that the psychological effects of “psychic numbing” lead policymakers and the public to underestimate the value of human life, particularly during mass atrocity, yielding sub-optimal policy outcomes. By accounting for this effect, policymakers will be better equipped to make informed decisions.
From this methodological discussion, we move to a brief conversation on economics, starting with retrospective analysis of the Great Recession. Nassim Nicholas Taleb and George A. Martin analyze the causes of the economic collapse, laying the blame with irresponsible risk management. The authors explore the causes and outline a few suggestions to avoid such catastrophes in the future. Xiaolu Wang bridges our economic discussion with our regional one, expounding the risks to economic and social development in China from hidden, or gray, income.
Following a geographic focus, the next three essays deal with one of the most pressing issues in international relations: the rise of China. Each, though, offers a novel approach to this well-covered territory. Charles F. Doran offers unique insights on China’s trajectory from the perspective of power cycle theory, providing suggestions on how to successfully and peacefully address changes in the international system. Christopher Ford tackles the China question from a completely different angle. In a critique of American foreign policy, the author objects to excessive reliance on soft power, calling for the employment of other...