Tonight a senior Health Ministry Official explains in respect of Pig Flu that it is better in these situations to be very cautious and take great care. It is better apparently to go overboard because we can always "ease back".


Sounds plausible and sounds like common sense. As usual always mistrust so called "common sense". Over reaction creates a "cry wolf" situation which is truly dangerous. Since the turn of the century we have specialised in these.... Y2K, SARS and onward to the latest.

Over reaction is costly, feeds the next over reaction as we count the cost of the last burst of irrationality and risks a "so what" response when a genuine threat emerges.

The shock All Black loss to France has plenty to teach us about randomness and why the work of Nassim Nicholas Taleb is so important. His point of course is that randomness - l'aspect aleatoire - has far, far more to do with the outcomes we observe than we care to admit or find comfortable. In fact we are finding this World Cup business downright uncomfortable.

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"When Disclosing Good News Looks Bad"

Rick Harbaugh
Indiana University

Dr. Theodore To
Bureau of Labor Statistics

This version: November 2006 (Journal of Economic Literature)

This is a powerful idea and once understood seems to both make sense and describe common situations. It may help account for over estimates of the credibility of information from brokers and under estimation of the credibility of disclosure by companies - though this is not an area the authors apply the theory to.

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