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TODAY’S STORY
14 Jul
,
2022

The Fence Paradox

Do you drive a car?

If you do, you must be aware of the Anti-lock Braking System (ABS) feature.

For those of you who don’t, what ABS essentially does is in times when you’re driving the car at high speed and you need to push the brakes in an emergency, the ABS prevents the wheels of the car from locking up.

Without ABS, a driver who pushes the brakes hard would immediately cause the wheels to lock up and the car to skid out of control. But with ABS, the wheels don’t lock up and maintain traction with the ground so that the driver still has the ability to manoeuver the car after she hits the brakes.

Great feature, right? I mean, I would imagine that it would certainly cut down on the number of deaths due to car accidents.

Well, you’d be wrong.

Counterintuitively, historical data shows that ABS has increased the number of deaths at the wheel, though it has reduced the number of incidents.

How is this possible?

It has to do with the Fence Paradox.

If you build fences around a system for protection, people start leaning on the fence too much. The fence gives them a license for bad behaviour. They start relying too much on the fence to protect them. And when the fence breaks, they suffer more losses than they would have suffered without the fence being there in the first place.

In this case, what it means is with increased safety provided by ABS, people are incentivized to drive at even higher, potentially fatal, speeds.

Now, ABS would work well if the driver were penalized in some way every time it was engaged. But since drivers aren’t penalized, drawing a protective fence actually makes people turn more complacent.

Let’s say there’s risk involved with a certain activity. To mitigate risk, the government creates fences, and builds regulations. But fences make people underestimate the risk. Then, when the fence breaks, many fall down. They felt safe with the fence and started overly relying on it, but they were wrong.

1. If getting education loans is too easy, you get trillions of dollars of student loan debt. Universities can keep inflating admission fees without a corresponding increase in their students' ability to get a job. This creates an education loan bubble.

2. Popping painkillers hides underlying symptoms, allowing patients to continue their unhealthy behaviours. You get the population addicted to painkillers.

3. With Universal Basic Income, you create a necessary dependence on the government. But all hell breaks loose when the monthly welfare paycheck stops, and governments can’t afford to let it happen. So the currency keeps on inflating beyond measure.

4. Believe it or not, even college degrees are a protective fence. Colleges make you believe that your degree is something you can fall back on. Consequently, a you tend to lean too heavily on the credentials you have already earned and tend to ignore the value of upskilling and keeping up with change.

Takeaway

The best policies protect the population by allowing them to take small risks while protecting them from larger ones.

The worst ones obfuscate risk entirely by creating fences and even absorbing small risks, which doesn’t let the population adapt well to the changing environment. It increases fragility.

Just like how overprotective parenting makes for weak children.

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