Acts of Nature and Potential Acts of Terrorists: Contrast Relative to Water Resource Systems

In assessing the vulnerability of the nation’s water supply systems to acts of nature and to acts of terrorists, Haimes et al. (1998) proposed hardening systems—that is, reducing their vulnerabilities—by implementing or augmenting security measures and by enhancing the redundancy, robustness, and resilience of the systems. Decisions made to harden the water infrastructure are future expectations made in a state of uncertainty, given that the future cannot be clearly comprehended. The traditional presumption that uncertainty derives from imperfect knowledge and therefore can be addressed through the theory of probability may not hold in the face of terrorist threats. Some decisions made to counter potential terrorist acts might be made in a state of uncertainty that derives from incomplete knowledge that may be addressed through a theory of surprise (Matalas 2003). Distinctions between acts of nature and potential acts of terrorists germane to decision making under uncertainty are noted.

Among natural acts, those of floods and droughts place the greatest stress on water systems, at least on a broad geographical scale. Rise in sea level and abnormally high tides resulting from coastal storms, floods of sorts, may bring about saltwater intrusion of coastal aquifers. Localized events such as landslides and earthquakes place immediate stresses on water systems, whereas changes in water balances as consequences of forest fires are manifest in the long run. For a given phenomena, such as floods, one act may be distinguished from another in terms of magnitude, severity of consequences, and recurrence. Magnitude and severity are meaningfully linked with recurrence via the theory of probability. Specific magnitudes and consequent severities relate to specific expected recurrence intervals, or return periods. The magnitudes of droughts, unlike those of floods, are difficult to measure in unambiguous physical terms. However, the severity of droughts distinguished by type—for example water supply drought and agricultural drought—are measureable in social and economic terms.

The severity of the consequences of an act of nature sequel to the occurrence of the act itself increases as the probability of occurrence of the act diminishes. However small the probability of occurrence of an act may be, the severity of the consequences yield little in the way of surprise owing to our extensive experience in dealing with acts of nature and our willingness to accept the consequences of rare or very rare occurrences of acts in excess of design specifications of protection.

The distinction between time $\left(t\right)$ and time $\left(T\right)$ made by Georgescu-Roegen (1971) is apt in distinguishing between acts of nature, which are recurrent, and acts of terrorists, which are not—a set of sequential terrorist acts is a set of sequential unique episodes. He noted that the time $t$ , which is embedded in mechanical systems, is not the same as $T$ conceived as the stream of consciousness or as a continuous succession of “moments,” noting that $t$ represents the measure by a mechanical clock of the interval between successive moments, $T^{\prime }$ and $T^{″}$ . Historical processes (e.g., acts of terrorists), unlike physical processes (e.g., an act of nature, such as flood), in the context of the passage of human activities and affairs, are functions of $T$ rather than $t$ . Georgescu-Roegen noted that the flow of heat was an exception. In the economic literature, $t$ and $T$ are sometimes referred to as logical time and historical time, respectively (Robinson 1980).

In contrast to acts of nature, we have little experience in dealing with acts of terrorists except secondarily via the experience of others. There is, however, the direct experience gained from 9∕11, at present a single case. Given that terrorist acts unfold in historical time and given but a single act, it is difficult to imagine all possible terrorist acts and their consequences. In marked contrast, we have a wealth of experience in dealing with natural acts and their consequences that unfold in logical time. No surprises await us, expect perhaps the occurrence of an act that beforehand we had deemed so unlikely that we had dismissed it from our minds, a counterintuitive surprise. In coping with acts and their consequences that unfold in historical time, we may be genuinely surprised. Thus the implicit assumption that with natural acts and their consequences the future will mirror the past is questionable in the case of terrorist acts and their consequences for which, as Shackle (1959) noted, knowledge cannot be gained before its time.

Decisions made to meet future expectations of protection from the adverse consequences of acts of nature are underpinned by the theory of probability. It is assumed that all the acts and their consequences are known, though imperfectly. Moreover, it is assumed that all alternative schemes of protection are known and are well understood. If all acts are not knowable, at least not before their time, then probabilities cannot be assigned to the acts that are known.

There are three well-established probabilistic pathways to decision making—adaptive expectation, expected utility, and rational expectation. Because of the atheoretical nature of the hypothesis of adaptive expectation and the fact that no account is taken of current information, the hypothesis has been largely superseded by the hypothesis of expected utility advanced by Savage (1954) and the hypothesis of rational expectation formulated by Muth (1961; see Palley [1993]). Given that all acts and their consequences are known, as well as all schemes of protection, the future essentially mirrors the past. Water management has drawn on each of these hypotheses in the making of decisions.

Acts of terrorists are unique episodes, such that the future now faced is not the future faced when the decision was made in response to or in anticipation of a terrorist act. If indeed our knowledge about acts of terrorists is not complete—some relevant matters simply unknowable and others unrevealed before their time—then it is questionable if probability-based decisions can be meaningfully made in such a state of uncertainty. In the face of uncertainty of this sort, two approaches to decision making are briefly noted.

A post-Keynesian perspective on decision making under uncertainty is that no expenditure of current resources on analyzing information about the past can provide meaningful statistical evidence regarding future prospects. One can either avoid making real-world choices or one can go with one’s gut feeling. Such a decision-making framework calls for a measure other than that of probability to substitute for uncertainty (Davidson 1991).

Shackle shared Keynes’s views on the limitations of applying probability theory to decision making, but unlike Keynes, Shackle (1949) proposed viewing the outcomes of decisions in terms of surprise, where surprise is the psychological state of mind following the occurrence of counterexpected events or unexpected events. See Shackle (1972). Counterexpected events are events that have been imagined but consciously rejected as not possible. Unexpected events are events that have never been imagined and thus never assessed as being possible or impossible. Counterexpected events occur in a state of imperfect knowledge, whereas unexpected events may occur in a state of incomplete knowledge.

Neither approach to decision making is part of mainstream economic thought, though both are discussed within the economic research community. Given that acts of terrorists are nonrecurrent and unfold in historical time suggests that the decision making should not be viewed strictly in the context of probability. There may well be unexpected surprises. The premise underlying nonprobabilistically-based decision making (knowledge is incomplete) cannot be assessed empirically, nor can the premise underlying probabilistically-based decision making that knowledge is imperfect.

Fiering and Kindler (1984) suggested, without reference to terrorism, that a notion of surprise might provide a useful characteristic of acceptable design of a water resource system. To explore the usefulness of the notion of surprise in water resource management, they offered, as a starting point, taxonomy of surprises that they viewed as resulting from unexpected events. Fiering and Kindler noted that their taxonomy was neither exclusive nor exhaustive:

Fiering and Kindler suggested that minimizing the likelihood of surprise might be a viable alternative to optimality as a characteristic of acceptable design of a water resource system. One might question how a measure of likelihood in its probability sense could be attached to surprise derived from an unexpected event. Nonetheless, the introduction of Shackle’s ideas on surprise to water management by Fiering and Kindler is timely. If the notion of Shackle’s surprise is viable in relation to acts of nature and the responses to those acts as illustrated by Fiering and Kindler, then Shackle’s notion would seem to be no less viable in relation to acts of terrorists and the responses to their acts.