Academic

In preparing classes this semester, I went over my notes from last year at this time and found ?Change seating chart ? H1N1.? I redid my seating chart about a week into that semester to encourage students to spread around the room after a public health professor visited the law school to encourage us to take precautions against the coming flu season. It seems years ago now, but the fears of a global pandemic faded and the Centers for Disease Control declared an end to the public health emergency with little media fanfare this spring.

The kneejerk reaction would be to echo the backlash against the Y2K preparations and say that this was a false alarm that generated unnecessary fear and cost. But grave matters like reviewing pandemic responses deserve careful study by public health scholars not idle punditry.

I wonder, though, what lessons we can learn from this type of review for financial regulation. In my own study of asset price bubbles and financial crises, I constantly wonder about the problem of whether I can identify whether and when warnings of a financial crisis were a false positive (examples from readers would be welcome).

However, as with H1N1, we should not be quick to attack policy responses if a crisis never materializes. For one thing, we never see the crises that are prevented, which may explain some of the impetus for deregulation; it is hard to see the value of levies that work by actually preventing the storm from occurring. Second, the hindsight bias may lead us to sharpen our knives too much. Policymakers, like business people, must make decisions under risk and uncertainty all the time. In fact, decision-making under uncertainty is an area of some of the hotter research in economics.

And ?in this it resembles all the old thinking.? Flashing back to a fall semester when I was a college freshman, my public policy class included a study evaluating the decision analysis for the Ford Administration on whether to require mass vaccination for, what else, swine flu.