A crisis that markets can't grasp

Now, the terrible “ifs” accumulate, as Japanese engineers work to bring the station’s reactors under control. The ultimate price, in human life, may not be known for years.
The details of this catastrophe were unforeseeable, leading some to conclude this was a black swan event — something so wildly unexpected, so enormous in its impact, that it seems to defy our understanding and expose the fragility of our knowledge of the world. How could anyone have predicted this?

And yet in 2007, Tokyo Electric Power, or Tepco, escaped a disaster at its huge Kashiwazaki-Kariwa nuclear power station, on the opposite side of Japan, when that plant was damaged by a 6.8-magnitude earthquake — three times as large as what the plant was designed to withstand. Tepco basically lucked out last time.

Financial collapse

Many have compared the events unfolding in Japan with 9/11, Hurricane Katrina, the financial collapse of 2008 and 2009, the BP oil spill, and the uprisings in the Arab world — in that all have shown the limits of the collective wisdom of the marketplace.

For a moment, all the swans seemed black. And those swans seemed blacker still when viewed through the lens of today’s hyperkinetic global markets. After its most harrowing week since the 1987 market crash, the Tokyo Stock Exchange found its footing on Friday. But it was a week like few others on the exchange: the Nikkei 225 stock index, Japan’s equivalent of the Dow Jones industrial average, fell 6.2 percent on Monday, plunged 10.5 percent on Tuesday, rebounded 5.7 percent on Wednesday and sank 1.4 percent on Thursday. It closed up 2.7 percent on Friday, at 9,206.75. The loss for the week totaled 1,048 points, or 10.2 percent.

Such analysis, of course, depends on — and perhaps even encourages — our belief that tomorrow will be much like today.