The (Next) Big Short: Prediction, Narrative, and Law in the Climate Crisis

Abstract

The Subprime Mortgage Crisis was a predictive failure that involved the misallocation of risk and blindness to uncertainty. Climate change, and the coming Climate Crisis, parallels the Subprime Mortgage Crisis in important ways that render our current approaches irrational and irresponsible. I examine the predictive failures of the Subprime Mortgage Crisis by focusing on what makes probabilities more likely to be accurate, and the circumstances in which predictions blind us to the uncertainty of large scale negative consequences. Using the theory of the Black Swan and other critiques from Nassim Nicolas Taleb, I explore the application of probability theory in the context of the Climate Crisis. At the same time, data and statistics are insufficient to motivate both individual actors and political entities to act proactively. Therefore, I posit that beyond the probabilistic conception of uncertainty and risk associated with global climate change, the Climate Crisis demands a narrative that resonates with individuals at a local, personal, and emotional level. I use narrative theory and the doctrine of legal storytelling to explain the difficulty experienced in implementing legal mitigation solutions for the Climate Crisis at the current time. The variety of legal solutions offered, all of which may accomplish the goal of reducing carbon emissions via a carbon tax or otherwise, are irrelevant if none of them are deployed. The difficulty in enacting legislative and regulatory reforms is best viewed as a failure of narrative rather than statistics, facts, or science.