That is the theme of my latest Bloomberg column, here is one bit:
Each generation has its own form of recency bias, as it is called in behavioral economics. Just after Sept. 11, for example, there was great concern about follow-up attacks. (Thankfully, nothing comparable followed.) Now we worry a lot — maybe too much — about insolvent banks, insufficiently high inflation, and the Chinese shock to U.S. manufacturing.
So what about nuclear war? Looking forward, the reality is that the risks of such a war are quite small in any particular year. But let the clock run and enough years pass, and a nuclear exchange of some kind becomes pretty likely.
I have found that people with a background in financial market trading are best equipped to understand the risks of nuclear war. An analogy might be helpful: Say you write a deeply out-of-the-money put, without an offsetting hedge. This is in fact a very risky action, though almost all of the time you will get away with it. When you don’t, however — when market prices move against you — you can lose all of your wealth quite suddenly.
In other words: Sooner or later the unexpected will come to pass.
Meanwhile, a generation of hypersonic delivery systems, being developed by China, Russia and the U.S., will shorten the response time available to political and military leaders to minutes. That raises the risk of a false signal turning into a decision to retaliate, or it may induce a nation to think that a successful first strike is possible. Remember, it’s not enough for the principle of mutual assured destruction to be generally true; it has to be always true.
Do read the whole thing, which includes a discussion of Steven Pinker as well.