A “Noise and Nonsense” Brigadier responds to Dr. C.Y. Thomas – Part 1

Dr. C.Y Thomas, in his column of Sunday 17th April last (https://www.stabroeknews.com/2022/04 /17/sunday/guyana-and-the-widerworld/critiques-2-3-exxonmobil-in-thecourts-of-law-and-public-opinion/) under the guise of a critique of ExxonMobil, continued his ridicule of those of us calling for guaranteed compensation in the form of insurance against any damage to the environment of Guyana and that of our Caribbean sister nations. His words were the following: “By moral hazard I refer to the well-known insurance risk management principle, which states that economic agents who seek protection from risk by way of insurance coverage may well choose to pursue a riskier pattern of behaviour after they are insured! As Investopedia states, the paradox is ‘when a party to a contract does not have to suffer the potential consequences of a risk the likelihood of a moral hazard increases’. Let’s hope the noise and nonsense brigade brings no harm to Guyana by their ill thought out pleadings/pressure for insurance, as ExxonMobil’s behaviour in cutting corners is certainly not comforting.”

Dr. CYT is an elder and economist, well respected among Guyanese and Caribbean academicians and beyond. It is therefore with reluctance that we are forced to pinpoint the logical fallacies of his argument.

He made this fallacious assertion in a season of dismissals of demands made by civil society as “nonsense.” The authority with which Dr. CYT is regarded lends a certain appearance of validity to his claims. This is not a person who was known to have a political purpose in launching feral blasts against civil society before the discovery of oil in Guyana.

Nor is he in the race to benefit from the fees, the crumbs falling from Exxon’s table compared to the feast that is rightfully ours if the money comes in fair amounts and goes in the right places– not as far as we know.

We have had cause to raise eyebrows at some of Dr. CYT’s en passant observations before but chose to remain silent given his credentials and esteem.

But there are so many problems with his assertion, captured above, that they cannot be left dangling in the minds of the public without response.

Essentially, Dr. CYT’s argument can be broken down as follows:

The call for insurance to provide substantial cover to match the substantial risk is ill-thought out.

It is ill-thought out because it can make Exxon more inclined toward “cutting corners”, a behaviour for which the company has already demonstrated a propensity.

This is because of something called ‘moral hazard’ – a well-known principle that inclines people to neglect to protect themselves because someone else will pay.

This position is flawed because, first of all, there is something so obviously and egregiously wrong with this contention that we wonder what could have motivated Dr. CYT to make it. One can simply turn the statement inside out to see how illogical, and even ridiculous, it is. His argument implies that people should not be allowed, or made, to take out insurance to cover any risk whatsoever over which they have control, as they would use this knowledge to relax their vigilance over safety measures they would otherwise take. This would be so, since the same argument can be made for