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Innovation, social risk and political responsibility

by Piero Bassetti [1], 17 April 2009

by Piero Bassetti (Lecture presented at the London School of Economics - 14 May 2003)

Ladies and gentlemen,

It is a great honour to address this distinguished audience at such a prestigious institution, one to which I feel especially close after my days here as a Stringer Fellow with Professor Yamey.

The background to the invitation is the analysis and research that the Giannino Bassetti Foundation - whose mission is to develop proposals on issues regarding "responsibility in innovation" - is conducting on the theme of our discussion today. Our work has been carried out at both the conceptual level and in actual projects with leading partners, such as an initiative with Allianz and the Christoph von Braun Foundation on the theme: "Changing insurance paradigms and risk management; the implications of September 11"; that with the regional government of Lombardy on "How to reconcile politically difficult decisions, such as those regarding genetically modified organisms (GMO), and democracy"; and that with Moda italiana on "Innovations in style and social change".

In order to balance my treatment of these two aspects of our work, I have elected to begin with a small number of conceptual considerations, followed by two case studies and short conclusions.

My central thesis is that when faced by the impact of innovations that increase social risk, political responsibility in our institutional systems tends to dissipate or weaken rather than become more defined and focused.

Before continuing, let me define the terms that feature in my title:

a) innovation

Innovation is on everyone's lips today. However, people often confuse innovation with discoveries or new developments, and little thought is given to the conceptual difference between innovation and change. And we rarely have a clear idea of the relationships between innovation, change, risk and responsibility. Only very occasionally do we consciously address the serious political problems that the management, or non-management, of innovation can engender. Far too often, the problem of the independence - and hence the responsibility - of research is erroneously confused with the independence and responsibility of innovation. These are two very different problems: research and discovery are not the same thing as innovation. A discovery becomes innovation only when the increase in "knowledge" implicit in every discovery becomes technology and actuating power (that is, social capital) that the discovery implements. As Schumpeter and Nelson have argued, it is only then that we obtain an increase in social power, which is in itself a factor of change and, thus, of social risk.

Real innovation is neither discovery or novelty, but rather the agent of a new scenario, the result of a new combination of knowledge and power.

For it to qualify as "creativity" as well, change must also be to some extent unpredictable. It is for this reason that we speak of innovation as the "realisation of the improbable". It combines risk and opportunity, changing the world around us but doing so in an intrinsically unpredictable direction. It may be an unpredictable change at the political or social level (such as new institutions, new approaches to relations, production, war, power) or at the technical and economic level (new materials, new energy sources, new instruments, new kinds of goods) or even at the cultural level (new styles, fashions, tastes and attitudes.

Innovation does not involve unpredictability alone. It also encompasses the second theme in my title:

b) social risk

We use this in the same way as well-known thinkers such as Ulrich Beck or Anthony Giddens: Beck has written that the concept of risk is a modern concept, which assumes the presence of danger, while Giddens has noted that it replaces the concept of chance. A society of innovation, and therefore a society of risk, is forced to make difficult choices aimed, as Beck writes, at making the unpredictable consequences of choices, made in the name of progress, predictable and controllable.

This brings us to the third element of my title:

c) political responsibility

The concept of responsibility has at least two meanings: one moral, the other objective.

We have elected to stand apart from the ethical debate - so fashionable today - and focus our attention on the decisions that regard the political implications of innovation.

Of course, this does not exempt us from examining the difficult choices that Beck refers to. On the contrary, it leads us to the heart of the problem of who is responsible for assessing social risk in innovation: the scientist who discovers, the intellectual who invents, the technologist who builds, the capitalist who finances, the entrepreneur who combines the factors of production, the legislator drafting laws or the politician wielding the tools of executive power?

As Beck rightly points out, Parliaments do not vote on the use and development of microelectronics, genetic engineering and so on. At most, they vote on supporting all of this. Nor is political power always able to assume political responsibility for the actions of the entrepreneur or firms, if it is precisely the intimate connection between decisions regarding technological development and investment that forces companies to forge their projects in secret for competitive reasons. As a result, the decisions reach politicians and the public only after they have already been taken.

In other words, are the decision-making methods of existing democratic institutions, which are based on the achievement of majority consensus, appropriate for prior assessment of situations like innovations, which by definition involved changes in "improbable" social powers and knowledge?

But if they are not, and politics is specialised in legitimising consequences that it did not cause and could not realistically prevent, who is responsible?

I have sought to clarify the terms of the debate simply to underscore the central thesis of my arguments, which can be reformulated as follows: if innovation is change; if it introduces new opportunities, but also new risks, into social life; if it changes history, then the agent of that innovation (be it a person, a firm or an assembly) is acting politically and the related responsibility cannot be removed from democratic control.

However, in reality this is often not the case.

Must we then resign ourselves? Can we allow politically irresponsible innovation in a democratic society? Can such responsibility be distributed indiscriminately between the entrepreneur (whose responsibility is at most implicit, namely that linked to success in the market) and the market in all its indeterminacy?

I feel that the best way to respond to the sweeping questions raised by reality is to look for answers in the tangibility of experience.

For this reason, when the Giannino Bassetti Foundation had the opportunity to participate in a number of events dealing with these issues, we jumped at the chance.

The first opportunity was a direct consequence of September 11.

The promoter of the initiative was the Allianz Center for Technology, which called the Foundation to work together with Christoph Friedrich von Braun.

The theme was to analyse the awful event of September 11, which had a devastating impact on the world insurance industry, and to begin to gain an understanding of its possible repercussions.

You are all familiar with Allianz: a major insurance group that, not only in terms of size but also in its long traditions, can be considered one of the leading actors in managing social risk through insurance methods. It had a major exposure towards the World Trade Center and the business conducted within it, which obviously generated significant losses: infact the total of all insured claims related to the September 11 terror attacks will probably be between 40 and 60 Billion US Dollar while the sum of Allianz Group's obligations stemming from September 11 attacks is estimated at 1.5 billion US Dollar net of reinsurance. However, these are just estimates. There are no reliable finale figures for these events.

The initial theme was: "Can Allianz insure skyscrapers any longer?"

It was immediately clear that the tragic and brutal event of September 11:

a) was an "innovation" in the narrow sense that we discussed at the start. It was a tragic innovation, but an innovation nonetheless;

b) called into question the entire framework of social risk and the collateral effects associated with the new vulnerability of buildings like the Twin Towers and, more generally, buildings with symbolic value;

c) had irreversibly changed the responsibility to stakeholders of an insurance company exposed to risks such as skyscrapers or other symbolic buildings. The episode revealed that the liabilities in this case were not just the settlement of the various claims for damages but also the simultaneous fall in the market value of the assets backing those risks. As Lutz Cleemann notes, "in financial terms the loss in investment far outstripped the insurance loss."

Apart from this initial area of consensus, the debate on how to create the conditions for reconstruction and who should be responsible revealed a complex range of positions.

The representatives of Allianz tended to underscore the quantitative aspects of the event. In their view, its "magnitude" was the core issue. When faced with assertions such as "A loss of these proportions was inconceivable prior to 9/11." or questions like "What can we change in order to better deal with risks of this dimensions in the future. How can we continue to guarantee insurability in the future?", they tended to advocate the use of sophisticated technical instruments such as "early warning systems". They argued that "We are now better prepared to deal with risk correlations like these ... we're doing everything in our power to meet our economic and social responsibilities in the face of increased risk of terrorism". They were clearly convinced that in the face of the increased risk of terrorism their task was to do "everything in our power to meet our economic and social responsibilities".

In fact, in their view "change did not occur on the morning of September 11, 2001. From the limited personal perspective of a few decades at best, it was a gradual process that took many side-steps and iterations. September 11 was only the culmination".

We at the Giannino Bassetti Foundation were more inclined to consider the events of September 11 as something exceptional not only in their magnitude but also in their nature.

While Allianz looked at the situation in terms of the need to "find solutions that will allow us to continue providing efficient insurance coverage", for us the attack represented a sharp discontinuity. It was a clear innovation that changed the framework of responsibility, shifting it, wholly or partially, from a market entity (namely, Allianz) to an institutional entity (Government).

The attack appeared to present a number of entirely novel aspects with regard to:

a) the ancient institution of war. Waging a "private" undeclared war on the territory of the world's leading power, with targets like the White House, the Pentagon and the Twin Towers (which together form the summit of the political, military and financial might of the United States) introduced a unique mix of war and terrorism in the heart of the world's traditional political institutions;

b) the technology adopted: the transformation of the adversary's civilian airliners into fuel-laden missiles to destroy exceptionally large buildings was an innovative way to mix aviation, missile technology and massacre.

c) the use of the media: giving a world-wide audience such a dramatic view of a terrorist attack was a unique media event;

d) the ruthless replacement of the ordinary targets of traditional terrorism with symbolic objectives.

This innovation, this perverse "realisation of the improbable" with a qualitative and quantitative impact perhaps exceeded only by the nuclear bombs of Hiroshima and Nagasaki could only give rise to a sweeping change in roles with regard to the social risk associated with the presence of skyscrapers in our cities, first and foremost New York.

If the agents of such an innovative attack and the reply were political actors, then the responsibility for the exceptional social risk must also lie with the political sphere.

The most serious consequences of the attack on the World Trade Center do not appear to be the ordinary collateral impact that "ranged from retail businesses in American airports to our operators in Islamic countries, all of whom faced falling revenues". Rather, they are the new and grave social risk of not being able to live or work in symbolic buildings such as skyscrapers because they have become a target of innovative attacks, linked to the dramatic appearance of a new type of war. It was no longer a war that could be defined in the classic terms as "an armed conflict between states or countries for the attainment of their goals or the safeguarding of their interests. It begins with a declaration of war an ends with surrender, an armistice or a peace treaty, again by the state involved". This has been replaced by a new type of aggression that may have revolutionised the assertion that "war is not insurable" but does not make it less pertinent.

Of the three possible proposals made at the meeting on the directions to be taken, namely to refuse to insure, increase premiums or find a third way, only the latter appears feasible. However, we cannot limit ourselves to "establish[ing] framework conditions for the appropriate application and adopt[ing] the eight additional anti-terrorism recommendations issued by the OECD's Financial Action Task Force (FATF)". We must face the problem of an irreversibly changed political context in which the issue of skyscraper risk, and the allocation of responsibility, must be addressed in equally innovative ways.

Our approach essentially proposes to deal with the social risk faced by any symbolic building not by countering the effects (that is, through insurance) but rather by controlling the causes. For us, the cause in this case was the macroscopic innovation introduced on September 11, with the radical transformation of the conditions of security or vulnerability of symbolic buildings and the consequent need to shift all or part of the problem of responsibility from the insurance industry to government authority.

Obviously, in a debate of this sort, the technical considerations, that insurance know-how tended to raise could not be overlooked. For example, the distinction between commercial risks and political risks in the insurance market is old and deeply rooted. It is based on the assumption that the former can be insured in the market, while the latter - war damage is typical - are charged to government, which transfers the cost to taxpayers.

At the same time, the awareness that "there is no travel without insurance, there is no education without insurance, there is no new technology, no construction or any other business without insurance" is hardly new. The problem is that the relationship between security, vulnerability and social risk is tackled in terms of the dialectic between risk reduction and risk prevention, and considered within the context of insurance techniques. Hence the tendency to ask questions like: "Do not the questions we are facing belong to the realms of politics and society, not to those of risks, probabilities and premiums and claims? Do we have a role in this process?" with technical responses such as "an efficient early warning system" or proposals to focus attention on the technical connection between insurability of risk and its calculability.

Here, too, while acknowledging that in the absence of consistent behaviour on the part of those responsible for "technological, economic, political and social developments [that] continuously affect risk parameters, [these] can cause very rapid risk (and opportunity) changes, as experienced in the case of the World Trade Center", Allianz's attention is clearly focused on the consideration that "the changing dynamics of risk parameters require new forms of risk assessment" to be sought within the industry (such as "early recognition systems acting as '360° radar screens' that can be focused on individual issues ...[and] should anticipate threats and identify opportunities") rather than, as we were suggesting, "a company such as Allianz...[should] foster a qualified debate (whether public or private would be an internal matter) among the main actors involved with special reference to government authorities". In our view, "this would be a major achievement because it would enable risk prevention and risk reduction to be addressed together again, in new form of collaboration between security and insurance (harking back to a different age)."

As regards "risk reduction", (where insurance companies have always performed their role in close collaboration with governments), it was clear that the context had changed even more radically.

Having transformed two admittedly exceptional commercial buildings into politically symbolic targets, the September 11 attacks crossed the traditional boundary between normal market real estate risks and symbolic buildings that are nonetheless insured as commercial property (a similar example for Milan would be the "Scala"), leaving them newly vulnerable.

In essence, we had a situation not only of what insurers call "risk reduction" but also one of "risk prevention", which raised new issues regarding the roles and responsibility of the various actors in the insurance market.

Before September 11, the insurance industry normally divided responsibilities among the various interested parties. There were acceptable trade-offs between the risks faced by the various actors since there were different types of coverage to which the latter could turn. The owner, builder, architect, tenant and other users considered the risk to be covered by their insurance policy, whose cost would have to be acceptable for the market to exist. Public authorities - and regulatory authorities in general - considered the risk to be covered by compliance with regulations: politicians by consensus, taxpayers by the balance of costs and benefits and the public in general by the desirability and urban value of the skyscraper in question. For primarily economic risks the essential facilitator was the insurance system. For non-economic risks the convergence of major interests - which the insurance system indirectly involved - represented significant additional, political and administrative coverage.

In the aftermath of the attacks, as the Washington Post commented in October 2001, "Companies may find terrorism coverage impossible to buy, because vulnerability can be reduced by appropriate safety concepts and risk handling but not by risk transfer and it determines the residual risk, which is a 'political quantity'".

In substance, the degree of risk attributed to the various insured assets - in this case skyscrapers - had become so great as to make it impossible to handle with the old rules and the related responsibilities.

It is therefore necessary to undertake a far-reaching examination not only of the changes in the security and vulnerability of exceptional buildings but also of the actors who are to take on the related risk.

Throughout history, responsibility has always been divided between insurers and the State: from the Hanseatic League to the Republic of Genoa, all the way up to the recent decision of President Bush to take on a part of the risk faced by airlines, there has always been a public actor that has taken the responsibility of providing, at its own expense, acceptable levels of social security. The weight of State and market in the realm of security has historically been the indicator of the equilibrium existing in terms of social security.

September 11 swept through this framework like a tornado. Someone would have to take the political initiative to modify the existing distribution of roles and responsibilities.

But how? By essentially returning to the previous state of security, assuming that state power could restore physical security to a level close that before the event (for example, through specific military initiatives)? Or by developing a new approach, bearing in mind the observations of W. Stahlen (a leading expert in this area), according to whom after September 11: "social ecology, e.g. factors such as democracy and human rights, and cultural ecology, which includes the framework conditions under which society functions, have to be better understood" because, as Michel Huber adds, "changes in the frequency and severity of natural hazards have challenged the insurance industry at a methodological level"?

We at the Foundation argued that the related risk of insuring symbols like skyscrapers in the United States has become a variable that cannot be offset in economic terms alone but must also be contained through public action in risk prevention (that is, increasing security). And that a closer cooperation between the public and private sectors would be indispensable because the actors responsible for containing the insurance risk of a skyscrapers can no longer be the same decision-makers that performed that task when vulnerability was much lower and the relative responsibility of the other subjects involved could be shifted onto insurance.

By contrast, Lutz Cleemann and the Allianz Center for Technology appeared to prefer a response internal to the insurance system.

For us, this was the key point: if the innovation had undermined the rationale of previous behaviour, with regard to symbolic buildings, new rules have to he established. But by whom?

Was it up to insurers to invent them, for example by refusing to insure skyscrapers, thus making their construction impossible? Or was it government's responsibility to restore acceptable risk conditions? And if it was government's responsibility of which one: Federal, State City? And to provide what subsidies to insurance companies (risk reduction) or by taking steps to reduce vulnerability (risk prevention)?

Subsequent events have shown us how the US government has chosen to slice the knot of responsibility in managing the response to the terrorist innovation of September 11. Two wars against two states are a clear demonstration that the US government has taken the path of removing the possibility of a repetition of the attack. In our terms, it has decided to oppose the innovation of Bin Laden with a counter-innovation - preventive war - in order to return at least the United States to the pre-attack level of political risk.

As regards our more immediate concerns, that is the feasibility of skyscraper construction, the underlying assumption appears to be that war against states can eliminate or at least reduce the social risk associated with living and working in symbolic buildings and restore the level of insurance risk to previous levels without changes in responsibility for reconstruction.

However, people are not entirely convinced that two preventive wars and some financial support have re-established security. The conditions for a return to the market do not yet appear mature. What to do?

In our case, the situation is far from clear in spite of the Terrorism Risk Insurance Act (TRIA) that was passed on November, 26, 2002 in the U.S.A..

All things considered, perhaps Allianz was not far off the mark in focusing on the apparently technical - but actually highly political - approaches and steps to be taken to maintain or build a renewed capacity to rationalise and face, albeit within the framework of new relations with governments, the challenges that the society of risk is posing to the sector's traditional arrangements. And these challenges are certainly not limited to terrorism. They also include other perhaps equally serious threats inherent in environmental and biotechnical developments, for example.

An illustration of the difficulties is provided by the negotiations for reconstruction at Ground Zero. Conducted in a highly traditional manner without resolving the thorny issues of insurability, and hence constructibility and usability, they have come to a halt over these very issues. To the best of my knowledge, it would appear that after the decision on awarding the design, no agreement has been reached yet. The federal government does not appear willing to make commitments that would involve rebalancing responsibilities after having made an enormous effort to reduce the vulnerability of symbolic buildings through two wars waged to remove the danger of terrorism at its source.

At the same time, trends in commercial rents in New York do not look promising for real estate investment of the sort envisaged in the design selected in the competition, never mind insurance considerations.

This holds even if we adopt the innovative formulas proposed by the Washington Post back in October 2001, when it suggested "setting up a government-backed terrorism pool into which all insurers would pay, thus spreading the risk of future attacks among the industry and among taxpayers". Agreement between Federal government, State government and citizens does not appear within reach. In fact, the State and City of New York are fighting over who should do and pay what. In short, the unresolved problem of political responsibility is already weighing heavily on the achievement of any agreement.

Only the future will tell us how insurance companies such as Allianz will be able to answer the question "Can Allianz insure skyscrapers any longer?". Only then will we know if the reconstruction of Ground Zero can become a reality.

We will thus be able to assess what I am sure is of great interest our friends with the Cities Program, who were instrumental to making this meeting possible: that is, in our future and in that of our cities, will skylines like that of New York, punctuated by soaring skyscrapers, continue to be a part of urban culture and aesthetics?

_ _ _ _

Let us now turn shortly to our second case: the issues raised in the collaborative initiative between the Giannino Bassetti Foundation and the regional government of Lombardy, which focuses on the theme of reconciling politically difficult decisions with democracy.

The innovation at the centre of the debate is the introduction of a GMO, a rice variant that had been genetically modified to resist the main types of herbicides. The social risk is represented by the possibility that resistance could be transmitted to the weeds themselves, thereby jeopardising the economy of a vast agricultural area. The political question is how can we responsibly and democratically manage an innovation with high social risk and high technical and scientific content.

The innovation in this case appears to have been created in the market, although it is actually the product of the vast scientific resources of the enormous multinational company Monsanto, with all of its lobbying power.

The challenge of managing political responsibility properly is facing the Region, which has to authorise or forbid the introduction of the innovation.

The political constraint in any case is compliance with practices of any democratic body. Since the body involved in this case acts through normal democratic procedures, the question is one of forming a majority in the regional council for a technically and politically informed decision on a matter bearing significant social risk offset by major economic benefits of uncertain magnitude. And this decision must be made under the considerable pressures exerted by the powerful interests involved.

The European Commission has issued a directive that, as regards GMOs, requires the competent government authorities, in this case the regional government, to establish decision-making procedures that are designed to prevent situations in which the inability to manage consensus formation might produce uninformed, reckless, demagogical or otherwise biased decisions.

This possibility, when it occurs, is almost always attributed to the inadequate critical powers of a public transformed into a Luddite mass by the pressure of the environmentalists or to the complicity of the mass media in a disinformation campaign.

The Foundation conducted two studies in collaboration with the University of Padua, with the participation of the University of Tokyo and the State University of New Jersey that demonstrated that disinformation and inadequate critical capacity exist but cannot be considered the only causes of the problem.

It is not sufficient to provide more and better information on a risk to make it acceptable.

We need to understand that the problem of the perception of risk in innovation is a complex issue, one that in this particular case reaches deeply into the cultural and symbolic meaning of food in a country like Italy.

The fact is that the problem of reconciling the challenges of expert knowledge and innovation with democracy and its procedures is fundamentally political.

In our example, the political issue is how to develop a procedure in Lombardy that complies with the substance of normal democratic processes while preventing summary use of those processes from producing an erroneous decision.

The immediate questions is: who should the regional government charge with decision-making responsibility? If the answer is the Regional Council, who will be responsible for briefing the Council (and how will they do so) in order to reduce their lack of knowledge? Or would it be better for the Council to delegate the task to people experts in the technical and scientific issues involved but with little experience in interpreting the political and social aspect of the risk?

Using this real-life case as a platform, we are working on democratic procedures to propose to the political authorities to reconcile innovation, risk, uncertainty and unpredictability with the idea of majority decision-making. This is in fact what the European Union seems concerned about, namely that European democracy can overcome the impasse between neo-Luddite reaction and technocratic oligarchy in dealing with innovation.

The results obtained so far are not entirely satisfactory. However, a careful examination of the available information has shown:

a) that the fascinating theoretical debate, to which scholars like Beck, Latour and others have made such a key contribution, is beginning to produce interesting innovations in actual political and administrative procedures. The idea of delegating technically complex but nevertheless political decisions to scientists alone is increasingly unpersuasive;

b) that a number of countries with long democratic traditions - such as the Scandinavian countries, the United Kingdom and the United States - are experimenting with innovative variations on the traditional democratic model (based on majority decisions in representative assemblies). Initiatives such as "consensus conferences" and similar mechanisms often have more in common with court trials or arbitration proceedings than traditional parliaments.

After all, justice systems - especially those in democratic societies - are constantly involved in decisions with high social risk that often have to be taken in conditions of scarce or partial knowledge of facts while maintaining an element of democracy.

Alongside this line of investigation, which we have called "jurisdictional", in which the paradigm is that of the trial, and the methodological approach that of "proceduralisation", our studies have highlighted another well-known approach that revolves around the idea of "agency": namely when the general democratic decision-making body, transfers political responsibility for innovation and the associated social risks not to a procedure but to a delegated agent. This "power of attorney" is not that granted to the technocrat on the basis of expertise, but rather one founded on complex, independent structures in which the technical and political components are integrated in their constitutions, whose drafting is the responsibility of the general assembly.

Now that the background research has been completed, we are preparing to make recommendations to the Region of Lombardy, which as I noted is facing a political decision that must avail itself of an innovative method or procedures to facilitate its difficult task.

From our point of view, the most significant result should be that a high-risk innovation - the use of GMOs - can be decided by replacing the crude rule of majority voting under the direct pressure of conflicting interests with a more refined procedural approach in which, as Beck has commented, faith in progress does not replace voting but nor does voting hinder progress.

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I would now like to conclude with some brief comments on our initial thesis in the light of these two cases.

First, we have seen that when an innovation appears, the political body responsible for introducing it or adapting the system to its anticipated impact in order to curtail the risk involved may take various forms. It may be a personalised actor, such as the President of the United States; it may be a private entity like Allianz, called upon to perform a political function, no matter how indirect, because of the relevance of its decisions; it may be an elective assembly such as the Regional Council of Lombardy, which is nevertheless forced to adopt binding procedures given the complexity of the issues to hand; finally, it may be a diffuse power like the market, which is distributed among a multitude of consumers.

All are in any case charged with assuming political responsibility.

However, the nature of such responsibility is clear only in the first case. In the second and third examples, that nature is already less definite, and in the fourth - that is when the innovation must be tested or validated in the impersonal market - the dispersion of agents makes it virtually impossible to attribute real responsibility. In this case, the market acts as a mechanism for removing responsibility.

Second, it is agreed that the higher the social risk, the stronger democratic control must be.

In reality, the process is moving in the opposite direction. There are an increasing number of cases in which innovations introduced directly in the market pose a very high level of social risk while the institutional tools to contain that risk appear unequipped to handle the problem. Terrorism is a paradigmatic example, but biotechnology is also producing significant risks and nanotechnology appears likely to be even more problematic.

While the pressure of innovation mounts and social risk increases, the organisation of powers and political responsibilities called upon to handle them in a democratic manner appears to weaken or dissolve.

Third, responsibility is a complex ethical concept that varies depending on whether those who have it are charged with personal power or instead have dispersed, inchoate power, like consumers in a market. In the humanistic tradition of European culture, such responsibility is only clear when it is personal. In the democratic tradition, it is legitimate only when it is the expression of a majority. In a market conception, it is legitimate only when it is profit-making.

Faced with the challenge of injecting responsibility into innovation, all of these assumptions are called into question: the more an innovation emerges from complex knowledge, the less effective majority voting appears. Conversely, the greater the social risk - and its collateral impact - the less technocratic or entrepreneurial powers are capable of taking on responsibilities that transcend them.

The word for risk in Latin is periculum. Pericula is also the word for test, examination. The market is the only institution that can test. But it does so only after the innovation has been released. In a democratic system, however, individuals must know the risk of innovation beforehand, and this is not always possible, giving rise to the temptation to decline all responsibility. Not being able to ask for a response through voting along, or not knowing how to channel the responsibility through appropriate procedures, people are only all too relieved to assign the task to the irresponsibility of technicians or the market. It would be an error to consider such irresponsibility in a solely negative light: don't forget that there is no responsibility without awareness and freedom. How many times has responsibility for "creative destruction", whose benefits only became apparent later, been taken by the technician or the market alone? Think for example of the many innovations with low technical content but high impact on cultural behaviour, in which the market alone gave creative entrepreneurial commitment the support decisive for a change in behaviour with a major social impact. For example, take the miniskirt, whose triumph and the resulting change in social customs were certainly not decided by some political body or even Mary Quant herself, but rather by millions of women who decided to wear it, taking responsibility for their individual choices but not the social changes that followed!

In such cases, the issue of the relationship between the political responsibility for innovation, social risk and the responsibility-negating role of the market create significant conceptual difficulties for economic and political thought alike. On the other hand, current trends in our cultural, economic and institutional organisation point to a sharp increase in the number and impact of innovations, and a large degree of dispersion among those called upon to evaluate them. Perhaps it is precisely this undermining of political responsibility that lies behind the much lamented crisis in politics.

Ladies and gentlemen,

I hope at this point that I have clarified the meaning of my title.

We live in an era of innovation. Every innovation generates social risk. In order for innovation to emerge, it must combine knowledge and power. The use of democratic power always requires taking responsibility, which decreases as the degree of dispersion of decision-makers increases.

Perhaps it would be better if things were different. But this is the situation in which we find ourselves, and there are no easy answers in sight.

The Giannino Bassetti Foundation is working to finds such answers, in honour and memory of its founder.

The help of distinguished cultural institutions such as your own is what I have come to seek.

Thank you.

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Reflecting the interdisciplinary content of the subject, the academic events are cosponsored by the London School of Economics' ESRC Centre for Analysis of Risk and Regulation (CARR), the Department of Information Systems and the LSE Cities Programme
[Referrer: the LSE web site [2]]

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