At the end of last year the percentage of adults infected with HIV was estimated at 0.2% in the United Kingdom, 21.5% in South Africa, 37.3% in Botswana, yet only 3.9% in Angola. Why do infection rates differ so much between countries? In the 1980s the World Health Organization and associated researchers made rather optimistic projections of the impact of AIDS on populations in Africa using extremely detailed computer models of population structure. Complex demographic models were combined with strong simplifying assumptions about sexual behaviour. Unfortunately, this led the modellers to ignore those factors most critical to the spread of AIDS. They assumed that the probability of transmitting the HIV infection was a function of the number of sexual acts, not the number of partners of infected persons. But it is crucial to distinguish between the two.8 Ten acts with one partner have a smaller impact on transmission of the infection than one act with each of ten different partners. As Professor (now Lord) May, President of the Royal Society, pointed out, ignoring this simple and crucial distinction led to a serious underestimate of the rate at which AIDS was likely to spread.9 By building elaborate models of demographic variables for which a great deal of information was available and making simple assumptions for behaviour about which little was known, the large models used by the World Health Organisation produced misleading results.
But in reforming our pension system, it is important to separate two issues. First, how should we pay for the cost of present pension commitments? Second, what is the right structure for our pension system: which risks should be borne individually and which collectively? A debate is needed over whether present arrangements imply too much or too little sharing of risk. We should remember also that insurance is based on ignorance - ignorance of the outcomes facing each individual. But knowledge can turn risk into certainty. The advent of genetic testing could undermine a private market in insurance against longevity and illhealth. Even if insurance companies could not require testing as a condition of insurance, the fact that tests were available could increase even further the degree of adverse selection in such insurance markets. Pooling risks caused by unequal genetic inheritance might no longer be feasible. Insurance would become instead a question about redistribution, and hence a matter for public policy. 6. Conclusions  In this lecture I have stressed that most public policy decisions are a matter of the balance of risks. There is no certainty. Indeed, it is the illusion of certainty that undermines much public debate. As Bertrand Russell said, “The whole problem of the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts”. Recognising and modelling risks means understanding the limits to our present knowledge. Communicating risk is about transparency.