Date created:21 March 2000

Last modified: 21 March 2000

Maintained by: John Quiggin

John Quiggin

Panic merchants owe us a bottle

Australian Financial Review

30 December 1999

Australian governments and companies have spent between $10 and $15 billion in the pursuit of Y2K compliance. Assuming that this cost is passed on to taxpayers and consumers, that's more than $500 a head, or between $2000 and $3000 for a family of four. This expenditure was made without any of the benefit-cost analysis that normally would be required for a multi-billion dollar infrastructure project.

Since I have such a big financial stake in Y2K, I have taken a keen interest in predicting what will happen on January 1. I can safely predict that millions of computers will crash resulting in the loss of vital data. Electricity and telephone systems in poor countries will fail. There will be scattered blackouts even in developed countries like Australia and the United States.

The reason I can make these predictions with confidence is simple. Millions of computers crash every day of every year, taking their volatile data with them. Electricity and telephone systems in poor countries are on the blink more often than not. Even in developed countries, local blackouts are a daily event, caused by storms, cable burnouts and drunks crashing into power poles.

With equal confidence, I can predict that problems due to the Y2K bug will be almost undetectable against the background noise of routine computer failures. This is because most Y2K-related problems have already happened. The financial year 2000 is already six months old. In any case, most computer activity that has any date-related component is forward-looking and is therefore already dealing mainly with events in the year 2000 and beyond.

From appointment diaries to calculating the expiry dates on Y2K survival kits, any program that can't handle the year 2000 has probably already failed. The worst Y2K failure to make the news so far has been a mailout to 500 alternate jurors in Philadelphia, Pennsylvania telling them to turn up for jury duty in January 1900. Fortunately, no similar catastrophe has taken place in Australia.

My final prediction is that the absence of any problems will be hailed by the Y2K industry as evidence that our our $10 billion was money well spent. The main difficulty with this claim is the fact that vast numbers of small businesses (over a million in the US) have ignored the problem, as have most poor countries, and even some rich ones, like Italy. When nothing happens to the non-compliers it will probably be claimed that it was only the big organisations with heavy reliance on modern computers that were vulnerable. Actually, the reverse is the case - old computers running legacy code should have the highest failure rate.

Another interesting part of the story relates to embedded systems. These are the vast number of computer chips in cars, lifts, power plants and so on. The prospect of widespread failure in embedded systems was a major selling point for the promoters of Y2K-related panic, because these systems effectively can't be fixed, only scrapped. But now that Y2K is upon us, the selling point becomes a problem - the systems haven't been fixed, but there is no serious prospect that they will fail. Hence, the Y2K industry has quietly decided that embedded systems are compliant after all.

A few Y2K alarmists have been honest enough to accept all this. For example, doomsday advocate Gary North's Website includes an article by Larry Sanger entitled ' If Y2K Fizzles, What Will Y2K Alarmists Say?' which says, in part

" What will I plead? Not that my alarm got people in high places to spend money to fix the computers .... The managers who spent hundreds of millions to fix their systems were misled, because those managers who did nothing and 'fixed on failure' were equally successful in dealing with Y2K."

It is obviously too late to ask for our money back, and it seems unlikely that the Y2K industry will ever be called to account for it. But there is still time for the industry to make some sort of gesture of recompense. A New Year's Eve bottle of champagne for every household in Australia would fit the bill nicely, and would barely make a dent in Y2K-related profits. Happy New Year!

Professor John Quiggin is a Senior Research Fellow of the Australian Research Council, based at the Australian National University and Queensland University of Technology.

Read more articles from John Quiggin's home page

Go to John Quiggin's Weblog