David Leonhardt had an interesting column on underestimation of risk.  BP’s possible underinvestment in protecting against a gross accident is exhibit one.:

The people running BP did a dreadful job of estimating the true chances of events that seemed unlikely — and may even have been unlikely — but that would bring enormous costs.

Perhaps the easiest way to see this is to consider what BP executives must be thinking today. Surely, given the expense of the clean-up and the hit to BP’s reputation, the executives wish they could go back and spend the extra money to make Deepwater Horizon safer. That they did not suggests that they figured the rig would be fine as it was.

But this does not prove the case.  You may buy a stock given the odds of it going up or down.  If it goes down you will regret your investment.  This does not prove it was wrong to invest in the first place.  It might have been right given your initial assessment. The same logic applies to BP.

This is a simple point: regret does not imply that the ex ante decision was bad.  Leonhardt is  a great economics commentator and journalist.  The fact that he makes this elementary mistake shows how easy it is to make.

But there is another factor at work.  It is impossible to determine BP’s probability assessment after the fact.  They can always claim the chance of a disaster was low.  There is no historical data against which to measure their assessment.   All we are left with is the option to blame them even if their decision was perfect from an ex ante perspective.  Blame involves saying them made a bad decision and holding them to account.  This was the key element in Jeff’s earlier post on the Blame Game.