Of course, the most flabbergasting example of risk denial erupted within the industry whose highest expertise is understood to be the analysis and management of financial risk.

As Nobel laureate Joseph Stiglitz has helpfully clarified, Wall Street not only failed to assess and mitigate financial risks in the system, but it amplified them. It exported toxic securities across the globe and designed derivatives and compounds that created new risks — rather than limited existing ones.

Predicting future calamity is at best an imprecise science, but our mental traps make it all but impossible.

In a stupefying understatement worthy of the Guinness Book, James Cayne, former chief executive of the defunct Bear Stearns, just told the Financial Crisis Inquiry Commission in Washington that the firm’s leverage — $42 of debt for every $1 of equity — was somewhat top-heavy. “In retrospect, in hindsight, I would say the leverage was too high,” he conceded.

Has the human capacity for discounting, denying and deluding away risk always been this endemic? Are there underlying pathologies that push the “Everything’s Fine” position to new extremes? Where do we look to guide the political economy toward more reality-based risk management?

Predicting future calamity is at best an imprecise science, but our mental traps make it all but impossible. First is the fear that the recognition of one risk might create another that leaders take more seriously.

For example, facing the priest abuse scandal creates the new risk of tarnishing the reputation of the institution of the church and its representatives.

A more realistic assessment of financial risks might lead to less expansive or less innovative trading operations, or higher reserve requirements, and thus, the risk of thinner profits and smaller bonuses.

A recognition of the true environmental hazards of deep-water oil extraction could dampen the “Drill, Baby Drill” chorus, — and force a serious energy policy for the future. But the immediate consequence of elevating a secondary risk, is to discount the primary peril, making it more likely that catastrophe hits us ill-prepared.

The spiritual architecture of Benedictine monasticism and Buddhist practice all wisely put emphasis on the necessary humility of accepting the real.

It is also the case that risks become calibrated according to historical experience — we tell ourselves that what might happen to a drilling rig or a derivative is limited to what has already happened to drilling rigs and derivatives. True, it’s an information-driven system — and the only solid information we have comes from what has already happened.

But no one would try to assess the dangers of a car crash by studying the history of horse-and-buggy accidents. And surely the financial engineers and oil companies know best how the new systems differ from the old, because they created them.

Finally, Wall Street comes off poorly even on a limited historical risk model, failing to learn or apply lessons from the collapse of Long Term Capital Management or other blowouts in the recent past.

A particularly unsettling question involves just who bears the risk. A financial house that packages toxic investments and moves them out the door has only a short-lived risk, one that may not be important to assess very thoroughly. It’s the investors ending up with the questionable securities who have reason to worry.

The harm from an oil spill also is unevenly shared — local fishermen are looking at a permanent loss of livelihood, while a global oil company might see years of legal wrangling and bad publicity, but a financial setback like that can easily be managed by the flow of continued revenues.

In international drilling ventures, the risks borne by, say, the communities of the Niger Delta or the Ecuadorian Amazon are far greater than those faced by the companies that are drilling there. In the church’s sex-abuse scandal, the risks were borne by children subject to abuser-priests.

True, risks get calibrated according to historical experience, but Wall Street comes off poorly even on a limited historical risk model.

The history of powerful institutions anticipating the risks that may visit dispersed, unorganized, inarticulate — and in the case of oil spills, non-human — bystanders, isn’t encouraging.

The military works with the realities of collateral damage every day, and is forced to make agonizing calculations about the loss of innocent life in pursuit of strategic goals. Are corporations and banks prepared to do the same?

We breathe in risk every day. Failure to name next month’s catastrophe is nothing to apologize for. However, the active obfuscation of risk through intricate financial masking techniques is fraud.

Less obvious, but equally dangerous is the often unspoken choice of looking the other way or allowing reputation protection to trump all other concerns.

Finally, it is enraging when institutions transfer risks to others who have no choice in accepting it — such as taxpayers caught in a heads-we-win, tails-you-lose gamble, or local populations who lose their source of protein when a foreign oil company spoils a river.

Modern society isn’t without guides in moving past the arrogance of contemporary risk denial.

The ability — or, more precisely, the willingness — to face risks realistically is diminishing.

The spiritual architecture of Benedictine monasticism, Buddhist practice and contemporary 12-step programs all put emphasis on the necessary humility of accepting the real. It is arrogant and self-defeating to repackage reality so it appears simpler and more palatable.

It is courageously humble to accept the actual risks and attempt either to manage them or make choices that avoid them.