Probably when I re-read it I’ll have all sorts of issues with it but this gets me excited (such a pity that CT is being dominated by a discussion on somebody making idiotic statements).

Risk-security angle is a good angle, and as far as I know quite innovative in current debates.

Thanks.

As for the big question of how society ought to handle risks, I think there’s a lot to be said for making sure that risks get shifted in ways that give the strongest incentives for risk reduction to those most able to shape risks. That means making sure that financial sector risk is borne primarily by participants in the sector managers and shareholders, not by the taxpayers.

But in a world of potentially infinite risk of something, it seems important too to have legitimate democratic procedures for deciding which risks to aggressively manage at any given place and time. This is a value decision, not just a technical optimization problem, and requires the sort of public moral deliberation that we’re out of practice with.

There is no risk of being born poor. (If there are pre-born souls, to whom they are born may be pre-destined. ;) Or does God play with dice?)

This claim is by no means obvious. It is quite possible to imagine a risk-free caste society. The introduction of risk into such a society might shake things up. In fact, great catastrophes can make for more social equality. In Europe, the Black Plague and the First World War were social levelers. The Great Depression also reduced inequality.

Isn’t a more important factor the ability of the rich and powerful to shift risk onto the rest of society? That helps to keep the downtrodden down. Also, the poor may be more inclined to take on risk if the potential reward is great. They may also be more resigned to it.

“On the other hand, as the financial crisis has shown, radical inequality in outcomes, such as that associated with massive rewards to financial traders, encourages risky behavior and particularly encourages a search for opportunities to capture the benefits of risky actions while shifting the costs onto others, or onto society as a whole.”

“Onto society as a whole is redundant.” Privatization of profit and commonization of cost is not just a feature of financial trading. It is a widespread cancer on the body politic.

Link

He notes that while the cooperative benefit from trade relies on differences between people (I prefer apples, you prefer oranges, etc.) the cooperative benefit from ‘risk pooling’ relies instead on reduced variation across larger sample sizes, even where all involved have the same preferences.

He further notes that these two forms of cooperative benefit, gains from trade and risk pooling, are often in direct conflict (pp27-28).

I think you’ve covered most of the same ground in your chapter above, but you might still find some useful points or references in the Heath essay – it’s what came to my mind as I read your chapter, at any rate.

See also: Douglas W. Hubbard, The Failure of Risk Management.