DISQUS

Blar · 3 years ago

A few comments (best considered separately, at least at first, as they may contradict each other and possibly also my beliefs):

1. Isn't the welfare state an important part of the solution to this risk aversion? The important thing is that the benefits not be tied to people's jobs (which makes this part of the French model, where the benefit is the job, especially unpromising). People's risk aversion in exploring jobs is going to be exacerbated when their health care, retirement savings, and ability to provide for their family (and get their kids a good education) are all highly dependent on their employment. It's important to look at the potential downside of this risk-taking from the point of view of the people who will actually be faced with these choices, not just at the macro level where we can talk about "volatility". Government policies that provide a safety net, offer universal benefits, or are forgiving to those in financial difficulty will help encourage risk-taking by softening the blow of failure. They could also encourage risk-taking psychologically, by changing people's construals of the risks so that they feel more secure and adventurous, confident that things will work out even if this one venture fails (instead of worrying that everything will fall apart).

2. If self-employment makes people happier and more fulfilled, then I guess that's good in a way, but isn't it also likely to reduce productivity? We're talking about people who are failing to take a risk that could bring non-pecuniary benefits due to the joys of autonomy, not risks with potentially lucrative financial benenfits that would bring growth and spread the benefits far and wide. Given the moral imperative of growth, and the billions of people throughout the world whose lives are greatly improved by the growth generated in advanced, productive societies, I wonder about the morality of encouraging individuals to find their "calling" so that they can be happy. (This is more of a "Bral" point, but I'd prefer a Will response to a Liam response.)

3. Is the problem that people are too risk averse, or is it just that people aren't taking the right kinds of risks? There are plenty of ways in which people engage in excessively risky behavior, arguably: buying lottery tickets, not wearing seatbelts, not saving enough for retirement, and buying housing with interest-only loans. An alternative psychological explanation, which also applies to many of those examples of excessive risk-seeking, is that people are neglecting or underweighting the future. Within, say, a one-year time frame, these kinds of risky business ventures usually don't make much sense. The negative risk is concentrated in short-term failure, while the positive value comes their chance of becoming fulfilling jobs for many years.

Brent · 3 years ago

I thought you might like this, which I culled from Garrison Keilor's Writers' Almanac on Honoré de Balzac: "All happiness depends on courage and work."

Keep up the good work, mate. Just lay off the evolutionary psychology. I thought Ed Crane was against it, at least in the early 1990s when his friend Charles Murrary was working on his now notorious book with R.J. Herrnstein.

Perhaps your being the Robert Wright of the Cato Institute is a sign of things to come.

Brent · 3 years ago

You'll appreciate this: http://www.hs.fi/english/article/Nokia%E2%80%99...

Outgoing Finnish CEO and president of Nokkia says his country needs more economic risk-taking. Important to say in a country that overly embraces security.