Amid an article about the GM bankruptcy, Mark Ambinder (political correspondent for the Atlantic Magazine) has the following offhand comment:
Purists — and virtually every academic economist one happens to encounter — wonder what happened to the once inviolate principle of rewarding risk-takers.
On a literal level, I don’t think that’s correct: the idea is that risk-takers can win big if they win, but if they lose, they lose: that’s what “risk” is all about. I don’t think anybody (except the risk-takers themselves, along with their friends and families) think that risk-takers should be rewarded when their bets lose.
But that’s all obvious and fits in with all the moral-hazard, perverse-incentives things we’ve been hearing about for awhile.
Why I’m going on about this
What interests me is the centrality of “risk” in the world of economics now. Until being pointed to the article linked to above, I had never heard of the “once inviolate principle of rewarding risk-takers.” Then again, it’s been almost 30 years since I’ve taken an economics class. In that class, the idea of “risk” wasn’t mentioned at all, I think. We learned about about supply and demand, inflation and unemployment, money, investment, the stock market, etc. But the whole “risk” thing didn’t come up.
Since then I’ve read enough to know that academic economists have been talking about risk for awhile, but I don’t think it was in the forefront of discussion. For example, I don’t think a magazine columnist 30 years ago would’ve written about the inviolate principle of rewarding risk-takers, or anything of the sort. Things have changed–a lot.