Abstract
Risk and uncertainty can be looked at in behavioral terms. Risk then refers to situations in which the world has provided measurements of what you’re up against, as in casino gambling. Uncertainty is when you only have some qualitative notion of what you’re up against, as when you’re calling a girl to ask her out on a first date.
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Notes
Andrew Mas-Colell, Michael Whinston, and Jerry Green, Microeconomic Theory (New York: Oxford University Press, 1995) describe the two approaches in secs. 6D and 6E, the latter of which we have called contingent markets and they call state-dependent. On p. 185 they say: “The concept of risk aversion provides one of the central analytical techniques of economic analysis.”
Max Hastings, Overlord: D-Day and the Battle for Normandy (New York: Simon and Schuster, 1984), 206–7;
Len Deighton and Max Hastings, Battle of Britain (London: Michael Joseph Ltd., 1990);
and Stephen Bungay, The Most Dangerous Enemy: The Definitive History of the Battle of Britain (London: Aurum Press, 2000), 401–5 provide some stories and opinions.
W. Kip Viscusi, Risk by Choice (Cambridge: Harvard University Press, 1983) is the reference.
For a standard account of the economics of migration, see ch. 8 of George Borjas, Labor Economics, 5th ed. (New York: McGraw-Hill, 2010). My brief experiences with Third World migration are well captured by the headline to an AP story by Paul Schemm that ran in the San Francisco Chronicle: “Spring Surge: Africans Risk Lives to Reach Europe” (April 10, 2014). But they continue to come, overshooting conventional economic calculations. A kind of risk seeking, I’d say.
The Dirac delta function is defined in David Tannor, Introduction to Quantum Mechanics (Sausalito, CA: University Science Books, 2007), 603f He takes an asymptotic approach that means we don’t have to get involved with infinity.
Schumpeter thought socialism was bound to win the competition, essentially because of the power of rent-seeking in democratic capitalism. Thomas Picketty, Capital in the Twenty-First Century (Cambridge, MA: Belknap Press of Harvard University, 2014) seems to agree, at least with the outcome.
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© 2016 Benjamin Ward
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Ward, B. (2016). Risk Aversion—The Convenience Error. In: Dionysian Economics. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137597366_10
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DOI: https://doi.org/10.1057/9781137597366_10
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