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It's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. I

by lmkg 6y ago

It's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. If the relation between risk and rates of return has held for longer than that, then it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy.

dannyw 6y ago
I don’t buy this. The recognition that when you lend money to someone, they may default, is something that has existed since bartering. “Risk” has excited forever. Risk is not a new recognition!
s1artibartfast 6y ago
>it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy. This is what pretty much every economist has said about market behavior. Participants don't need to understand theory for the markets to work. In fact, things get weird when participants DO understand it. Humans set prices long before written language was developed to describe supply and demand.
joe_the_user 6y ago
I don't think the concept of risk broadly speaking could possible be new. The danger that things might not work out had to be thought out since you had societies of moderate levels of complexity. See: https://en.wikipedia.org/wiki/History_of_insurance#Ancient_era https://en.wikipedia.org/wiki/History_of_insurance#Ancient_e...
kristopolous 6y ago
As a formalized quantifiable theory, sure. But it's intuitive. If you think someone has less of a chance of making good on their promises whether because of their actions or some external calamity you will ask for more from them. I wouldn't be surprised to find such relationships chiseled in ancient tablets. Trust, risk and reward among groups is a topic that animal behaviorists study. I'm certainly not in that field but I believe they claim it's a common evolutionary trait and have done experiments with children and primates to show primates lacking this intuition wherein 2-year old humans don't. There was a lecture about this I saw recently. I'll have to dig it up edit: here: https://www.lse.ac.uk/Events/2020/11/202011191630/cooperation https://www.lse.ac.uk/Events/2020/11/202011191630/cooperatio... links at the bottom

by lmkg 6y ago

dannyw 6y ago

I don’t buy this. The recognition that when you lend money to someone, they may default, is something that has existed since bartering. “Risk” has excited forever. Risk is not a new recognition!

s1artibartfast 6y ago

>it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy. This is what pretty much every economist has said about market behavior. Participants don't need to understand theory for the markets to work. In fact, things get weird when participants DO understand it. Humans set prices long before written language was developed to describe supply and demand.

joe_the_user 6y ago

I don't think the concept of risk broadly speaking could possible be new. The danger that things might not work out had to be thought out since you had societies of moderate levels of complexity. See: https://en.wikipedia.org/wiki/History_of_insurance#Ancient_era https://en.wikipedia.org/wiki/History_of_insurance#Ancient_e...

kristopolous 6y ago

As a formalized quantifiable theory, sure. But it's intuitive. If you think someone has less of a chance of making good on their promises whether because of their actions or some external calamity you will ask for more from them. I wouldn't be surprised to find such relationships chiseled in ancient tablets. Trust, risk and reward among groups is a topic that animal behaviorists study. I'm certainly not in that field but I believe they claim it's a common evolutionary trait and have done experiments with children and primates to show primates lacking this intuition wherein 2-year old humans don't. There was a lecture about this I saw recently. I'll have to dig it up edit: here: https://www.lse.ac.uk/Events/2020/11/202011191630/cooperation https://www.lse.ac.uk/Events/2020/11/202011191630/cooperatio... links at the bottom