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Speech material
belongs to Blog  by Over the Counter on 2007-03-08 05:31 PM read 357 times Source: http://blog.risk.net/2007/03/speech_material.html |
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It is often supposed that the costs of production are threefold, corresponding to the rewards of labour, enterprise and accumulation.[In other words: salaries, shareholders' dividends, and debt costs - OTC.] But there is a fourth cost, namely risk; and the reward of risk-bearing is one of the heaviest, and perhaps the most avoidable, burden on production. This element of risk is greatly aggravated by the instability of the standard of value. Currency reforms, which led to the adoption by this country and the world at large of sound monetary principles, would diminish the wastes of Risk, which consume at present too much of our estate.From the preface to Keynes' Tract on Monetary Reform (1924). Keynes was talking about inflation risk. Given the time he wrote it, that's understandable; as Brad DeLong explains, his concern was to argue against a return to the gold standard, abandoned during the fiscal stresses of the First World War (and reintroduced, tragically, the next year by then-chancellor Winston Churchill), and in favour of a strong inflation-targetting central bank. But, of course, the point holds for any sort of risk; the reason we are willing to pay so much to get rid of risk is that the shadow of an uncertain future has a terribly chilling effect on any sort of enterprise.
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