Saturday, February 11, 2006

Subsidizing risk!

Ideas can be like colored shades. You put on Incentives and you see the world in a different way. The same could be said for institutions and information. Of late, I find Risk to be my new lens to view the world. While my interest is in its regulatory aspects, its application and potential to better our decisions is immense. Risk is about a few basic ideas: threat, vulnerability and consequences. And their rigorous application to a field.

Here is a question that may be a worthwhile one to think about. This is related to my recent project on bankruptcy in the US and the risk taken by entrepreneurs. The US supports those who go bankrupt of which a particular percentage are those who have been entrepreneurs or small-scale businessmen. The ostensible goal is to provide them a fresh start. In these times nobody would disagree that entrepreneurship is needed in society. But does it make sense for the state to support those who go down under in their entrpreneurial ventures. In other words, subsidize them. Does this send incorrect signals of their ventures to an entrepreneur or to society? And who bears the losses?

Keep watching this space for the answers.

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