The perception about risk is fast changing with new risks arising and few vanishing altogether. But the lowering of perceived risk by the investors has made the markets totally deserted. The article discusses the emerging trends and the role of risk aversion in the economy.
Even as the world was celebrating the new magic that has enabled material prosperity to grow more in the last century than in all of our human history, my associates and I were analysing the proximate causes and catalysts that have worked jointly in fuelling material prosperity. We discovered, through econometric analysis of data from 58 countries, a set of three consistent causal and catalytic factors that have had a consistent impact on costs, productivity and risks. The three country-specific causal and catalytic factors are governance, trade and internal economic freedoms.
A democratic format of governance, an abundance of internal economic freedoms and involvement with global trade work independently as well as together towards lowering costs, lowering risks and risk perception and increasing productivity. Lower costs, actuarial risks and risk perception on the one hand and increased productivity on the other have enabled the world to enjoy unprecedented material prosperity.
|
