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Questions that are rarely asked
So if we could get people to exercise more, would they become more risk-loving, want less insurance, make more aggressive investments, and induce faster economic growth? Would this be a good thing?
That's Robin Hanson, the basic empirical result is that physically weaker people are more risk-averse in a wide variety of settings.
Posted by Tyler Cowen on September 2, 2008 at 02:55 PM in Science | Permalink
Comments
Perhaps it depends on the exercise. Robin seems to have in mind strength training.
But what if the exercise were aerobic conditioning, e.g. long runs. That might increase life expectancy, and according to most economic models, that could lead to more risk aversion.
Posted by: a student of economics at Sep 2, 2008 3:14:27 PM
A large part of being physically weak is being weaker than other people, and there will always be a lowest quartile in the distribution.
Posted by: Cyrus at Sep 2, 2008 4:18:27 PM
A good point by Cyrus, I think.
Posted by: Bernard Yomtov at Sep 2, 2008 5:11:12 PM
Increased levels of testosterone increase both strength and aggression. Maybe we should all start doing steroids?
Posted by: Kyle S at Sep 2, 2008 5:27:24 PM
My immediate concern is whether we look at absolute strength or relative strength. Those that feel confident in their prowess relative to others (IE, higher social standing) might be more likely to take on greater risk, especially if they obtained this greater strength through training (accomplishing goals=higher risk tolerance?) or constant fighting (reinforcing the notion that they are stronger than their peers).
What I find most interesting:
"Predictions for men and women differ
only slightly by the gender of the predictor: both men and women underestimate their target’s risk
tolerance, but the difference is especially high for female targets."
Meaning people think women are much more cautious than they actually are, if I am reading that correctly. That could explain a lot of the wage and promotion gap within high status job tracks at major corporations.
Especially...
"It is heavy women who are seen as less risk-accepting."
Posted by: Robert Olson at Sep 2, 2008 5:29:49 PM
People exercised much more in the 18th century when Adam Smith pointed out that while insurance was a good idea the market for it would always be small because most people have an irrational preference for risk.
Posted by: michael vassar at Sep 2, 2008 6:20:11 PM
OTOH, the rich frequently become less risk adverse.
Posted by: Lord at Sep 2, 2008 7:40:37 PM
The determining factor is whether or not your decision will affect your children/grand-children. If you don't care about the future (no children) then it doesn't matter, unless you're driven by some sort of general survival-of-the-species motive. I'm physically weak (pathetically so) but don't worry about risks because they're irrelevant (no kids), except to the extent they affect my wife.
The question is - why are there so many unhealthy people who do appear to have a stake in the future?
Posted by: john turnbull at Sep 2, 2008 9:32:58 PM
Looking at the current problems in the financial markets it is hard to believe that making people, or at least bankers, less risk adverse is good for the economy, or economic growth.
Posted by: joan at Sep 3, 2008 12:34:00 AM
To follow up on Joan, how does Robin Hanson determine that people are too risk averse? Seems to me not that different from deciding that people really should like the color blue more.
Even if the economy would grow faster, what is illegitimate about a choice for security over wealth?
Posted by: Zamfir at Sep 3, 2008 4:50:39 AM
Even if it is not all selection bias, I wonder if relative strength is actually the important factor, making it a zero sum game.
Posted by: josh at Sep 3, 2008 12:59:17 PM
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