I’m co-author of a forthcoming legal book on political risk, International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide. My co-author, an excellent but mainstream international lawyer in Paris, has added to the draft the following paragraph on the nature of “risk” and “profit opportunities”, and he has quoted Keynes.
I am not happy with the description of the nature of risk and profit opportunities nor with the quote of Keynes. I’d like to suggest a replacement for this with some good quotes from Mises. I have a few in mind but thought some on the list could suggest some others. Any suggestions of good quotes by Mises on the nature of risk, and profit opportunities, please email to me at nskinsella -at- gmail dot com.
Thanks, Stephan Kinsella
In this chapter, we discuss the general nature of political risk: the various types or manifestations of political risk, factors that contribute to political risk, and ways that investors can assess the political risks inherent in particular investment regimes or with respect to certain investments. “Risk” is a concept explored at length in the economic, political science, and anthropological literature, and we will not delve into theoretical detail here.[1] For our purposes, risk should be understood in its plainest meaning, namely the probability (whether looming or remote) that an event will come to pass that will adversely affect the return on an investment. This view of risk is necessarily forward-looking: in hindsight there can be no risks, only history. All business ventures involve a variety of risks. Profit opportunities arise because different people assess risks differently at the outset, and because they tolerate the possibility of negative outcomes to varying degrees. Investment is, to a large degree, the product of this sort of risk arbitrage. In the elegant phrasing of John Maynard Keynes,Business men play a mixed game of skill and chance, the average results of which to the players are not known by those who take a hand. If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation.[2]
------------------------------------- [1] For general background on the theory of risk and human behavior, see Tim Bedford and Roger Cooke, Probabilistic Risk Analysis: Foundations and Methods (2001); Peter Bernstein, Against the Gods: The Remarkable Story of Risk (1998); David Ropeik and George Gray, Risk: A Practical Guide for Deciding What’s Really Safe and What’s Really Dangerous in the World Around You (2002). [2] John Maynard Keynes, The General Theory of Employment, Interest and Money 149 (1967).
