11 Against the Gods

Risk is an ever-present factor in any economic activity. Markets swing upwards and downwards, and the business cycle moves from expansion to contraction. Along the way, livelihoods are lost, and businesses go bust. Sometimes these swings are relatively gentle and sometimes violent. There are various instruments for handling risk such as insurance and options. However, according to Robert Shiller, these could be greatly expanded in scope to the entire economy. However, risk-handling has to be built into the world economic system. Shiller's 2003 book 'The New Financial Order' is a set of proposals about how to achieve risk-handling without inhibiting creative, entrepreneurial activity.