I’m actually going to remove the example as unneeded, as it’s caused two distinct comments one of which pointed out it’s not working right and one of which challenged its assumptions. It’s a distraction that isn’t worth it, and a waste of space. So thank you for pointing that out.
To respond directly, one who takes on a share of tail risk needs to enjoy a share of the generic upside, so the carpenter would get a small equity stake in the house if this was a non-trivial risk. Alternatively, we could simply accept a small distortion in the construction of houses in favor of being ‘too safe’ and favoring carpenters who don’t have children. Or we could think this punishment is simply way too large compared to what is needed to do the job.
To respond directly, one who takes on a share of tail risk needs to enjoy a share of the generic upside, so the carpenter would get a small equity stake in the house if this was a non-trivial risk.
This helps a lot—I think that more explicit emphasis on risk and reward needing to be symmetric in both type and shape in addition to magnitude would help a lot.
Edit: would help a lot for the symmetric justice argument, I should have said. Although a casual introspective review of my conversations about risk says it would be a good idea for all such discussions. I will develop a habit of being explicit about the type and shape (which is to say distribution) of risks moving forward.
I’m actually going to remove the example as unneeded, as it’s caused two distinct comments one of which pointed out it’s not working right and one of which challenged its assumptions. It’s a distraction that isn’t worth it, and a waste of space. So thank you for pointing that out.
To respond directly, one who takes on a share of tail risk needs to enjoy a share of the generic upside, so the carpenter would get a small equity stake in the house if this was a non-trivial risk. Alternatively, we could simply accept a small distortion in the construction of houses in favor of being ‘too safe’ and favoring carpenters who don’t have children. Or we could think this punishment is simply way too large compared to what is needed to do the job.
This helps a lot—I think that more explicit emphasis on risk and reward needing to be symmetric in both type and shape in addition to magnitude would help a lot.
Edit: would help a lot for the symmetric justice argument, I should have said. Although a casual introspective review of my conversations about risk says it would be a good idea for all such discussions. I will develop a habit of being explicit about the type and shape (which is to say distribution) of risks moving forward.