Interesting. what you argue seems to be similar to my views on "real interest
rates" (which are about as unreal as you can get). it is often claimed that
nominal rates have to be set high enuf to compensate "lenders" for expected
inflation, such that if expected inflation rises the nominal rate must go up.
whether or not one would like to be compensated for risk/inflation and whether
one feels after the fact that one has indeed been so compensated is a matter for
one's psychiatrist, and not for serious economists?
From: [log in to unmask] [mailto:[log in to unmask]]
Sent: Tuesday, October 12, 1999 2:19 PM
To: [log in to unmask]
Subject: Re: Entrepreneurs & Risk
In a message dated 99-10-12 13:28:48 EDT, you write:
Donovan may feel compensated for risk if he lends to me. I pay him. He
is paid by me the use of his money. Whether he feels compensated for the
risk, or compensated for the repulsive act of lending to a member of AFEE, or
happy to get the interest, or uncompensated for a loan that he really did not
want to make (but did so for whatever reason), none of us know. When he
tells us why, he may be telling an unvarnished truth, or a varnished truth,
or an untruth that his shrink has failed to point out to him. I do not know.
Even more, from the viewpoint of social science, I cannot know.
We are, or should be, talking about a system, not guessing about
motives; and I think that we should be careful to steer clear of ideas that
smack of justification.
How about this? Actually Donovan lent me the money so that he could
claim it was a bribe to implicate me in one of his shady schemes that I knew
nothing about? We may be sure that Donovan did no such thing, but the
transactions in the market do not provide us with any evidence--not even of
jealousy, resentment, or whatever.