Synthesized answer
The "wastes of Risk" refer to the burdens and costs associated with uncertainty in production, particularly those aggravated by an unstable standard of value [2, 3]. A significant portion of this risk arises because businesses incur expenses in money during the production process, with the expectation of recouping these outlays through sales in money at a later date [1]. This means the business world as a whole is positioned to profit from rising prices and suffer losses from falling prices [1, 5]. The reward for bearing this risk is described as one of the heaviest, and potentially most avoidable, burdens on production [2, 3].
Implementing "sound monetary principles" would specifically reduce these wastes of risk by stabilizing the standard of value [2]. When the money used as a measuring-rod is undependable, arrangements for saving and production cannot work properly [3]. Currency reforms that lead to the adoption of sound monetary principles would diminish the risk directly arising from instability in the value of money [1, 2]. This would help alleviate problems like unemployment, the precarious life of the worker, and the disappointment of expectation, all of which are linked…
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From the book
isk could be diminished or if we could devise a better means of insurance against it for the individual _entrepreneur_. A considerable part of the risk arises out of fluctuations in the _relative_ value of a commodity compared with that of commodities in general during the interval which must elapse between the commencement of production and the time of consumption. This part of the risk is independent of the vagaries of money, and must be tackled by methods with which we are not concerned here. But there is also a considerable risk directly arising out of instability in the value of…
ely risk; and the reward of risk-bearing is one of the heaviest, and perhaps the most avoidable, burden on production. This element of risk is greatly aggravated by the instability of the standard of value. Currency Reforms, which led to the adoption by this country and the world at large of sound monetary principles, would diminish the wastes of _Risk_, which consume at present too much of our estate. Nowhere do conservative notions consider themselves more in place than in currency; yet nowhere is the need of innovation more urgent. One is often warned that a scientific treatment of…
FACE We leave Saving to the private investor, and we encourage him to place his savings mainly in titles to money. We leave the responsibility for setting Production in motion to the business man, who is mainly influenced by the profits which he expects to accrue to himself in terms of money. Those who are not in favour of drastic changes in the existing organisation of society believe that these arrangements, being in accord with human nature, have great advantages. But they cannot work properly if the money, which they assume as a stable measuring-rod, is undependable.…
an is a cannibal at home and eaten abroad, do not cancel out to render him innocuous and safe. But there is a further reason, connected with the above but nevertheless distinct, why modern methods of production require a stable standard,--a reason springing to a certain extent out of the character of the social organisation described above, but aggravated by the technical methods of present-day productive processes. With the development of international trade, involving great distances between the place of original production and the place of final…
rld as a whole must always be in a position where it stands to gain by a rise of price and to lose by a fall of price. Whether it likes it or not, the technique of production under a _régime_ of money-contract forces the business world always to carry a big speculative position; and if it is reluctant to carry this position, the productive process must be slackened. The argument is not affected by the fact that there is some degree of specialisation of function within the business world, in so far as the professional speculator comes to the assistance of the producer proper by…
More questions about this book
- Keynes asserts that the existing organization of society "cannot work properly if the money...is undependable." Explain, using a specific example or analogy, how an unstable monetary "measuring-rod" directly disrupts the rational economic behavior of both the "private investor" and the "business man" as described in the text.
- The preface links various societal problems, from "unemployment" to "profiteering," to the "instability of the standard of value." Choose two of these consequences and delineate the precise causal steps through which monetary instability leads to each, as if explaining it to someone unfamiliar with economics.
- The author suggests that society's current economic arrangements are "in accord with human nature." What specific human economic behaviors or motivations does Keynes assume are fundamental, and how does an "undependable" monetary standard fundamentally undermine these presumed aspects of human nature?
- Keynes contends that while "conservative notions consider themselves more in place than in currency," the "need of innovation is more urgent." Based on the identified problems, what foundational "conservative notions" about currency might Keynes be implicitly challenging, and what kind of "new ideas" is he preparing the reader to receive?