Tail Risk Killers: How Math, Indeterminacy, and Hubris Distort Markets

CHAPTER 8Coming to Grips with Austerity

Talk of austerity is all the rage. The problem is that we don’t even know the meaning of the word. Let’s face it, most of us are pretty coddled when it comes to belt tightening.

Austerity is not flashy. Nor is it fun. But it isn’t hopeless. People get angry, get sad, and then they move forward. It is characterized by

• Ambiguous property rights

• Extreme income inequality

• And, often enough, violence

I found some data, long forgotten and collecting dust, to shed some light on the subject.¹ The data come from a survey of 2,910 households randomly chosen in clusters of 30 households and stratified across 32 of the 39 provinces of South Vietnam in 1964. The only region of this country not included in the ...