Rajiv Sethi Misses a Point...

Mark Thoma sends us to Rajiv Sethi, who writes:

Rajiv Sethi: On Tail Risk and the Winner's Curse: [T:]hose with the most optimistic expectations will take the greatest risks and suffer the most severe losses when the low probability events that they have disregarded eventually come to pass. But tail risks are unlike auctions in one important respect: there can be a significant time lag between the acceptance of the risk and the realization of a catastrophic event. In the interim, those...