MILTON FRIEDMAN AND L J. SAVAGE volved:(a)those involving little or no which does not appeal to great ambition groups according to the degree of risk in- ing only C200. Uncertainty, therefor risk about the money return to be re- and lofty aspirations, has special attrac ceived-occupations like schoolteaching, tions for very few; while it acts as a de other civil service employment, clerical terrent to many of those who are making work; business undertakings of a stand- their choice of a career. And as a rule the ard, predictable type like many pub- certainty of moderate success attra lic utilities: securities like ke government more than an expectation of an uncertain bonds, high-grade industrial bo ss that has an equal actuarial OD rticularly owner-o "But on the other hand. if mely high prizes, its rate degree of risk but unlikely to lead attractiveness is increased out of all pro- to either extreme gains or extreme losses portion to their aggregate value. 3 -occupations like dentistry, account- Adam Smith comments similarly about ancy, some kinds of managerial work; occupational choices and, in addition business undertakings of fairly standard says of entrepreneurial undertakings kinds in which, however, there is suf- "The ordinary rate of profits always ficient competition to make the outcome rises more or less with the risk. It does fairly uncertain; securities like lower- not, however, seem to rise in proportion grade bonds, preferred stocks, higher- to it, or so as to compensate it com grade common stocks; (c) those involving pletely. he presumptuous hope much risk, with some possibility of ex- success seems to act here as upon al tremely large gains and some of extreme- other occasions, and to entice so many ly large losses occupations involving adventurers into those hazardous trades, risks, like piloting aircraft,auto- tha competition re bile racing, or professions like medi- below what is sufficient to compensate cine and law business undertakings in the risk. 1 untried fields; securities like highly Edwin Cannan, in discussing the rate speculative stocks some types of real of return on investments, concludes that 'the probability is that the classes of in- The most significant generalization in vestments which on the average return the literature about choices among these most to the investor are neither the very three uses of resources is that, other safest of all nor the very riskiest, but the things the same, uses a or c tend in gen- intermediate classes which do not appeal eral to be preferred to use b; that is, either to timidity or to the gambling people must in general be paid a premium instinct. I5 to induce them to undertake moderate This asserted preference for extremely risks instead of subjecting themselves to safe or extremely risky investments over either small or large risks. Thus Marshall says:"There are many people of a sober 0p cil, PP.554-55 steady-going temper, who like to know 140pcil,pIII what is before them, and who would far s Article on"Profit, "in Dictionary of Political rather have an appointment which of-He f6oo,but had an equal chance of afford- and Political Science, 1933), pp. 362-oz. economi H. Knight, Risk, Uncertainty, and Profit(Ner than one which was not unlikely to yield York, 1921; reprint London School of