Ron Lieber of The New York Times asks, Could the cur­rent finan­cial cri­sis be breed­ing an entire gen­er­a­tion of risk averse traders?

Kevin Bro­sious, a finan­cial plan­ner in Allen­town, Pa., polled the stu­dents in his finan­cial man­age­ment class at DeSales Uni­ver­sity on the per­cent­age of their port­fo­lios they would allo­cate to stocks right now. The major­ity would put less than half in stocks; among their rea­sons were fear of job loss, lack of account­abil­ity on Wall Street and eco­nomic fears ampli­fied by the news media.

The prob­lem with their approach, accord­ing to Mr. Bro­sious, is that by invest­ing con­ser­v­a­tively they are prob­a­bly guar­an­tee­ing them­selves a smaller return and a more mea­ger stan­dard of liv­ing in retirement.

Or, as Robert N. Sieg­mann, chief oper­at­ing offi­cer and senior adviser of the Finan­cial Man­age­ment Group in Cincin­nati, wrote to me in an e-mail mes­sage, “Why would you con­sider tak­ing less risk NOW after most of the risk has already been paid for in the mar­ket over the past 12 months?”

[…]

So what kind of risk should you take on with the sav­ings you have left over? To Moshe A. Milevsky, […] risk should have less to do with the era in which you live and more to do with what you do for a living.

On the topic of rea­son­able risk assess­ment, the UK Pro­fes­sor of the Pub­lic Under­stand­ing of Risk, David Spiegel­hal­ter, believes it may be time to teach risk lit­er­acy as part of the main­stream aca­d­e­mic cur­ricu­lum.

“I regard myself as part of a move­ment we call risk lit­er­acy. […] It should be a basic com­po­nent of dis­cus­sion about issues in media, pol­i­tics and in schools.

“We should essen­tially be teach­ing the abil­ity to decon­struct the lat­est media story about a can­cer risk or a won­der drug, so peo­ple can work out what it means. Really, that should be part of everyone’s language.”

As an aspect of sci­ence, risk was “as impor­tant as learn­ing about DNA, maybe even more impor­tant,” he said. “The only prob­lem is putting it on the cur­ricu­lum: that can be the kiss of death.”

Like Schneier, this reminds me of John Allen Pau­los excel­lent ‘man­i­festo’, Innu­mer­acy.