Americans have long taken pride in their willingness to bet it all on a dream. But that risk-taking spirit appears to be fading. Three long-running trends suggest the U.S. economy has turned soft on risk: Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities.
The changes reflect broader, more permanent shifts, including an aging population and the new dominance of large corporations in many industries. They also may help explain the increasingly sluggish economic recoveries after the past three recessions, experts said.
Companies that gamble on new ideas are more likely to fail, but also more likely to hit it big. Entrepreneurs face long odds, but those that achieve success create jobs for many others. As important, say economists, are small acts of risk-taking: workers who quit their jobs to find better ones, companies that expand payrolls and families that move from sluggish economic regions to ones with low unemployment rates.Multiplied across the U.S. economy, these acts of faith and ambition help speed money, talent and resources to where they are needed.
Of course, too much risk-taking can be dangerous, as the financial crisis showed. And with the stock market soaring, some types of risk are displaying signs of a strong postcrisis rebound. Indeed, the Federal Reserve said it was watching for signs that easy-money policies are leading investors to take excessive risks. But a broad cross section of U.S. economists, from a range of academic disciplines and political persuasions, agree that a specific and necessary kind of risk-taking is on the decline. Historically, risk-taking that supports high rates of churn—lots of hiring and firing, company formation and destruction—gives economies more flexibility to adapt to changing markets.
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