674 TRANSACTIONS OP SECTION F* 



the direct incidence of which must be borne by the individual, the action of the 

 community being confined to such indirect measures as may strengthen the power 

 of the individual to meet the risk, as, for example, by technical and general 

 training. 



On the other hand, I think that most people would agree that in a country 

 like the United Kingdom at the present time, the incalculable risk of a prolonged 

 depression of trade, due perhaps to some financial catastrophe thousands of miles 

 away, is one the exposure to which of the individual workman does little but 

 harm. Such a risk is too much beyond his powers of foresight, and also too 

 great in magnitude in proportion to his reasonable opportunities of making 

 provision, to exercise any appreciable effect in stimulating self-help, 

 while the liability to see all his savings swept away in a few weeks by 

 cyclical fluctuations in employment which he can do nothing to avoid is a 

 demoralising risk acting on his character precisely like the liability to earthquake 

 or other cataclysm, and discouraging to a marked extent the accumulation of 

 savings and the development and maintenance of habits of providence. 



Between these two extremes, the risk due to personal inefficiency and that 

 resulting from a world-wide depression of trade, lie intermediate classes of risks 

 about which there might be more difference of opinion, and the incidence of 

 which probably acts on national character in very different ways in countries 

 at different stages of development. 



I propose presently to examine more closely some of these classes of risks. 

 At the moment, however, I am only concerned to illustrate my general proposition 

 that neither free adventure nor economic security suffices singly as an ideal of 

 economic conduct without careful discrimination, and that the criterion for such 

 discrimination is the effect of exposure to each class of risk in building up or 

 degrading the national character. 



In suggesting that the attention of economists is being directed and will con- 

 tinue to be directed in an increasing degree to the ends of economic conduct as 

 distinct from a mere analysis and description of existing conditions, I have taken 

 a single example, the pursuit of economic security as an objective, and have 

 drawn a vital distinction between the classes of economic risks exposure to which 

 tends to the building up or to the degradation of the national character. And as 

 regards these risks I have taken a single illustration, that of unemployment, partly 

 because the evils resulting therefrom have been very much in our thoughts during 

 the last few years, partly because their analysis affords good illustrations of 

 almost every class of economic risk. 



I might go on to take other examples, but I think that it may perhaps serve a 

 more useful purpose if during the time that remains to me I follow up in further 

 detail the particular illustration which I have chosen, and inquire specifically how 

 far the risks of unemployment are risks which it is expedient in the public 

 interest that each individual should be left to meet unaided, or how far they are 

 from the social point of view ' insurable risks ' which can properly be met by 

 combined action. 



We shall find that the reply to the proposition is by no means a simple one, that 

 it will differ to a large extent for different trades, and that probably it will also 

 differ widely for different countries. 



At the outset it is to be noted that I use the term ' insurable risk ' for the 

 purpose of this inquiry in a much narrower sense than that which it bears in 

 the ordinary language of the insurance world. Broadly speaking, if the term be 

 used in its widest sense there are no risks that are not insurable except those which 

 are the result of the direct wilful act of the insured person. Thus you can insure 

 against fire but not arson, against death but not suicide. And even with regard to 

 acts which are voluntary the modern tendency is to take a very broad view, and 

 to narrow the classes of cases excluded. Thus most life assurance companies will 

 pay on death, even if due to suicide, provided that the policy was taken out 

 sufficiently long before the death to make it fairly certain that suicide was not in 

 contemplation at the time. 



As I am now using the term 'insurable,' however, I mean not merely a risk 

 in respect of which you could get some company or underwriter to quote you a 

 premium, but a risk for which some sort of social insurance is a practicable and 



