Search Results

Investing in the underserved urban markets is an innovative practice in which institutional investors can enjoy competitive financial returns on their investment while stimulating economic growth in urban communities. Over the last three decades, targeted investment has undergone a paradigm shift from the traditional subsidy-driven model to the market-driven model. In the capital-driven model, institutional investors perceive investing in the underserved urban areas as an overlooked economic opportunity. Public sector pension funds look for ways to maximize their overall investment returns while managing risk. In doing so, they seek alternative investment strategies and increasingly allocate a portion of their portfolio to illiquid, riskier investments in pursuit of higher returns. Key to such sound investments is recognizing and mitigating the financial and political risks to which pension funds, particularly defined benefit pension funds are prone. This chapter deconstructs how pension funds use urban investments to meet their long-term liabilities while also managing risk. It argues that pension funds can use urban investments together with risk management tools to achieve their portfolio diversification requirements, through evidence drawn from over 100 individual interviews with pension fund trustees and officers, investment vehicles, and other stakeholders in examining the targeted investing strategies of the large California, New York, and Massachusetts' public sector pension funds.

This chapter first takes into account the history of financial crises in America, citing financial crises as a regular and often debilitating feature of American life. The lack of a crisis for about 50 years, here, is attributed to the federal government’s active role in managing financial risk. This is a role which began to blossom in 1933 with the passage of the Glass-Steagall Act, which introduced federal deposit insurance, expanded federal supervision of banks, and separated commercial banking from investment banking. Critics of the Glass-Steagall Act, however, cited problems that could have arisen, such as the undermining of the nation’s financial system, or the encouragement of excessive risk taking or “moral hazard.” In the end, private financial institutions and markets cannot always be relied upon to manage risk effectively on their own. As a result, the best way to address the issue is through the identification and systematic regulation of significant financial institutions on an ongoing basis.

In Chapter Five, the area of child protection is considered by using an explicitly positivist approach to the existence of power laws within complex adaptive systems that explains repeated failures to protect children from serious harm and death. The authors argue that historically, reports and inquiries that have examined these failures have taken a linear approach in the analysis of the chronology of service failure, with the result that their recommendations have failed to take account of the dynamic nature of the complex adaptive systems within which these children are embedded. They further argue that an approach based upon complexity suggests that there will be unintended and unpredictable consequences as the tightening of procedures leads to defensive practice and a ‘tick-box’ approach to assessment of risk in the future. Building upon the previous chapters, this raises serious questions about how practitioners use their judgements in managing risk, and also what our understanding of complex adaptive systems says about the inevitability of child deaths in the future.

This chapter applies Benford's law to study how players choose numbers in fixed-odds number lottery games. Empirical data suggests that not all players choose numbers with equal probability in lottery games. Some of them tend to bet on (smaller) numbers that are closely related to events around them (e.g., birthdays, anniversaries, addresses, etc.). In a fixed-odds lottery game, this small-number phenomenon imposes a serious risk on the game operator of a big payout if a very popular number is chosen as the winning number. The chapter quantifies this phenomenon and develops a choice model incorporating a modified Benford's law for lottery players to capture the magnitude of the small-number phenomenon observed in the empirical data.

This chapter situates the current crisis in relation to both capitalism and the era of neoliberalism and finance capitalism, stressing in particular how an era obsessed with managing risks failed to come to terms with “systemic risk.” Figuring prominently in this is the question of what would happen to a highly leveraged financial system if liquidity dried up. In order to make deeper sense of it, the chapter argues that the internal contradictions of capital accumulation should be addressed. Capitalism works in part by repeatedly challenging, transcending, or working around limits, barriers to growth. It suffers temporary crises and regains momentum as limits are overcome. As such, there is potential for a renewed capitalist momentum with China in the forefront, but there is also the possibility of trying to create a new and different kind of economy more directly focused on meeting human needs.