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Comment by alex_smart | Hacker News Reader

This is exactly the why and how of "travel broadens the mind". You only have to visit countries and socities that do not have well-developed financial markets to directly see and appreciate the value financial markets bring to your own society.

Visit a part of the world where most people do not have access to home loans, health insurance etc. and you will not have to ask how mere redistribution of risk and capital adds to productivity ever again. (I happen to have been born one such part of the world.)

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> socities that do not have well-developed financial markets to directly see and appreciate the value financial markets

Which is true, but there's another angle that needs discussing - that of a high-trust society vs low-trust society.

In all places where there are well functioning financial markets, there exists a high trust society. This trust is the foundation on which the financial markets exist.

So in poorer countries where such financial markets don't exist (or don't serve the people), it's not because they've chose not to have it, but that individual actors cannot trust that the system is fair and is rules based. So the problem isn't the lack of financial markets (which is a symptom), but that of a lack of good governance (bad or non-existant laws, corruption etc).

Rural India (unlike urban India) is relatively high trust environment. Everybody knows each other and there are lots of shared ethical values. But they still have to build their houses one brick wall at a time (lack of access to home loans) and be at the risk of financial ruin due to unpredictable life events (lack of access to insurance).

Urban India is a very low trust environment, but people still have access to things like home loans, insurance and capital markets (equity and loans).

> lack of good governance (bad or non-existant laws, corruption etc)

I agree that good governance is a necessity for development of financial markets, but not sure what it has to do with being a high trust or low trust society.

> lack of access to home loans [in rural india]

i would imagine that high trust but only within the village is not really high trust. Anyone outside the village who would've otherwise had the capital to lend to this village would not trust them to repay the loans, and perhaps would also not trust that the authorities would come in to enforce the collection of collateral (and in any case, if you forcibly evicted the original owners of a property for debts, the other villagers are probably not going to let you live there peacefully).

> but not sure what [good governance] has to do with being a high trust or low trust society.

Good governance allows high trust to exist, which allows many other things to exist as a precondition.

> (I happen to have been born one such part of the world.)

Care to elaborate for those of us who never made it out of middle-america?

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