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Lumifer comments on Rationality Quotes April 2014 - LessWrong
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While this is true, it may also be the case that humans in the default state don't take enough risks. Indeed, an inventor or entrepreneur bears all the costs of bankruptcy but captures only some of the benefits of a new business. By classical economic logic, then, risk-taking is a public good, and undersupplied. Which said, admittedly, not all risk-taking is created equal.
That's exactly wrong. Bankruptcy releases the entrepreneur from his obligations and transfers the costs to his creditors.
Not to say that the bankruptcy is painless, but its purpose is precisely to lessen the consequences of failure.
The inventor is still bearing the costs of the bankruptcy. The creditors are bearing (some of) the costs of the failure, which is not the same thing.