RISK IS UNDESIRABLE to most people, especially risk involving household income. However, for the rural poor in developing countries, fluctuations in income pose a particularly grave danger. Suppose the income of a typical North American family fell abruptly by $1,000. Although certainly unwelcome, it would be of little real consequence, perhaps vacation plans changed from a hotel stay to a camping trip. But an income loss of $1,000 for a rural Central American family would be devastating. It would probably necessitate the sale of assets, such as land, that are crucial to the household's long-term livelihood. It could force the migration of a family member. It might even force a change to a cheaper and less nutritious diet: more tortillas, fewer meats and vegetables.

The irony is that while the consequences of risk are more disastrous in developing countries, risk is also more prevalent. To continue the example, despite a far lower base of wealth, an abrupt $1,000 loss in income is arguably more likely for the rural Central American household than for the household in North America. This may be true for several reasons. First, risk inherently follows the uncertainties that surround rural households in developing countries.