Risk Neutrality

The Iranian claim that its nuclear program is intended solely for peaceful purposes tends to run into skepticism, due to the conventional wisdom that an oil-exporting nation has no real need for nuclear power. Matt Yglesias imagines that he has debunked this idea:

How much oil a country has is totally unrelated to the desirability of establishing non-oil energy sources, including nuclear plants.
... A country like Iran, especially, where oil is both plentful and owned by the state, can just get oil for free. Superficially, that's a very different situation. Fundamentally, however, the situations are identical.
The reason is that Iran can export a quantity of oil that equals total Iranian production minus domestic consumption. Reducing domestic consumption increases export earnings which increases the amount of non-oil goods you can buy.

Mr. Yglesias is implicitly assuming that nations, and the people inhabiting and ruling them, are risk-neutral and seek only to maximize their expected gain. And under this assumption, his analysis would indeed be correct.

But nations, like people, tend to be risk-averse. For good reason: extra risk means extra economic uncertainty, which leads to more conservative and less accurate asset allocation, decreasing wealth in the medium term. A nation like Japan decreases its economic risk by investing in nuclear power; a nation like Iran increases it. Thus the conventional wisdom, however boring, is right.

[Update: JW Mason makes the same point in Mr. Yglesias's comments, and is attacked by people who cannot distinguish between reducing risk and eliminating it.]