Re: AltInst: Legislation insurance

George L. O'Brien writes:
>Seriously, insurance companies can only insure against statistical risks
>(fires, burglaries, etc.) where history matters. In the case of
>legislation, history only tells you that there is no way to predict
>specific legislation. All you can predict is that there will be more of it.

Financial derivatives and asset management can allow one to insure against
a wide variety of risks for which good historical statistics are unavailable.
And insurance organizations like Lloyds of London have insured people against
many unusual and unrepeated risks. It is true that big insurance companies
prefer to focus on risks with good statistics, but other risks can and are
often insured.

Btw, someone once suggested that the government issue policy-choice insurance,
and then make the policy choice that minimized the insurance payout.
(See Mueller's "Public Choice", p. 69.

Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614

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Received on Thu Apr 23 18:33:22 1998