Ron Paul, the Hamilcar of Presidential Candidates

[Razgovory]

I wonder what Ron Paul thinks of fire departments.

[Admiral Yi]

I wonder what Ron Paul thinks of fire departments.

He probably thinks they do a good job of putting out fires.

[Monoriu]

I think he is right. Whether it is going to be popular with the voters is another thing, but you gotta admire the guy for saying unpopular stuff even if it costs him votes.

There is a case for helping victims of extremely unusual, impossible to predict catastrophes, but a choice to live in a flood area or a tornado country usually means you are able to get your property cheaper than in a safer place. This cost discount is offset by the cost you would incurr if you took on the property insurance - or by the risk you take if you do not. If you then expect the taxpayers to cover that risk for you in the event you are hit with a flood/tornado/earthquake, it is moral hazard in its classic form.

Philosophically speaking, I agree with all that.  Let's assume for a second that the voters agree to go along with the above idea of mandatory insurance.  How does the government know which areas are prone to flooding, tornados, and other types of disasters?  How does one figure out the probability of each disaster happening?  Past data is not necessarily an accurate predictor for the future.  Ok, let's assume even further that someone has done the math and figured out the insurance cost of each house.  What if that calculation was wrong?  A major disaster hits, and the insurance pool (or whatever term that should be) is not enough to cover the insurance claims? 

I am not saying that I disagree with your idea.  I just can't figure out how to actually implement it. 

[Admiral Yi]

Has you civilization not discovered the mysteries of "insurance" yet Mono?

[Razgovory]

I wonder what Ron Paul thinks of fire departments.

He probably thinks they do a good job of putting out fires.

I wonder.  They are government.

[Monoriu]

Has you civilization not discovered the mysteries of "insurance" yet Mono?

Well, I'm not an acturary, but I think it takes more than "there should be insurance for this and that!" for an insurance contract to work.  Most fundamentally, you need a price for a trade to happen.  How do you price a natural disaster insurance contract?  That is the question that I ask. 

[Admiral Yi]

Well, I'm not an acturary, but I think it takes more than "there should be insurance for this and that!" for an insurance contract to work.  Most fundamentally, you need a price for a trade to happen.  How do you price a natural disaster insurance contract?  That is the question that I ask.

Experience.  There's tons of historical data on natural disasters.

[Monoriu]

Well, I'm not an acturary, but I think it takes more than "there should be insurance for this and that!" for an insurance contract to work.  Most fundamentally, you need a price for a trade to happen.  How do you price a natural disaster insurance contract?  That is the question that I ask.

Experience.  There's tons of historical data on natural disasters.

We can't accurately predict the occurance of earthquakes, tornados and tsunamis, to name a few examples.  Japan's last major earthquake caught everybody by surprise. 

[Admiral Yi]

We can't accurately predict the occurance of earthquakes, tornados and tsunamis, to name a few examples.  Japan's last major earthquake caught everybody by surprise.

Why in the world would you need to know what day any of those are going to hit?  You just need to know their frequency.

[The Brain]

Well, I'm not an acturary, but I think it takes more than "there should be insurance for this and that!" for an insurance contract to work.  Most fundamentally, you need a price for a trade to happen.  How do you price a natural disaster insurance contract?  That is the question that I ask.

Experience.  There's tons of historical data on natural disasters.

We can't accurately predict the occurance of earthquakes, tornados and tsunamis, to name a few examples.  Japan's last major earthquake caught everybody by surprise.

[Monoriu]

We can't accurately predict the occurance of earthquakes, tornados and tsunamis, to name a few examples.  Japan's last major earthquake caught everybody by surprise.

Why in the world would you need to know what day any of those are going to hit?  You just need to know their frequency.

I don't even think we know the frequency sufficiently well.  If we take a precautionary approach and assume the worst, we'll end up with huge areas being uninhabitable because cost of insurance is too high.  That is inefficiency. 

[Caliga]

but a choice to live in a flood area or a tornado country usually means you are able to get your property cheaper than in a safer place

I agree with most of what you've said but just FYI most of the United States would qualify as "tornado country", so you can't possibly expect people to avoid living in places where tornadoes can strike.  Your reasoning is a lot more apt when applied to people insisting on living in flood plains or on a coastal barrier island in the southern US (where hurricanes strike frequently).  But I believe every state east of the Rockies is prone to tornadoes, and I think they've even happened in California.

[Razgovory]

What if insurance companies just decide they don't want to offer their services to areas where those disasters happen.  You can get flood insurance, but only in the mountains etc.

[Admiral Yi]

I don't even think we know the frequency sufficiently well.

Why do you think this?

[Monoriu]

I don't even think we know the frequency sufficiently well.

Why do you think this?

Because major disasters don't happen too often, so there is not enough data.  Because we still can't predict the occurance of earthquakes.  Because if it works, commercial insurance companies would have done it.

Why do you think there is enough data?