They should have built their houses elsewhere! :mad:
http://news.yahoo.com/ron-paul-no-federal-financial-aid-tornado-victims-102533838.html
QuoteRon Paul: No Federal Financial Aid for Tornado Victims
National JournalBy John Aloysius Farrell | National Journal – 16 hrs ago
Rep. Ron Paul, R-Texas, stood by his libertarian beliefs on Sunday, saying that victims of the violent storms and tornadoes that have battered a band of states in the South and Midwest in recent days should not be given emergency financial aid from the federal government.
"There is no such thing as federal money," Paul said, on CNN's State of the Union. "Federal money is just what they steal from the states and steal from you and me."
"The people who live in tornado alley, just as I live in hurricane alley, they should have insurance," Paul said.
Paul said there was a role for the National Guard to restore order and provide care and shelter in major emergencies, but that the Federal Emergency Management Agency (FEMA) led to nothing but "frustration and anger."
"To say that any accident that happens in the country, send in FEMA, send in the money, the government has all this money—it is totally out of control and it's not efficient," Paul said.
That will get him elected. Psycho
I didn't know the Federal government taxed the states.
Quote from: Razgovory on March 05, 2012, 11:01:29 PM
I didn't know the Federal government taxed the states.
The Federal Government demands tribute, lest it unleash its armada of black helicopters upon its foes!
Quote from: jimmy olsen on March 05, 2012, 11:03:58 PM
Quote from: Razgovory on March 05, 2012, 11:01:29 PM
I didn't know the Federal government taxed the states.
The Federal Government demands tribute, lest it unleash its armada of black helicopters upon its foes!
Oh, they dont hey guys in black uniforms with guns..... :huh:
Well, at least he's philosophically consistent. I wonder what he thinking about flood insurance, which wouldn't exist if not for the feds?
He's a caricature of himself.
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.
For the record, I'm not a libertarian. I think this issue should be solved by mandated property insurance for people living in dangerous areas. But I don't think we should be giving out handouts to people who are taking risks for their own benefit, and then expect help if the risk they took backfires.
This is similar to the situation we are having in CEE with people who chose to gamble on FX by taking mortgages denominated in foreign currencies, especially CHF, and then cry the river and expect the government to bail them out once the exchange rate goes haywire.
So yes I understand Ron Paul and I understand Hamilcar. Like them (I think), I'm a risk averse individual and take my decisions in a way that minimises the risk I may be facing - that's why for example I took a loan denominated in Polish zloty, i.e. the currency I earn my remuneration in, as well. This has its own risks (e.g. increasing base interest rate, as the currency is devaluating) so I'm not willing to pay for someone else's irresponsible behaviour on top of that.
I agree with Marty.
I agree with Marty! :blink:
My libertarianism aside, I even think that his mandatory insurance idea could be a solution.
And the CHF loan issue hits home. The government here has been forcing extreme measures on the banks to basically bail out the CHF mortgages at the costs of the banks - which at the end means that irresponsible, reckless risk taking proved to be a fail-safe idea with excellent profits, compared to the poor suckers who were thinking ahead and kept moderation in their loan-taking.
NOT the example you build a society or economy on.
Fortunately, here the government has largely resisted the populist urge to suck up to CHF borrowers. The only measure they introduced (and which I think is pretty reasonable) is that they allowed borrowers to repay their loan directly in the foreign currency, rather than in PLN, according to the exchange rate used by the bank. So people can e.g. stock up on CHF or EUR when the exchange rate is fine, and then use it to repay the loan to the bank in that (as opposed to using the often above market exchange rate the bank is applying at the time the loan is being repaid).
The Polish financial markets watchdog has also issued an instruction to the banks that they should significantly reduce the number of loans given in foreign currencies.
What ours did was to arbitarily determine an exchange rate on which the CHF borrowers could repay their loan (in HUF) in a lump sum.
The funny thing about this is that a LOT of people used this opportunity. TONS of money just suddenly appeared in the population out of nowhere as far as the tax and bank records are concerned. The government didn't want to sabotage it's own measure so there was a promise that the tax authority would not follow up on this ridicoulously obvious leads. Official line is that the people used their savings, but the amount of savings in banks did not decrease by any amount of significance.
There aren't really any areas not susceptible to one type of natural disaster or another.
Quote from: Peter Wiggin on March 06, 2012, 05:04:07 AM
There aren't really any areas not susceptible to one type of natural disaster or another.
Yeah, there are few areas that aren't susceptible to twisters.
I wonder what Ron Paul thinks of fire departments.
Quote from: Razgovory on March 06, 2012, 05:17:34 AM
I wonder what Ron Paul thinks of fire departments.
He probably thinks they do a good job of putting out fires.
Quote from: Martinus on March 06, 2012, 04:20:53 AM
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.
Has you civilization not discovered the mysteries of "insurance" yet Mono? :hmm:
Quote from: Admiral Yi on March 06, 2012, 05:19:21 AM
Quote from: Razgovory on March 06, 2012, 05:17:34 AM
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.
Quote from: Admiral Yi on March 06, 2012, 05:38:34 AM
Has you civilization not discovered the mysteries of "insurance" yet Mono? :hmm:
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.
Quote from: Monoriu on March 06, 2012, 05:57:14 AM
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.
Quote from: Admiral Yi on March 06, 2012, 06:03:54 AM
Quote from: Monoriu on March 06, 2012, 05:57:14 AM
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.
Quote from: Monoriu on March 06, 2012, 06:23:24 AM
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.
Quote from: Monoriu on March 06, 2012, 06:23:24 AM
Quote from: Admiral Yi on March 06, 2012, 06:03:54 AM
Quote from: Monoriu on March 06, 2012, 05:57:14 AM
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.
:unsure:
Quote from: Admiral Yi on March 06, 2012, 06:25:57 AM
Quote from: Monoriu on March 06, 2012, 06:23:24 AM
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.
Quote from: Martinus on March 06, 2012, 04:20:53 AM
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.
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.
Quote from: Monoriu on March 06, 2012, 06:31:33 AM
I don't even think we know the frequency sufficiently well.
Why do you think this?
Quote from: Admiral Yi on March 06, 2012, 06:36:50 AM
Quote from: Monoriu on March 06, 2012, 06:31:33 AM
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?
Quote from: Monoriu on March 06, 2012, 06:40:15 AM
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?
How do you know that major disasters don't happen too often? :lol:
We should get rid of fire departments, too. And community hospitals. Get your own fire hoses and paramedic kits.
Quote from: CountDeMoney on March 06, 2012, 07:15:52 AM
We should get rid of fire departments, too. And community hospitals. Get your own fire hoses and paramedic kits.
Beat you to it.
Quote from: CountDeMoney on March 06, 2012, 07:15:52 AM
We should get rid of fire departments, too. And community hospitals. Get your own fire hoses and paramedic kits.
It is sooo not the same thing.
Quote from: Tamas on March 06, 2012, 07:24:34 AM
Quote from: CountDeMoney on March 06, 2012, 07:15:52 AM
We should get rid of fire departments, too. And community hospitals. Get your own fire hoses and paramedic kits.
It is sooo not the same thing.
Why not? It's a case where government is being used to solve personal problems.
Quote from: Razgovory on March 06, 2012, 07:25:37 AM
Why not? It's a case where government is being used to solve personal problems.
So is the National Guard helping preserve order and helping people to shelter, which Paul claims to be in favor of.
Quote from: Tamas on March 06, 2012, 07:24:34 AM
Quote from: CountDeMoney on March 06, 2012, 07:15:52 AM
We should get rid of fire departments, too. And community hospitals. Get your own fire hoses and paramedic kits.
It is sooo not the same thing.
Sure it is. Organized, pooled assets for collective assistance and security within a community. Local, municipal, state, federal. It's what we do.
Quote from: Admiral Yi on March 06, 2012, 07:27:07 AM
Quote from: Razgovory on March 06, 2012, 07:25:37 AM
Why not? It's a case where government is being used to solve personal problems.
So is the National Guard helping preserve order and helping people to shelter, which Paul claims to be in favor of.
National Guardmen are state entities, not federal.
Quote from: CountDeMoney on March 06, 2012, 07:27:59 AM
Sure it is. Organized, pooled assets for collective assistance and security within a community. Local, municipal, state, federal. It's what we do.
The tragedy of the commons.
Quote from: Admiral Yi on March 06, 2012, 07:29:41 AM
Quote from: CountDeMoney on March 06, 2012, 07:27:59 AM
Sure it is. Organized, pooled assets for collective assistance and security within a community. Local, municipal, state, federal. It's what we do.
The tragedy of the commons.
No, you are.
Quote from: Admiral Yi on March 06, 2012, 07:27:07 AM
Quote from: Razgovory on March 06, 2012, 07:25:37 AM
Why not? It's a case where government is being used to solve personal problems.
So is the National Guard helping preserve order and helping people to shelter, which Paul claims to be in favor of.
So is bailouts and government assistance. So maybe he ain't so consistent after all. Or maybe SSI employees should carry guns and have uniforms. Maybe that makes the difference.
Quote from: Admiral Yi on March 06, 2012, 07:29:41 AM
Quote from: CountDeMoney on March 06, 2012, 07:27:59 AM
Sure it is. Organized, pooled assets for collective assistance and security within a community. Local, municipal, state, federal. It's what we do.
The tragedy of the commons.
Is that really what you want to invoke? The danger of unregulated resources taken by private actors? As far as I know, organized, pooled assets are regulated by definition.
Quote from: Razgovory on March 06, 2012, 07:44:01 AM
Is that really what you want to invoke? The danger of unregulated resources taken by private actors? As far as I know, organized, pooled assets are regulated by definition.
Really!
The tragedy of the commons is not that of unregulated resources taken by private actors, it's the overuse of commonly held assets.
And who is overusing the community assets? Private individuals. And the commons are assumed to be unregulated. Like you know, grass or fish in the sea. In fact the guy who coined the phrase later lamented he should have called it "The tragedy of the unregulated commons.
Quote from: Admiral Yi on March 06, 2012, 07:46:04 AM
Really!
(https://languish.org/forums/proxy.php?request=http%3A%2F%2F2.bp.blogspot.com%2F_tLBb6JUxq6o%2FTNnsO7Xn_eI%2FAAAAAAAAAls%2FT41oHbJXSRI%2Fs1600%2FREALLY_SNL_AIG_flv.jpg&hash=d19188cf4362d0301e377897dbeb4f37349fbdf3)
Quote from: Razgovory on March 06, 2012, 07:50:14 AM
And who is overusing the community assets? Private individuals. And the commons are assumed to be unregulated. Like you know, grass or fish in the sea. In fact the guy who coined the phrase later lamented he should have called it "The tragedy of the unregulated commons.
A reasonable point Raz. But the fact is FEMA does not regulate the commons when it comes to tornado relief.
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
Quote from: Admiral Yi on March 06, 2012, 07:57:05 AM
Quote from: Razgovory on March 06, 2012, 07:50:14 AM
And who is overusing the community assets? Private individuals. And the commons are assumed to be unregulated. Like you know, grass or fish in the sea. In fact the guy who coined the phrase later lamented he should have called it "The tragedy of the unregulated commons.
A reasonable point Raz. But the fact is FEMA does not regulate the commons when it comes to tornado relief.
They don't? Okay, you lost me. What does "The commons" mean for you here? I thought you talking about government resources. If that's so, I'm fairly sure that they have a bureaucracy to allocate those resources.
Quote from: Tamas on March 06, 2012, 08:07:18 AM
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
They are still expending public resources to save a private individual or their property. It need not be relegated to bailouts.
Quote from: Razgovory on March 06, 2012, 08:11:28 AM
Quote from: Tamas on March 06, 2012, 08:07:18 AM
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
They are still expending public resources to save a private individual or their property. It need not be relegated to bailouts.
But you do see why you can simultaneously support the idea of state-sponsored firefighters, while dismiss the idea of lack of insurance leading to a state bailout, right?
Quote from: Tamas on March 06, 2012, 08:21:06 AM
Quote from: Razgovory on March 06, 2012, 08:11:28 AM
Quote from: Tamas on March 06, 2012, 08:07:18 AM
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
They are still expending public resources to save a private individual or their property. It need not be relegated to bailouts.
But you do see why you can simultaneously support the idea of state-sponsored firefighters, while dismiss the idea of lack of insurance leading to a state bailout, right?
Yes, you could be inconsistent. Or I could be reading this wrong.
Quote from: Razgovory on March 06, 2012, 08:09:47 AM
They don't? Okay, you lost me. What does "The commons" mean for you here? I thought you talking about government resources. If that's so, I'm fairly sure that they have a bureaucracy to allocate those resources.
I think we have a legislature that allocates those resources, hence this thread.
What does a "regulated commons" mean to you Raz? If 40 people decide at the same time to pasture their sheep on the commons is an example of a regulated commons?
Quote from: Razgovory on March 06, 2012, 08:23:30 AM
Quote from: Tamas on March 06, 2012, 08:21:06 AM
Quote from: Razgovory on March 06, 2012, 08:11:28 AM
Quote from: Tamas on March 06, 2012, 08:07:18 AM
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
They are still expending public resources to save a private individual or their property. It need not be relegated to bailouts.
But you do see why you can simultaneously support the idea of state-sponsored firefighters, while dismiss the idea of lack of insurance leading to a state bailout, right?
Yes, you could be inconsistent. Or I could be reading this wrong.
Ok Raz. Whatever.
Quote from: Admiral Yi on March 06, 2012, 08:26:55 AM
Quote from: Razgovory on March 06, 2012, 08:09:47 AM
They don't? Okay, you lost me. What does "The commons" mean for you here? I thought you talking about government resources. If that's so, I'm fairly sure that they have a bureaucracy to allocate those resources.
I think we have a legislature that allocates those resources, hence this thread.
What does a "regulated commons" mean to you Raz? If 40 people decide at the same time to pasture their sheep on the commons is an example of a regulated commons?
I thought regulated commons in this case meant resources. FEMA can allocated resources to different places. That's part of their job. Congress allocates resources to FEMA.
A regulated common to me is say a pasture which is not owned by anyone or owned collectively but restrictions are put on how it can be used. For instance the Shepard can only put so many sheep on the pasture at once. The 40 shepherd can only put say 4 sheep apiec on the pasture as oppose to the unregulated common where they can put as many as they want. The tragedy of the commons is when the shepherds put more and more animals on the pasture degrading it's quality. Each sheep a person puts on commons provides more profit to that shepherd which is enjoyed solely by him at the cost of a small the degradation of the pasture which is felt by everyone. Because the individual makes a net gain from each sheep he puts in the pasture he keeps putting sheep on pasture, as does everyone else. It is the rational self-interested thing to do. However, the sheep will eventually degrade the pasture to the point where it is useless, and everyone's sheep dies. Thus the tragedy. Everyone is acting in an enlightened self-interested and rational way and in doing so eventually destroy themselves.
Quote from: Tamas on March 06, 2012, 08:34:11 AM
Ok Raz. Whatever.
Why do you regard not buying insurance differently then say not buying smoke detectors, fire escapes and fire extinguishers? Both are failures to prepare.
Quote from: Razgovory on March 06, 2012, 08:43:48 AM
I thought regulated commons in this case meant resources. FEMA can allocated resources to different places. That's part of their job. Congress allocates resources to FEMA.
A regulated common to me is say a pasture which is not owned by anyone or owned collectively but restrictions are put on how it can be used. For instance the Shepard can only put so many sheep on the pasture at once. The 40 shepherd can only put say 4 sheep apiec on the pasture as oppose to the unregulated common where they can put as many as they want. The tragedy of the commons is when the shepherds put more and more animals on the pasture degrading it's quality. Each sheep a person puts on commons provides more profit to that shepherd which is enjoyed solely by him at the cost of a small the degradation of the pasture which is felt by everyone. Because the individual makes a net gain from each sheep he puts in the pasture he keeps putting sheep on pasture, as does everyone else. It is the rational self-interested thing to do. However, the sheep will eventually degrade the pasture to the point where it is useless, and everyone's sheep dies. Thus the tragedy. Everyone is acting in an enlightened self-interested and rational way and in doing so eventually destroy themselves.
Bravo Raz!
Now please tell me what FEMA does that is the equivalent of limiting each shepherd to 4 sheep.
Uh, they are the ones who decide who gets what money. They aren't just flying overhead dropping hundred dollar bills. They have requirements on who can get what money (or food or water, or labor or whatever) and how. That's regulation of the resource.
Quote from: Razgovory on March 06, 2012, 08:47:37 AM
Quote from: Tamas on March 06, 2012, 08:34:11 AM
Ok Raz. Whatever.
Why do you regard not buying insurance differently then say not buying smoke detectors, fire escapes and fire extinguishers? Both are failures to prepare.
In the civilized world sites with high risk of fire or high risk to life in case of fire already pay a premium to be in compliance with more stringent regulations. They need more elaborated plans, much more expensive materials and equipment and specialized staff.
Quote from: Admiral Yi on March 06, 2012, 08:50:07 AM
Now please tell me what FEMA does that is the equivalent of limiting each shepherd to 4 sheep.
Only those people who have suffered through a natural disaster are entitled to aid?
Having said that, not really sure what any of this has to do with the commons.
Quote from: Razgovory on March 06, 2012, 08:54:52 AM
Uh, they are the ones who decide who gets what money. They aren't just flying overhead dropping hundred dollar bills. They have requirements on who can get what money (or food or water, or labor or whatever) and how. That's regulation of the resource.
If I were to say that everyone who's last name begins with the letters A-M can pasture as many sheep as they want on the commons, that would be regulation too. But it wouldn't avoid the tragedy of the commons.
America should get rid of it's nuclear deterrent, it would be far more efficient if everyone was obliged to take out an insurance policy against nuclear blackmail or WW3. :cool:
Quote from: Admiral Yi on March 06, 2012, 08:57:21 AM
Quote from: Razgovory on March 06, 2012, 08:54:52 AM
Uh, they are the ones who decide who gets what money. They aren't just flying overhead dropping hundred dollar bills. They have requirements on who can get what money (or food or water, or labor or whatever) and how. That's regulation of the resource.
If I were to say that everyone who's last name begins with the letters A-M can pasture as many sheep as they want on the commons, that would be regulation too. But it wouldn't avoid the tragedy of the commons.
Yes, that is true. It assumed that regulations enacted are pertinent to the subject or attempt to address the problem. I kinda thought that would have been obvious to you.
Is this some kind of trick?
Quote from: Monoriu on March 06, 2012, 06:40:15 AM
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?
Mono, those estimations are not only possible, but already done. That's how regulators decide, for example, how big an earthquake a new nuclear power station or dam has to be able to withstand.
Quote from: Razgovory on March 06, 2012, 09:02:13 AM
Yes, that is true. It assumed that regulations enacted are pertinent to the subject or attempt to address the problem. I kinda thought that would have been obvious to you.
Is this some kind of trick?
Regulation of the commons attempt to align the individual's interests with the interests of the group. Handing out money to people who have lost property because of natural disaster doesn't do that. It disincentivizes people from hedging their own risks, as Marty pointed out on page one.
Quote from: Iormlund on March 06, 2012, 09:07:32 AM
Quote from: Monoriu on March 06, 2012, 06:40:15 AM
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?
Mono, those estimations are not only possible, but already done. That's how regulators decide, for example, how big an earthquake a new nuclear power station or dam has to be able to withstand.
And Fukushima must be a shining example of the accuracy of those estimations, I assume?
Quote from: Admiral Yi on March 06, 2012, 09:16:34 AM
Quote from: Razgovory on March 06, 2012, 09:02:13 AM
Yes, that is true. It assumed that regulations enacted are pertinent to the subject or attempt to address the problem. I kinda thought that would have been obvious to you.
Is this some kind of trick?
Regulation of the commons attempt to align the individual's interests with the interests of the group. Handing out money to people who have lost property because of natural disaster doesn't do that. It disincentivizes people from hedging their own risks, as Marty pointed out on page one.
Having lots of homeless people isn't in the disinterest of the group? I strongly suspect that people have a disincentive to not have their home destroyed by Tornadoes even with FEMA. I really don't think of living in Ohio as reckless risk taking.
Quote from: Monoriu on March 06, 2012, 09:23:53 AM
And Fukushima must be a shining example of the accuracy of those estimations, I assume?
No building is suppossed to withstand every event. That's impossible. IIRC critical sites here have to survive the biggest quake in the region in the last X hundred years.
In any case, AFAIK in Fukushima the builders failed to notice that a big enough tsunami could take out every redundant system at the same time. It was a design failure.
Quote from: Iormlund on March 06, 2012, 09:28:34 AM
Quote from: Monoriu on March 06, 2012, 09:23:53 AM
And Fukushima must be a shining example of the accuracy of those estimations, I assume?
No building is suppossed to withstand every event. That's impossible. IIRC critical sites here have to survive the biggest quake in the region in the last X hundred years.
In any case, AFAIK in Fukushima the builders failed to notice that a big enough tsunami could take out every redundant system at the same time. It was a design failure.
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
Quote from: Caliga on March 06, 2012, 06:33:11 AM
Quote from: Martinus on March 06, 2012, 04:20:53 AM
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.
Assuming this is true, wouldn't "mandatory tornado insurance" look a lot like "property tax"? :hmm:
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
Yeah, and it's happened once in half a century. That's not exactly a bad run.
Quote from: Iormlund on March 06, 2012, 09:36:37 AM
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
Yeah, and it's happened once in half a century. That's not exactly a bad run.
What about the financial crisis of 2008? The financial people failed to calculate the risks of a collaspe in the US housing market. What about Greece? The creditors failed to put the right price on their bonds. The list goes on. People miscalculate risks all the time.
Quote from: Malthus on March 06, 2012, 09:35:46 AM
Assuming this is true, wouldn't "mandatory tornado insurance" look a lot like "property tax"? :hmm:
Yes, but the sweet, sweet money stays away from the damn government.
Quote from: Razgovory on March 06, 2012, 09:25:21 AM
Having lots of homeless people isn't in the disinterest of the group? I strongly suspect that people have a disincentive to not have their home destroyed by Tornadoes even with FEMA. I really don't think of living in Ohio as reckless risk taking.
The disincentive is in buying insurance.
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Quote from: Iormlund on March 06, 2012, 09:28:34 AM
Quote from: Monoriu on March 06, 2012, 09:23:53 AM
And Fukushima must be a shining example of the accuracy of those estimations, I assume?
No building is suppossed to withstand every event. That's impossible. IIRC critical sites here have to survive the biggest quake in the region in the last X hundred years.
In any case, AFAIK in Fukushima the builders failed to notice that a big enough tsunami could take out every redundant system at the same time. It was a design failure.
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
You can't out-engineer Mother Nature, goof.
Quote from: PDH on March 06, 2012, 09:42:07 AM
Quote from: Malthus on March 06, 2012, 09:35:46 AM
Assuming this is true, wouldn't "mandatory tornado insurance" look a lot like "property tax"? :hmm:
Yes, but the sweet, sweet money stays away from the damn government.
Well, yes and no, because replacing government programs with mandatory contracts requires someone to establish standards and enforce the contracts ... of course, while some of that sweet, sweet money goes to governments in the form of judges, baliffs, regulators and the like, more of it is going to lawyers.
So there *is* an upside to the plan. :D
Quote from: Monoriu on March 06, 2012, 09:39:49 AM
What about the financial crisis of 2008? The financial people failed to calculate the risks of a collaspe in the US housing market. What about Greece? The creditors failed to put the right price on their bonds. The list goes on. People miscalculate risks all the time.
Which is why we call it taking a risk instead of a sure thing.
Quote from: PDH on March 06, 2012, 09:42:07 AM
Quote from: Malthus on March 06, 2012, 09:35:46 AM
Assuming this is true, wouldn't "mandatory tornado insurance" look a lot like "property tax"? :hmm:
Yes, but the sweet, sweet money stays away from the damn government.
And into the hands of the private sector, which is so much more accountable.
Quote from: Iormlund on March 06, 2012, 09:47:00 AM
Quote from: Monoriu on March 06, 2012, 09:39:49 AM
What about the financial crisis of 2008? The financial people failed to calculate the risks of a collaspe in the US housing market. What about Greece? The creditors failed to put the right price on their bonds. The list goes on. People miscalculate risks all the time.
Which is why we call it taking a risk instead of a sure thing.
But the whole point of insurance is to manage risks. In order to do that, it is necessary to know the risks involved fairly reliably. Otherwise, there will be mispricing in the insurance contracts. Or the contracts won't take place in the first place. I love the idea of insurance against natural disasters. But I can't convince myself how that works.
Quote from: CountDeMoney on March 06, 2012, 09:47:51 AM
Quote from: PDH on March 06, 2012, 09:42:07 AM
Quote from: Malthus on March 06, 2012, 09:35:46 AM
Assuming this is true, wouldn't "mandatory tornado insurance" look a lot like "property tax"? :hmm:
Yes, but the sweet, sweet money stays away from the damn government.
And into the hands of the private sector, which is so much more accountable.
Well, look on the bright side: it is bound to increase litigation. :D
Quote from: Razgovory on March 06, 2012, 06:34:12 AM
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.
Funny enough, that is exactly what happens in real life.
Which is why flood insurance is provided via a government program, the National Flood Insurance Program.
Quote from: Monoriu on March 06, 2012, 09:51:49 AM
But the whole point of insurance is to manage risks. In order to do that, it is necessary to know the risks involved fairly reliably. Otherwise, there will be mispricing in the insurance contracts. Or the contracts won't take place in the first place. I love the idea of insurance against natural disasters. But I can't convince myself how that works.
I said nothing of commercial insurance for disaster-prone areas. That's silly. No company will want to provide it, just like no sane insurer would admit me in a health plan.
I just said those estimations are already done. And for the most part, work fairly well.
Quote from: Razgovory on March 06, 2012, 08:11:28 AM
Quote from: Tamas on March 06, 2012, 08:07:18 AM
the firemen example would stand if the fire department would buy a new house to replace the burned ones. Guess what, it doesn't.
They are still expending public resources to save a private individual or their property. It need not be relegated to bailouts.
I was typing a post but then I realized it's you, so I am not even going to waste a single minute on "arguing" with you.
Quote from: Monoriu on March 06, 2012, 09:39:49 AM
Quote from: Iormlund on March 06, 2012, 09:36:37 AM
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
Yeah, and it's happened once in half a century. That's not exactly a bad run.
What about the financial crisis of 2008? The financial people failed to calculate the risks of a collaspe in the US housing market. What about Greece? The creditors failed to put the right price on their bonds. The list goes on. People miscalculate risks all the time.
Only because risk predictions are sometimes wrong, that does not mean they are pointless. Of all people, I thought you would be more educated and bureaucratically inclined to realize that.
Incidentally, some risks (like Fukushima) are so unlikely, they are not really worth to protect against on a cost-benefit basis. It's like the snow paralyzing Heathrow from time to time - it's cheaper to close down the airport for 2-3 days once every few years than to invest into an expensive defrosting system, for example.
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
There are a couple of factors here to consider. One is that this is as close to a worst case scenario as far as what can happen to a nuclear reactor apart from an even more cataclysmic series of events (hurricane hitting at the same time, direct meteor strike or volcano). Second, there were design changes and safety violations at the plant which made recovery more difficult.
See this from the wiki article:
QuoteOn request of the Japan Broadcasting Corporation, on 2 October 2011 the Japanese Government released a report of TEPCO to NISA. These papers proved that TEPCO was well aware of the possibility that the plant could be hit by a tsunami with waves far higher than the 5.7 meters which the plant was designed to withstand. Simulations done in 2008, based on the destruction caused by the 1896-earthquake in this area, made it clear that waves between 8.4 and 10.2 meters could overflow the plant. Three years later the report was sent to NISA, where it arrived on the 7 March 2011, just 4 days before the plant was hit by the tsunami. Further studies by scientists and an examination of the plant's tsunami resistance measures were not planned by TEPCO before April 2011, and no further actions were planned to deal with this subject before October 2012. TEPCO official Junichi Matsumoto said that the company did not feel the need to take prompt action on the estimates, which were still tentative calculations in the research stage. An official of NISA said that these results should have been made public by TEPCO, and that the firm should have taken measures right away.[57][58]
This all was in sharp contrast with the events at the Tōkai Nuclear Power Plant where the dike around the plant was raised to 6.1 meters after evaluations showed the possibility of tsunami-waves higher than previously expected. Although the dike was not completely finished at 11 March 2011, the plant could ride out the tsunami, even though the external power-sources in Tokai were lost too. With two (of three) functioning sea-water-pumps and the emergency diesel-generator the reactor could be kept safely in cold shutdown.
It wasn't the designers that failed to properly appreciate the risks, it was the company that decided not to make the necessary changes based on new evidence on the risks.
Quote from: The Minsky Moment on March 06, 2012, 10:02:52 AM
Funny enough, that is exactly what happens in real life.
Which is why flood insurance is provided via a government program, the National Flood Insurance Program.
So you are saying that forcing the government out and allowing the private sector in would result in a need for the government in because the private sectors wanted out?
Quote from: PDH on March 06, 2012, 10:57:27 AM
Quote from: The Minsky Moment on March 06, 2012, 10:02:52 AM
Funny enough, that is exactly what happens in real life.
Which is why flood insurance is provided via a government program, the National Flood Insurance Program.
So you are saying that forcing the government out and allowing the private sector in would result in a need for the government in because the private sectors wanted out?
The government doesn't need to be "forced out". Any private insurer who wishes could offer coverage now. They don't and they won't. And history suggests that if the government exits that market, private insurance won't come in.
I was taking the Paulist line :)
Force the Government out of our lives!
Quote from: frunk on March 06, 2012, 10:45:25 AM
Quote from: Monoriu on March 06, 2012, 09:33:52 AM
Exactly. Design failures are possible because the designers failed to calculate the risks accurately.
There are a couple of factors here to consider. One is that this is as close to a worst case scenario as far as what can happen to a nuclear reactor apart from an even more cataclysmic series of events (hurricane hitting at the same time, direct meteor strike or volcano). Second, there were design changes and safety violations at the plant which made recovery more difficult.
See this from the wiki article:
QuoteOn request of the Japan Broadcasting Corporation, on 2 October 2011 the Japanese Government released a report of TEPCO to NISA. These papers proved that TEPCO was well aware of the possibility that the plant could be hit by a tsunami with waves far higher than the 5.7 meters which the plant was designed to withstand. Simulations done in 2008, based on the destruction caused by the 1896-earthquake in this area, made it clear that waves between 8.4 and 10.2 meters could overflow the plant. Three years later the report was sent to NISA, where it arrived on the 7 March 2011, just 4 days before the plant was hit by the tsunami. Further studies by scientists and an examination of the plant's tsunami resistance measures were not planned by TEPCO before April 2011, and no further actions were planned to deal with this subject before October 2012. TEPCO official Junichi Matsumoto said that the company did not feel the need to take prompt action on the estimates, which were still tentative calculations in the research stage. An official of NISA said that these results should have been made public by TEPCO, and that the firm should have taken measures right away.[57][58]
This all was in sharp contrast with the events at the Tōkai Nuclear Power Plant where the dike around the plant was raised to 6.1 meters after evaluations showed the possibility of tsunami-waves higher than previously expected. Although the dike was not completely finished at 11 March 2011, the plant could ride out the tsunami, even though the external power-sources in Tokai were lost too. With two (of three) functioning sea-water-pumps and the emergency diesel-generator the reactor could be kept safely in cold shutdown.
It wasn't the designers that failed to properly appreciate the risks, it was the company that decided not to make the necessary changes based on new evidence on the risks.
But that says the new evidence was in their hands 4 days before the earthquake - hardly enough time to do anything. They didn't "decide" not to do anything, they simply didn't decide anything yet.
That is the nature of risk assessment - and when it comes to once in a century level of disasters, there generally isn't much urgency until it is too late.
There seems to be this idea that if only all the risks are evaluated properly, bad things simply won't happen at all. That is not at all true, rather if you evaluate risks properly, you may very well decide the risk is not great enough to justify the cost of mitigating it.
And what does it mean to evaluate risk "properly" anyway? If the current data suggests that the odds of something happening in a given year are 1 in 10,000, then it happens, and someone finds out that the data was wrong, does that mean the risk was improperly evaluated? Not really - it may very well have been correct given what was known. But evaluating risk like odds of an earthquake is always based on data that is incomplete, so there is the risk of your risk being wrong.
Paul is sort of correct, and sort of wrong. We do need a FEMA, but not to deal with risks that are well understood, like the odds you house gets crushed by a tornado. We need them to deal with risks that are NOT well understood, or low enough that they won't be accounted for in any reasonable assessment, not to mention damage to public property that could very well be out of the capability of local resources to handle.
I completely agree with him that it is not the job of the federal government to rebuild your house when it gets wiped out by a natural disaster you could very well have simply purchased insurance for.
Flood insurance is another matter however - there the risk to insurance companies is high enough that it is simply not viable for them to sell insurance. Therefore as a society we have to decide if we want to take on that cost ourselves, or live with the idea that large portions of otherwise pretty nice parts of the country should not be considered habitable. I think it is reasonable to accept that risk, and I welcome anyone who wishes to take advantage of the cost savings a federal flood insurance program creates to live in flood prone areas to take advantage of it. I will pass.
Quote from: The Minsky Moment on March 06, 2012, 10:59:40 AMThey don't and they won't. And history suggests that if the government exits that market, private insurance won't come in.
Out of curiosity--why don't they? Is it not profitable? Just no customers for it?
Quote from: MadImmortalMan on March 06, 2012, 12:07:10 PM
Quote from: The Minsky Moment on March 06, 2012, 10:59:40 AMThey don't and they won't. And history suggests that if the government exits that market, private insurance won't come in.
Out of curiosity--why don't they? Is it not profitable? Just no customers for it?
Not profitable. Those floods are pretty regular.
My understanding is the private flood insurance market failed precisely because of the federal moral hazard. People were unwilling to buy because of the expectation of being made good by the gubmint. So the government stepped in and offered (subsidized) flood insurance, which I think is also mandatory for people living in flood plains.
Quote from: Berkut on March 06, 2012, 12:04:02 PM
But that says the new evidence was in their hands 4 days before the earthquake - hardly enough time to do anything. They didn't "decide" not to do anything, they simply didn't decide anything yet.
You didn't read the quote correctly. The information on the modeling was available to the company three years before the accident, but wasn't released to the government until 4 days before. At the government run nuclear power plant they had already started making improvements against tsunamis in 2007 based on similar modeling some of which had been done as far back as 2002. The delay of the company in not only responding to new risk assessments but just running them in the first place was the difference.
Quote from: Admiral Yi on March 06, 2012, 12:21:21 PM
My understanding is the private flood insurance market failed precisely because of the federal moral hazard.
No it failed because of adverse selection. the American Insurance Association did a study on the absence of insurance in the mid-1950s and concluded that from the private sector perspective, floods were uninsurable.
Quote from: The Minsky Moment on March 06, 2012, 12:29:58 PM
No it failed because of adverse selection. the American Insurance Association did a study on the absence of insurance in the mid-1950s and concluded that from the private sector perspective, floods were uninsurable.
"There is no risk that is too high, only a premium that is too low."
Lloyds of London
Quote from: Admiral Yi on March 06, 2012, 12:32:58 PM
"There is no risk that is too high, only a premium that is too low."
Lloyds of London
Yeah, and look where that got them.
Quote from: crazy canuck on March 06, 2012, 12:39:09 PM
Yeah, and look where that got them.
They set their premiums too low.
Quote from: Admiral Yi on March 06, 2012, 12:40:33 PM
Quote from: crazy canuck on March 06, 2012, 12:39:09 PM
Yeah, and look where that got them.
They set their premiums too low.
And that is exactly the risk when insurance companies attempt to set a premium on something that is better deemed uninsurable.
Quote from: Martinus on March 06, 2012, 04:20:53 AM
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.
That is actually a good point. :hmm:
Quote from: Peter Wiggin on March 06, 2012, 05:04:07 AM
There aren't really any areas not susceptible to one type of natural disaster or another.
Yes, but some areas are way more succeptible than others to one disaster or another.
I have lived in several areas that are not really subject to natural disasters, at least to the extent that I have no need to carry any kind of insurance to protect against them.
Tucson/Phoenix Arizona, and now Rochester NY. Arizona literally had nothing, and upstate New York has the occasional blizzard, but even the worst blizzard is not going to destroy my house.
Sweden has moose.
Quote from: Tamas on March 06, 2012, 04:43:46 AM
My libertarianism aside, I even think that his mandatory insurance idea could be a solution.
Already exists, at least for flood plains. At least that's what I was taught in mechanics of property transactions.
Quote from: Admiral Yi on March 06, 2012, 12:32:58 PM
"There is no risk that is too high, only a premium that is too low."
Lloyds of London
I am telling you historical facts, you are responding with theory. There may be ways of overcoming or ameliorating adverse selection but IRL private insurance companies either didn't think these would work or thought it too much trouble to bother.
Quote from: Caliga on March 06, 2012, 06:33:11 AM
Quote from: Martinus on March 06, 2012, 04:20:53 AM
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.
Just because a tornado can hit most everywhere in US doesn't mean that every place is prone to them. There are a number of states, mainly in the middle of US, that are far more prone to tornados than other states.
Quote from: Martinus on March 06, 2012, 10:22:31 AM
I was typing a post but then I realized it's you, so I am not even going to waste a single minute on "arguing" with you.
Good idea, It is better to keep silent and be thought a fool than to speak and remove all doubt.
Quote from: Admiral Yi on March 06, 2012, 09:42:19 AM
Quote from: Razgovory on March 06, 2012, 09:25:21 AM
Having lots of homeless people isn't in the disinterest of the group? I strongly suspect that people have a disincentive to not have their home destroyed by Tornadoes even with FEMA. I really don't think of living in Ohio as reckless risk taking.
The disincentive is in buying insurance.
Yeah, FEMA does more then just buying up destroyed property. Hell, I think they help even if you do have insurance.
Quote from: The Minsky Moment on March 06, 2012, 01:28:57 PM
Quote from: Admiral Yi on March 06, 2012, 12:32:58 PM
"There is no risk that is too high, only a premium that is too low."
Lloyds of London
I am telling you historical facts, you are responding with theory. There may be ways of overcoming or ameliorating adverse selection but IRL private insurance companies either didn't think these would work or thought it too much trouble to bother.
Adverse selection is not really a good reason that I can see. If you have adverse selection, it means that insureds know more about the risks than the insurer. That may be the case in health insurance, but it's highly unlikely for property insurance in this day and age. Maybe that was true in 1950ies, but insurance market was extremely uncompetetive and unsophisticated back then.
Local and plot specific factors play a significant role in determining flood risk, likelihood and severity of losses. It may not be impossible insurance companies to create comprehensive databses to track this kind of information, but I would question whether it would be worth the effort in terms of profits to be earned.
Given that the private insurance market had withdrawn from flood insurance for decades at the time the NFIP was put into place, it seems to me the burden is heavily on those who would claim that it would magically fill the gap now if the government withdrew.
Quote from: The Minsky Moment on March 06, 2012, 02:10:23 PM
Local and plot specific factors play a significant role in determining flood risk, likelihood and severity of losses. It may not be impossible insurance companies to create comprehensive databses to track this kind of information, but I would question whether it would be worth the effort in terms of profits to be earned.
Given that the private insurance market had withdrawn from flood insurance for decades at the time the NFIP was put into place, it seems to me the burden is heavily on those who would claim that it would magically fill the gap now if the government withdrew.
We have models now that work at a very fine resolution. Hurricane models can give you address-level results. That wasn't in place 20 years ago.
Are you saying these tech advances may have created an environment where it could actually be done then?
Something that I don't think anyone has mentioned is that relatively rare major disasters that nevertheless destroy communities are difficult to insure through anything but massive insurance companies (and even they will be reluctant in some cases). The odds may be 1-100 that a car will be stolen in Miami in a given year but if one is, a Florida insurance company there will be able to pay for the loss with the proceeds from 99 other policies. However, the odds may be 1-1000 that a major hurricane will destroy a coastal home in Miami, but if one does, the other 999 homes in the community are probably severely damaged too. An insurance company is going to find it difficult to pool the risks that could destroy a city, especially since we organize our insurance companies on a state by state basis.
There is probably something to the idea that flood insurance is mispriced and doesn't sufficiently discourage people from living in floodplains, but that doesn't seem to really apply to tornadoes in my opinion. The chance of a tornado destroying any specific home is remote and the risk is distributed across a large part of the country. The odds of flood damage are concentrated in certain areas that are typically well known to be flood prone.
Ah. So you'd have to be selling policies to people like me who live halfway up a mountain in order to spread the risk out enough.
Quote from: MadImmortalMan on March 06, 2012, 03:27:44 PM
Ah. So you'd have to be selling policies to people like me who live halfway up a mountain in order to spread the risk out enough.
If you are a Florida insurance company, there is really no way to sell enough policies to protect against a major hurricane blasting Miami. The insurance companies got hammered when one did--and now the state government has felt the need to step in as many of the insurance companies pulled out. The next major hurricane in Florida is an insurance disaster waiting to happen--though this time it will be the state that takes it on the chin.
I thought what insurers did in those cases was to spread the risk among other insurers. IIRC here there's also a mechanism where a special fund (I think similar to deposit insurance funds) will step in and assume part of the cost in case of severe circumstances.
Quote from: Iormlund on March 06, 2012, 03:36:55 PM
I thought what insurers did in those cases was to spread the risk among other insurers. IIRC here there's also a mechanism where a special fund (I think similar to deposit insurance funds) will step in and assume part of the cost in case of severe circumstances.
You can reinsure risks.
Quote from: alfred russel on March 06, 2012, 03:35:50 PM
Quote from: MadImmortalMan on March 06, 2012, 03:27:44 PM
Ah. So you'd have to be selling policies to people like me who live halfway up a mountain in order to spread the risk out enough.
If you are a Florida insurance company, there is really no way to sell enough policies to protect against a major hurricane blasting Miami. The insurance companies got hammered when one did--and now the state government has felt the need to step in as many of the insurance companies pulled out. The next major hurricane in Florida is an insurance disaster waiting to happen--though this time it will be the state that takes it on the chin.
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
I would think there would be some that would still buy it. Lots of banks even require you to carry certain types to protect the mortgage collateral.
I think this blaming the victim thing is a bit silly. Cities tend to be built where they are economically useful. It would be difficult to build a City like New Orleans that serves as a port on the Gulf of Mexico and the Mississippi river on top of some mountains in Idaho. Likewise, tornadoes are pretty common in the US. There are few places where they don't strike.
Quote from: PJL on March 06, 2012, 04:02:04 PM
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
Probably second one. For example, the costs of my Crohn's in the last 4 years have amounted to at least € 100k. Any insurer would ask me for a premium impossible to pay in a country with a median salary of just € 13k.
Quote from: alfred russel on March 06, 2012, 03:20:45 PM
Something that I don't think anyone has mentioned is that relatively rare major disasters that nevertheless destroy communities are difficult to insure through anything but massive insurance companies (and even they will be reluctant in some cases). The odds may be 1-100 that a car will be stolen in Miami in a given year but if one is, a Florida insurance company there will be able to pay for the loss with the proceeds from 99 other policies. However, the odds may be 1-1000 that a major hurricane will destroy a coastal home in Miami, but if one does, the other 999 homes in the community are probably severely damaged too. An insurance company is going to find it difficult to pool the risks that could destroy a city, especially since we organize our insurance companies on a state by state basis.
There is probably something to the idea that flood insurance is mispriced and doesn't sufficiently discourage people from living in floodplains, but that doesn't seem to really apply to tornadoes in my opinion. The chance of a tornado destroying any specific home is remote and the risk is distributed across a large part of the country. The odds of flood damage are concentrated in certain areas that are typically well known to be flood prone.
That is a problem, but that's what reinsurance is for.
Quote from: alfred russel on March 06, 2012, 03:35:50 PM
Quote from: MadImmortalMan on March 06, 2012, 03:27:44 PM
Ah. So you'd have to be selling policies to people like me who live halfway up a mountain in order to spread the risk out enough.
If you are a Florida insurance company, there is really no way to sell enough policies to protect against a major hurricane blasting Miami. The insurance companies got hammered when one did--and now the state government has felt the need to step in as many of the insurance companies pulled out. The next major hurricane in Florida is an insurance disaster waiting to happen--though this time it will be the state that takes it on the chin.
Florida is not really an insurance failure, it's an insurance regulation failure. The reason the state of Florida is in insurance business is because they don't let private insurers charge what they think is an appropriate rate.
Quote from: PJL on March 06, 2012, 04:02:04 PM
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
Looks like raising the prices wasn't an option, apparently.
Quote from: PJL on March 06, 2012, 04:02:04 PM
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
You can't just increase insurance rates for personal insurance because you think it's necessary. You need to have the approval of Department of Insurance in most states. Florida's DOI is one of the most restrictive in what it allows insurance companies to charge. Private insurers can't really charge what Florida's DOI allows them, or they would risk their rating, so they have to pull out.
Quote from: Razgovory on March 06, 2012, 04:22:48 PM
Likewise, tornadoes are pretty common in the US. There are few places where they don't strike.
That line has already been refuted. Some areas are more prone to tornadoes than others. Google Tornado Alley. Just because everyone can get into a car accident doesn't mean that someone with 10 DUIs in the last 2 years isn't a higher risk.
Quote from: DGuller on March 06, 2012, 04:53:44 PM
Quote from: Razgovory on March 06, 2012, 04:22:48 PM
Likewise, tornadoes are pretty common in the US. There are few places where they don't strike.
That line has already been refuted. Some areas are more prone to tornadoes than others. Google Tornado Alley. Just because everyone can get into a car accident doesn't mean that someone with 10 DUIs in the last 2 years isn't a higher risk.
I know where Tornado alley is, and it's not in Ohio or Indiana.
Quote from: Razgovory on March 06, 2012, 04:56:55 PM
Quote from: DGuller on March 06, 2012, 04:53:44 PM
Quote from: Razgovory on March 06, 2012, 04:22:48 PM
Likewise, tornadoes are pretty common in the US. There are few places where they don't strike.
That line has already been refuted. Some areas are more prone to tornadoes than others. Google Tornado Alley. Just because everyone can get into a car accident doesn't mean that someone with 10 DUIs in the last 2 years isn't a higher risk.
I know where Tornado alley is, and it's not in Ohio or Indiana.
That's just an example that not every place has the same risk. That's not really what's used in insurance. The first map in the Wiki article is more representative, and it does include Ohio and Indiana as severe tornado risks.
Look Dguller, we can't evacuate the entire central part of the US because to help Insurance premiums. Somebody is going to have to live there.
Quote from: Razgovory on March 06, 2012, 05:18:31 PM
Look Dguller, we can't evacuate the entire central part of the US because to help Insurance premiums. Somebody is going to have to live there.
I'm not saying that you should evacuate, I'm saying that you should pay for the costs of living in a higher risk area rather than be subsidized by the entire country for it. That's how economics work. Sometimes it can't be done by insurance, agreed, but tornado risk has been successfully covered by private insurance for many decades. It's not exactly like nuclear accident insurance.
Quote from: Tamas on March 06, 2012, 04:43:46 AM
I agree with Marty! :blink:
I agree with Marty, Tamas, Guller and Yi :mellow:
I'd err with Marty's idea of mandatory insurance though.
Quote from: Sheilbh on March 06, 2012, 06:01:21 PM
Quote from: Tamas on March 06, 2012, 04:43:46 AM
I agree with Marty! :blink:
I agree with Marty, Tamas, Guller and Yi :mellow:
I'd err with Marty's idea of mandatory insurance though.
You could find better company.
Quote from: DGuller on March 06, 2012, 02:20:27 PM
We have models now that work at a very fine resolution. Hurricane models can give you address-level results. That wasn't in place 20 years ago.
It seems that I stand corrected.
Quote from: DGuller on March 06, 2012, 04:51:15 PM
Quote from: PJL on March 06, 2012, 04:02:04 PM
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
You can't just increase insurance rates for personal insurance because you think it's necessary. You need to have the approval of Department of Insurance in most states. Florida's DOI is one of the most restrictive in what it allows insurance companies to charge. Private insurers can't really charge what Florida's DOI allows them, or they would risk their rating, so they have to pull out.
So really it's a legal problem there than an economic one. Just get rid of the limits to get the insurers back. Problem solved.
I think part of the problem is the US suffers from continental weather, so whilst here, as I live in a river valley, I may get flooded up to a couple of feet, in America whole counties can get inundated at the same time to sometimes tens of feet. It's a different scale of natural disaster.
Similarly we have 'tornadoes' that sometimes knock down a few chimneys and pull off several roofs, but generally no one dies; in the US these are regulars annual events that routinely kill a couple of dozen and chew up whole sections of small towns. It makes 'sense' for the shared sovereignty of government to deal with these eventualities.
Quote from: PJL on March 06, 2012, 07:31:20 PM
Quote from: DGuller on March 06, 2012, 04:51:15 PM
Quote from: PJL on March 06, 2012, 04:02:04 PM
But why did they leave rather than massively increase the prices? Or would have meant that no-one would have bought the insurance anyway?
You can't just increase insurance rates for personal insurance because you think it's necessary. You need to have the approval of Department of Insurance in most states. Florida's DOI is one of the most restrictive in what it allows insurance companies to charge. Private insurers can't really charge what Florida's DOI allows them, or they would risk their rating, so they have to pull out.
So really it's a legal problem there than an economic one. Just get rid of the limits to get the insurers back. Problem solved.
More accurately, the problem is political. If you liberalize the insurance rates, properties on the coast are going to have their rates skyrocket, which would also lead to plunging real estate prices there. Good luck getting re-elected as a Florida governor when you do that. It's much easier to have the state government insure all the high risk properties, and hope that you'll be on your next job when Miami gets hit by a hurricane like when it did in 1926.
Quote from: DGuller on March 06, 2012, 05:21:57 PM
I'm not saying that you should evacuate, I'm saying that you should pay for the costs of living in a higher risk area rather than be subsidized by the entire country for it. That's how economics work. Sometimes it can't be done by insurance, agreed, but tornado risk has been successfully covered by private insurance for many decades. It's not exactly like nuclear accident insurance.
I'm not sure you understand how tornadoes work. Yes, areas like the Ohio Valley are 'higher risk' than say New Jersey because tornadoes are an annual event in the Ohio Valley as opposed to a once-a-decade or less thing in New Jersey. Even so, a typical tornado doesn't do much damage and doesn't kill anyone. Even 'monster' tornadoes like the one in Henryville, which did do damage and did kill people, killed maybe a dozen people in a county where 110,000 people live and destroyed maybe three dozen houses out of (I would guess) 40,000 or so. The media likes to use phrases like "the town is gone" and "the whole town is leveled" but that most certainly did not happen in Henryville, IN, which I know firsthand because as mentioned elsewhere I have a friend who videotaped the tornado and appeared on CNN. Yet, I keep hearing the term bandied about (even in local media) because I imagine it keeps people glued to the TV.
So I guess what I'd argue is that it's kind of disingenuous to say any location in the United States is a "high risk area" for tornadoes because their path of damage, while possibly quite intense, is extremely narrow in focus. I don't think it's at all the kind of risk you can compare to say a major earthquake or a colossal hurricane, and should in no way be assessed as a penalty against someone in terms of insurance premium adjustments. I would guess that no matter where you live in the United States, your chance of losing your house to a tornado is tiny compared to the risk of losing your house to a fire, which obviously could occur anywhere.
Quote from: Caliga on March 06, 2012, 09:09:52 PM
Quote from: DGuller on March 06, 2012, 05:21:57 PM
I'm not saying that you should evacuate, I'm saying that you should pay for the costs of living in a higher risk area rather than be subsidized by the entire country for it. That's how economics work. Sometimes it can't be done by insurance, agreed, but tornado risk has been successfully covered by private insurance for many decades. It's not exactly like nuclear accident insurance.
I'm not sure you understand how tornadoes work. Yes, areas like the Ohio Valley are 'higher risk' than say New Jersey because tornadoes are an annual event in the Ohio Valley as opposed to a once-a-decade or less thing in New Jersey. Even so, a typical tornado doesn't do much damage and doesn't kill anyone. Even 'monster' tornadoes like the one in Henryville, which did do damage and did kill people, killed maybe a dozen people in a county where 110,000 people live and destroyed maybe three dozen houses out of (I would guess) 40,000 or so. The media likes to use phrases like "the town is gone" and "the whole town is leveled" but that most certainly did not happen in Henryville, IN, which I know firsthand because as mentioned elsewhere I have a friend who videotaped the tornado and appeared on CNN. Yet, I keep hearing the term bandied about (even in local media) because I imagine it keeps people glued to the TV.
So I guess what I'd argue is that it's kind of disingenuous to say any location in the United States is a "high risk area" for tornadoes because their path of damage, while possibly quite intense, is extremely narrow in focus. I don't think it's at all the kind of risk you can compare to say a major earthquake or a colossal hurricane, and should in no way be assessed as a penalty against someone in terms of insurance premium adjustments. I would guess that no matter where you live in the United States, your chance of losing your house to a tornado is tiny compared to the risk of losing your house to a fire, which obviously could occur anywhere.
I don't think you understand how insurance works. However tiny the chance of an individual house being destroyed by tornado, it's a lot less tiny in Oklahoma than it is in Rhode Island. Therefore, all else being equal, insurance rates in Oklahoma should be higher than insurance rates in Rhode Island, to reflect the greater possibility of a house being destroyed by tornado. Higher premiums are not "penalties", they're just a reflection of the higher risk and the higher cost of insuring houses.
And, speaking of cost to insure against tornadoes, you're mistaken regarding the chance of losing your house to tornado as opposed to fire. In some of the more tornado-prone states, the loss cost of covering tornado damages is about equal to the loss cost of covering fire damages. Thankfully for insurers, and highly unfortunately for the people, tornados are frequent enough that they can actually be priced fairly accurately based on just experience.
Quote from: Monoriu on March 06, 2012, 09:23:53 AM
Quote from: Iormlund on March 06, 2012, 09:07:32 AM
Quote from: Monoriu on March 06, 2012, 06:40:15 AM
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?
Mono, those estimations are not only possible, but already done. That's how regulators decide, for example, how big an earthquake a new nuclear power station or dam has to be able to withstand.
And Fukushima must be a shining example of the accuracy of those estimations, I assume?
It did survive the earthquake. :contract: