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Insurance is just a form of investment. It seems to me that the primary difference between gambling and investment is that the utility of gambling (the expected return over time) is negative, and the utility of investment is positive. And that's it. In a casino, the gambler is gambling, while the casino is investing.
Earlier quoted context omitted.
> I've always thought that ethically "right" forms of insurance (and other financial products, like equities, futures, etc.) is that they should enable individuals to take actions that are riskier than they would normally be able to, without unduly increasing the aggregate risk of the entire system. What are some examples of an "ethically right" insurance product?
One example that the article gave is how Ghanan farmers couldn't risk to expand or specialize their crops because of the risk of drought. That feels like a need that could viably be met with sensible insurance. One form of insurance I've always been a fan of in the US, at least, is mandatory car insurance. Considering that the cost of a collision can be extraordinarily high for all parties involved, but because most…
We were hit from behind in a car that we did not carry collision insurance on. The at-fault driver is responsible for the repairs and they have mandated insurance to cover that.
Is insurance a zero sum game?
I think...sort of?
Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…
Playing at a casino, I’m almost guaranteed to lose money (unless I’m a very good poker player — the house and I can both win there); if I’m lucky, I can win big. If I buy insurance, I’m almost guaranteed to lose money; if I’m unlucky, I can get reimbursed for losses.
From: The House Always Wins — Casinos and Insurance Companies — https://kriswilliams.medium.com/the-house-always-wins-casino...
Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…
0. https://www.policygenius.com/auto-insurance/what-is-self-ins...
In gambling you expect to come out behind in the average case.
Therefore insurance is rational and gambling is irrational.
I'm trying to figure this out, gambling is a zero sum game. The gamblers are the only ones bringing money to the table, the bookies take a cut, someone loses and someone wins. Is insurance a zero sum game? I think...sort of?
Gambling isn't wrong. Gambling is stupid . Hedging risk is not stupid. That's the difference.
IMO gambling gets a bad reputation by people who only look at the expected value. If you place a bet where the cost is low enough that it won’t make a qualitative difference to your life, and the possible (not expected) reward is such that it would make a qualitative difference in your life, then you might have maximized the probability of achieving that qualitative difference, despite lowering your expected value. T…
No, you have only maximized the probability if you bet all of your money and all of the money you can borrow, beg or steal.