What makes gambling wrong but insurance right? (2017)
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Re: What makes gambling wrong but insurance right? (2017)
#2I'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. Of course, this is 1. Hard to measure and 2. Hard to define "unduly". For example, I believe mortgages are a "good" financial instrument, because they enable people to have homes and roofs over their head without introducing systemic risk... except when done in 2008. The devil is in the details and the implementation, I suppose.
Re: What makes gambling wrong but insurance right? (2017)
#3I'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. Of course, this is 1. Hard to measure and 2. Hard to define "unduly". For example, I believe mortgages are a "good" finan…
> 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?
Re: What makes gambling wrong but insurance right? (2017)
#4Gambling isn't wrong. Gambling is stupid. Hedging risk is not stupid. That's the difference.
Re: What makes gambling wrong but insurance right? (2017)
#5Insurance 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, allows you move your odds from the ends of the bell curve towards the center. If you win, you win a bit less because you have to take into account the Insurance money you spent. If you lose, you lose less because the insurance premiums will kick in.
Basically, insurance is a PID controller.
Re: What makes gambling wrong but insurance right? (2017)
#6Gambling isn't wrong. Gambling is stupid . Hedging risk is not stupid. That's the difference.
Insurance is stupid if you are wealthy enough to cover the damages on your own.
Insurance for your phone, computer etc for example is certainly stupid for most people.
Re: What makes gambling wrong but insurance right? (2017)
#7The difference is that gambling increases the overall variance of outcomes to an individual whereas insurance decreases it. I wouldn't say insurance is a form of gambling but that they are two ends of the same spectrum. The difference in intention is a clear distinction to me.
Re: What makes gambling wrong but insurance right? (2017)
#8I'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. Of course, this is 1. Hard to measure and 2. Hard to define "unduly". For example, I believe mortgages are a "good" finan…
> 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 people don't crash, amortizing that risk out among drivers enables more people to get vehicles and transportation without freak accidents putting people into financial distress.
Re: What makes gambling wrong but insurance right? (2017)
#9[deleted]
Re: What makes gambling wrong but insurance right? (2017)
#10Gambling 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. This could be a reasonable strategy.
I don’t gamble but I see why people do it. The toxic element occurs when the reduction in expected wealth does become enough to produce a qualitative QOL change.