Regular readers know I’m fascinated by Law and Economics theory. Even though some devotees treat it more like a religion than an economic theory, it offers a valuable perspective on the world. The big failing of Law and Economics, however, is that it stands dumbfounded and slack-jawed before examples of irrational behavior, such that it won’t even admit these examples exist. I was therefore interested by this post from the UK about whether insurance itself is irrational.
The way "irrational" is used in the post is different than true irrationality: whether one buys coverage from an insurance carrier or not, you are still insured — you are merely choosing to self-insure and spread the risk of loss onto yourself, your family and whatever other social safety net might exist for you. A given risk may be low or it may be high, but it doesn’t go away merely because one fails to buy insurance. All in all, though, a good post.