Risky Business


There I was, minding my own business and rereading Emerson’s Nature (with the intent of writing something about how the Transcendentalists would reject out of hand today’s “green” cult) when I was interrupted by rhetoric so strikingly stupid I was compelled to put down the old book.

The president was on the television, babbling:

And when you look at what independent economists are saying about the American Jobs Act, my jobs plan, uniformly what they are saying is, this buys us insurance against a double-dip recession, and it almost certainly helps the economy grow and will put more people back to work, and that's what the American people want . . .

It’s excruciating to me how this affirmative action-borne halfwit misuses the word “insurance.” And this is more than just a semantic objection — the stupidity that statists show about matters of risk and insurance are a major reason America is stumbling toward bankruptcy.

I make my living writing about risk and insurance for professionals and interested laymen. It’s important stuff, a nexus of philosophy and finance. So it galls me particularly when some hack yammers about “insurance against . . . recession.” That’s like insurance against bad luck or unhappiness. There’s no such thing.

Insurance entails many elements but two are most important: risk identification and risk transfer. The first involves understanding and organizing the specific causes of loss that a person or entity faces in given circumstances. The second involves finding a counterparty willing — for a fee — to indemnify the person or entity against the losses that occur from those specific causes.

The point here is that no one, and no form of insurance, can eliminate risk. All that insurance does is move the risk around. Done well, it moves the risk in a way that makes economic sense to all parties involved.

The president believes that his latest spending spree is insurance. If so, who’s the person or entity identifying the risk? He? We? And who’s the counterparty agreeing to indemnify against the specific losses? They? A bunch of rich guys who aren’t Jeffrey Immelt?

The answer, of course, is nihil and null set. The American Jobs Act transfers nothing and insures against nothing. And I hazard the prediction that will accomplish nothing.

Hacks like Obama confuse the concepts “insurance” and “subsidy.” And this isn’t a new mistake for the president. Four years ago, when I reviewed his meager campaign document The Audacity of Hope for this magazine, I wrote:

Obama’s most tortured pages are the ones that deal with issues of risk and security in public policy. Like most statists, he has a weak understanding of risk theory.

“The bigger the pool of insured, the more risk is spread, the more coverage provided, and the lower the cost. Sometimes, though, we can’t buy insurance for certain risks on the marketplace — usually because companies find it unprofitable. Sometimes the insurance we get through our job isn’t enough, and we can’t afford to buy more on our own. Sometimes an unexpected tragedy strikes and it turns out we didn’t have enough insurance. For all these reasons, we ask the government to step in and create an insurance pool for us — a pool that includes all of the American people.” (177–78)

This passage makes Obama seem either ignorant or willfully misleading about risk allocation and insurance. . . . no [counterparty] — including the state — can “step in” and create a risk pool after a loss (in his words, a “tragedy”) has occurred. The purpose of risk pools is to gather resources before a loss occurs, so that they can be allocated when one does.

That part about stepping in and setting up risk pools after a loss is important. It’s essentially what Obama is doing now — arguing for more borrowed money to be spent “creating jobs” after high unemployment numbers have been reported.

This willful stupidity about risk and insurance explains much about Obama’s ineffectiveness as an executive. And I still wonder today what I did four years ago: do statist hacks believe in collectivism because they don’t understand risk and rewards? Or do they believe in collectivism first and then ignore risk because its rules contradict their halfwit pieties?

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To expect a politician's speechwriter to infuse their scripts with material that stands up to scrutiny is a mark of naïvete.

Politicians will say whatever they think is required to gull the cretins who listen to them - full stop, end of story.

To do this, they employ people who write stuff. That stuff is piped to the teleprompter, and only morons believe that what is subsequently said has any relationship to the politicians actual opinions, plans or beliefs.

A sensible discussion of the fact that insurance can't make risk disappear can be had without reference to professional liars and parasites.

As you age, you will (hopefully) learn that anytime you hear a politician speaking, you should do something to actively prevent the noises they make from reaching your eardrums. Get an MP3 player, or change the channel... stop short of sticking pointy objects in your ear canals though.

Do something to reduce the amount of bullshit in your life: ignore a politician today. We're allowed to ignore the Pope, and he says things that are slightly less manipulative than the political class.

One day we will have the same relationship to Obama and the rest of the vampire political class, as we do to the Pope and the rest of the ecclesiastical class: gullible idiots who need to believe in fairy tales will be able to voluntarily associate with these megalomaniacal sociopathic vermin, without forcing the sane amongst us to pay for it.

Jon Harrison

Politicians try to communicate to a broad audience in terms they think the audience will understand. They may or may not be sincere, they may or may not be correct on the facts, but they are, after all, political actors trying to persuade. Adhering to the narrow, technical definition of the term insurance would be meaningless here. To expect any politician to be that discriminating is simply expecting too much.

Rodney Choate

Another question to consider: does anyone think that Obama would ever actually use the word "insurance" in its complete correct meaning, in a speech?

Rodney Choate

Perhaps if the results of their misuse of a concept were to be benign, Jim would have just continued reading his Emerson. Is not the medical care war largely about the destruction of the middle class's ability to pay their own way through insurance? Would anyone call the medical care debate innocent miscommunication regarding the institution of insurance? Perhaps it's not too much to ask that people ask what things mean before they preach. When the ignorant hear Obama say "insurance", that is what they will think insurance is.

Rodney Choate

Those of us who are wise to the ways of moochers and looters are keenly aware of any number of concepts that are twisted to suit their diabolical purposes. We all have our own pet peeves: take the word "commitment", for instance- a handy weapon to shoot at a person who refuses to rescue, of take care of you.

The list of "re-worked" concepts is a long one.

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