Questions of Risk, whether or not closely tied to insurance, pop up regularly online. Some recent samples:
- Writing for Slate -- with an audio version for NPR's Day to Day -- Edward Jay Epstein purports to reveal how the insurance business runs Hollywood:
Insurance is not a word usually associated with the power and glory of Hollywood—at least not to outsiders. To insiders, especially those involved in the behind-the-scenes decisions of who will be the stars and what movies will be made, it connotes a sine qua non reality of the entertainment universe. After all, once the media dressing is stripped away, what is the New Hollywood about other than minimizing risk?
Read the whole thing to learn about the awesome force that is Nicole Kidman's knee, and why you shouldn't believe a word of those "[insert superstar name here] insisted on doing all of his/her own stunts" stories in the entertainment press.
- Megan McCardle (Jane Galt) of Asymmetrical Information looks at regulating risk in the context of pensions and Social Security:
There's a debate that we should be having in this country, about risk, but aren't, because everyone's trading scare stories about Social Security.
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[B]asically, there are three entities that can bear retirement risk: a company, a person, or a government.
There are problems with all three. People are too small to be actuarially sound; they can be wiped out by adverse events. Also, some of them are incredibly stupid about money; others like to gamble.
The defined benefit corporate pension plan has been, for a long time, the holy grail of liberals. It was lavish and safe. It is also dying. Not that it was ever that prevalent in the first place, mind you; liberals who lionize the Golden Days of the fifties and sixties seem to believe that everyone worked for either IBM or GM, when in fact most jobs, just like today, were with small businesses.
But the corporate pension was certainly *more* prevalent. Unfortunately, time has revealed its cracks; companies aren't very good vehicles for managing this sort of risk. Time is the biggest one; pensions require companies to plan over time horizons that span 30 or 40 years. That was fine in the cozy, protected, and highly regulated environment of the 50s and 60s, but when the market changed, the pension promises couldn't. This is what (among other things) is dragging down the major airlines; I expect that within the next decade we will also see Ford and GM default on their pension promises.
The government, which is an actuarially sound pool, seems like a natural to take over insuring away this kind of risk. Unfortunately, government has its own problems. For one, it is even more rigidly unable to cope with changes in the pool than an old industrial firm coping with an intransigent union. This is saying a lot. But it is justified. . . .
- Recently added to the links in the right is AutoMuse, the weblog of E. L. Eversman, chief counsel for Vehicle Information Services, Inc. All things risky and automotive fall under the jurisdiction of that site. Earlier this week, for example, a shudder-inducing post on the installation of used and recycled airbags.
- And speaking of risk in the air: I have been remiss in not linking more frequently to Doug Simpson's "weblog of research on the collision of law, networks and disruptive technologies," Unintended Consequences. Last month, on the occasion of the rollout of the colossal Airbus A380, he offered this worrisome observation:
The new Airbus A380 super-jumbo will carry more passengers than any before it. Some think that its size presents a potential liability exposure that exceeds the existing capacity of the aviation insurance market. . . .
Happy landings.
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