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> economics 101 ... the more fractured the pool the worse the outcome. You're probably (I don't know) talking about large insurers being able to aggregate non-
by cronjobber 10y ago
> economics 101 ... the more fractured the pool the worse the outcome.
You're probably (I don't know) talking about large insurers being able to aggregate non-correlated risk into a nice non-risky positive expectation of profit.
But of course econ 101 loves nothing more than to look at the margin, and if the marginal client simply lowers expected profit, you better fracture him out. But you clearly know that, so what are you talking about?
- intended 10y agoRight - and that's why insurance is discussed as the extra-ordinary case where the normal market rules result in worse outcomes. More competition results in a worse functioning market. Therefore for ideal outcomes you don't create separate insurers, and no one moves out. My question isn't on the economics, to be honest. My question is on the weird cultural idiosyncrasy. I don't really understand that (and by that I mean I understand its "political", but the math and success of it is pretty clear, so how is the topic successfully made confusing). That's the real magic at play, and thats what I'd like insight about.
- cronjobber 10y ago> My question isn't on the economics, to be honest No, your question isn't, mine is. I still don't really know what "Econ 101" (i.e., basic) market failure you're talking about. Can you explain like I knew enough jargon to understand an Econ 101 explanation but slept through that one lesson? Intrinsic economies of scale producing oligopolistic structures in insurance – I've seen that mentioned as a market failure, but it would be strange to fix a tendency towards oligopoly by legalizing it into a total monopoly, no? So you're not talking about that.