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Insurance is about risk aversion (which is reasonable in some cases), not loss aversion (which is completely irrational)

• perl4ever 7y ago
  I'm not sure of the difference, but before I go look for educational material on how these phrases are used, obviously(?) risk is an abstract idea that we can never actually measure or demonstrate even in retrospect, whereas losses are a fact of life that everyone experiences. So it sounds very odd on the face of it to say loss aversion is irrational and risk aversion is not. Would you say that evolution is fundamentally irrational? It's certainly unavoidable.
  • lonelappde 7y ago
    Loss aversion refers to a preference for "not getting something you don't have" over "losing something you do have", even when the thing you don't gain is worth more. It's nearly wholly irrational.
    • perl4ever 7y ago
      Worth more? Who considers value to be an objective thing? Certainly not any economist I've ever heard of. How could you have trade at all if value was objective?