10 ms·

I think you have it backwards - insurance and lottery are (sort of) equal. In the long term, you'll lose money in the lottery. You'll also lose money paying for

I think you have it backwards - insurance and lottery are (sort of) equal. In the long term, you'll lose money in the lottery. You'll also lose money paying for insurance. If you have extraordinary "good luck", you may come out ahead in the lottery. And if you have extraordinary "bad luck" you may come out ahead in insurance. Insurance of course has a more practical value, and a much better return on investment (even if it averages negative returns)

shoo 6y ago
this way of framing things is only valid if outcomes of events are somewhat linear, but in real life this isn't true at all: some uninsured bad events can wipe you out completely, whereas insured bad events might not wipe you out. it doesn't matter if your expected value of not being wiped out was predicted to be 0.1 if you've gotten wiped out. the decision of purchasing insurance or not depends more on how many resources or alternatives you have, and if you can easily smooth over an uninsured bad event so that it doesn't wipe you out. for individuals with limited resources who will be wiped out if uninsured, it is very rational to buy insurance, including paying a profit margin to the insurer on top. another way of thinking about insurance is a way for groups of people to pool and share risk -- if they don't get hit by correlated bad luck then they all get to smooth out their bad outcomes.
- SlavikCA 6y ago
  > for individuals with limited resources who will be wiped out if uninsured Usually, individuals with limited resources can't really be wiped out: there is not much to wipe out. Here is my perspective: I consider myself typical individual with limited resources: I'm mostly live on the my salary (Software dev), I don't really have major assets (20k car bought for cash, renting a house), have some savings (~30k cash). And I only have minimal car liability insurance, as required by law. So, what kind of "wipe out" event can happen to me / my family? And what kind of insurance do I need to get for that? Let's say I have auto accident and I'm liable for million dollars. The likelihood of such event is low. Such event probably would result in bankruptcy, but it's not much worse, then constantly paying extra for insurance. So, there is "no wiping out" in this seemingly catastrophic event. So, what I'm saying is "individuals with limited resources" often doesn't have much to wipe out, so they don't have to worry about insurance.
  - rdtwo 6y ago
    Usually they have wipeout problems that can’t be insured for. Medical conditions or unemployment being the most common.
    - SlavikCA 6y ago
      Can't be insured for? I find that ironic, because we actually have medical insurance and unemployment insurance here in USA, but we often see "individuals with limited resources" wiped out for reasons you mentioned.
      - rdtwo 6y ago
        In areas where that works it’s more of a social insurance and government run. In the us medical insurance is a rate subscription service, similar to say Costco.
  - skybrian 6y ago
    That depends on how much avoiding bankruptcy is worth to you. It might be worth learning more about what the experience is like?
  - zeroxfe 6y ago
    > Let's say I have auto accident and I'm liable for million dollars. The likelihood of such event is low. Such event probably would result in bankruptcy, but it's not much worse, then constantly paying extra for insurance. So, there is "no wiping out" in this seemingly catastrophic event. Consider the same accident and you fracture your spine, leaving you paralyzed neck down. Insurance (at least in the US) affords you access to medical care, and access to follow up therapy and other resources to (hopefully) recover completely. If you have limited resources and no insurance, the consequences are a lot worse than bankruptcy.
pdonis 6y ago
> You'll also lose money paying for insurance. Only if you put zero value on the peace of mind that comes with having insurance against risks that, if they happened, would bankrupt you. But if you put zero value on that, you wouldn't buy insurance.
- pottertheotter 6y ago
  It's the same with the lottery. If you understand that the cash expected value is lower than the cost of the ticket, but you get some value from having "played" and the net is at least equal to the price of the ticket, it's not irrational to buy a lottery ticket.
  - pdonis 6y ago
    This is true, but the kind of value being provided is different. Peace of mind is not the same thing as entertainment.
    - brlewis 6y ago
      Maybe you all can agree that insurance and lottery are the same in that only a fraction of consumers come out ahead, and are opposites in terms of smart vs. stupid.
      - pdonis 6y ago
        > Maybe you all can agree that insurance and lottery are the same in that only a fraction of consumers come out ahead Only a fraction of the consumers come out ahead if we only consider monetary value. But the whole reason insurance and the lottery exist in the first place is that there are other kinds of value besides monetary value. In the case of insurance, it's peace of mind. In the case of the lottery, it's whatever entertainment value comes from being able to visualize yourself winning, even if your chances of actually doing so are tiny.
- deleted 6y ago
  [deleted]
skybrian 6y ago
Insurance increases equality by reducing the financial penalties of bad luck. A lottery increases inequality by creating rich lotto winners who by definition are no more deserving than anyone else. If you're interested in equality and justice, you should be in favor of insurance (and insurance-like government schemes like social security) and against lotteries. On the other hand, the good thing about lotteries is that they can be used to raise money for a good cause with entirely voluntary contributions, and even for most people who don't win, it can still be considered pretty cheap entertainment.
ska 6y ago
Another way of thinking about it. Insurance is a way of marginally reducing the potential effect of variance on your life, lotteries are a way to increase it.

shoo 6y ago

this way of framing things is only valid if outcomes of events are somewhat linear, but in real life this isn't true at all: some uninsured bad events can wipe you out completely, whereas insured bad events might not wipe you out. it doesn't matter if your expected value of not being wiped out was predicted to be 0.1 if you've gotten wiped out. the decision of purchasing insurance or not depends more on how many resources or alternatives you have, and if you can easily smooth over an uninsured bad event so that it doesn't wipe you out. for individuals with limited resources who will be wiped out if uninsured, it is very rational to buy insurance, including paying a profit margin to the insurer on top. another way of thinking about insurance is a way for groups of people to pool and share risk -- if they don't get hit by correlated bad luck then they all get to smooth out their bad outcomes.

SlavikCA 6y ago
> for individuals with limited resources who will be wiped out if uninsured Usually, individuals with limited resources can't really be wiped out: there is not much to wipe out. Here is my perspective: I consider myself typical individual with limited resources: I'm mostly live on the my salary (Software dev), I don't really have major assets (20k car bought for cash, renting a house), have some savings (~30k cash). And I only have minimal car liability insurance, as required by law. So, what kind of "wipe out" event can happen to me / my family? And what kind of insurance do I need to get for that? Let's say I have auto accident and I'm liable for million dollars. The likelihood of such event is low. Such event probably would result in bankruptcy, but it's not much worse, then constantly paying extra for insurance. So, there is "no wiping out" in this seemingly catastrophic event. So, what I'm saying is "individuals with limited resources" often doesn't have much to wipe out, so they don't have to worry about insurance.
- rdtwo 6y ago
  Usually they have wipeout problems that can’t be insured for. Medical conditions or unemployment being the most common.
  - SlavikCA 6y ago
    Can't be insured for? I find that ironic, because we actually have medical insurance and unemployment insurance here in USA, but we often see "individuals with limited resources" wiped out for reasons you mentioned.
    - rdtwo 6y ago
      In areas where that works it’s more of a social insurance and government run. In the us medical insurance is a rate subscription service, similar to say Costco.
- skybrian 6y ago
  That depends on how much avoiding bankruptcy is worth to you. It might be worth learning more about what the experience is like?
- zeroxfe 6y ago
  > Let's say I have auto accident and I'm liable for million dollars. The likelihood of such event is low. Such event probably would result in bankruptcy, but it's not much worse, then constantly paying extra for insurance. So, there is "no wiping out" in this seemingly catastrophic event. Consider the same accident and you fracture your spine, leaving you paralyzed neck down. Insurance (at least in the US) affords you access to medical care, and access to follow up therapy and other resources to (hopefully) recover completely. If you have limited resources and no insurance, the consequences are a lot worse than bankruptcy.

pdonis 6y ago

> You'll also lose money paying for insurance. Only if you put zero value on the peace of mind that comes with having insurance against risks that, if they happened, would bankrupt you. But if you put zero value on that, you wouldn't buy insurance.

pottertheotter 6y ago
It's the same with the lottery. If you understand that the cash expected value is lower than the cost of the ticket, but you get some value from having "played" and the net is at least equal to the price of the ticket, it's not irrational to buy a lottery ticket.
- pdonis 6y ago
  This is true, but the kind of value being provided is different. Peace of mind is not the same thing as entertainment.
  - brlewis 6y ago
    Maybe you all can agree that insurance and lottery are the same in that only a fraction of consumers come out ahead, and are opposites in terms of smart vs. stupid.
    - pdonis 6y ago
      > Maybe you all can agree that insurance and lottery are the same in that only a fraction of consumers come out ahead Only a fraction of the consumers come out ahead if we only consider monetary value. But the whole reason insurance and the lottery exist in the first place is that there are other kinds of value besides monetary value. In the case of insurance, it's peace of mind. In the case of the lottery, it's whatever entertainment value comes from being able to visualize yourself winning, even if your chances of actually doing so are tiny.
deleted 6y ago
[deleted]

skybrian 6y ago

Insurance increases equality by reducing the financial penalties of bad luck. A lottery increases inequality by creating rich lotto winners who by definition are no more deserving than anyone else. If you're interested in equality and justice, you should be in favor of insurance (and insurance-like government schemes like social security) and against lotteries. On the other hand, the good thing about lotteries is that they can be used to raise money for a good cause with entirely voluntary contributions, and even for most people who don't win, it can still be considered pretty cheap entertainment.

ska 6y ago

Another way of thinking about it. Insurance is a way of marginally reducing the potential effect of variance on your life, lotteries are a way to increase it.