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> It’s unlikely prediction markets affect natural disaster odds. They don't need to. Predictions markets for natural disasters exist, we call them insurance co
by kibwen 2y ago
> It’s unlikely prediction markets affect natural disaster odds.
They don't need to. Predictions markets for natural disasters exist, we call them insurance companies, and the concept of moral hazard when it comes to insurance is a well-studied topic: https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard
- JumpCrisscross 2y agoOne, insurance happens at insurance companies and in markets. Two, there are prediction markets for natural disasters. Three, moral hazard doesn’t mean insurance makes natural disasters more likely.
- kibwen 2y agoThe distinction matters both because the precise wording of specific contracts will cause distinctions that were not adequately considered by certain participants, and also because of who enforces the contract at a human level. Who determines what does and does not qualify as a natural disaster? If that entity has a stake in one outcome, or is influenced by an entity with a stake in one outcome, that changes the outcome. Both of these are seen in insurance claims, where homeowners find out that rising rainwater does not actually count as a "flood", and where agents of the insurance company are financially incentivized not to pay out at all if they can help it. These factors do not go away just because you take away the insurance company, you've simply diffused them.