Replies to post #601723 on Zeev's Turnips Patch-No Politics (ZEEV)

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"health insurance for the uninsurable or property insurance in florida for those who can't get it otherwise or no-fault or other auto insurance don't fit that bill. "

Ever notice that insuring the "uninsurable" at public expense is just a way of jacking up the price of medicine and make it unaffordable to the average people? National insurance for the disaster-prone areas is the very reason why those areas are over-built? States with "no-fault" auto insurance mandates have the highest insurance rate?

"there are really good examples from game theory, which you might be familiar with, or if not even have seen in the movie aboug nash, "a beautiful mind". his discovery was that there are situations where everyone, acting in their own best interest, will drive a system to a worse, or at least less than optimal, solution. if a bank is wobbly, it makes sense to go and take your money out. but if everyone does this, you have a panic that causes a collapse. that collapse was completely unnecesaary. if you have some agent come in - and in this case, probably only the gov can do it - and guarantee your deposits, voila, panic averted. a very cheap solution that eliminates an otherwise very costly problem. "

Goes to show that Hollywood is terrible place to learn economics, finance, history and public policy. Where would the government come up with the money to fight off all run-on-banks? Fiat money printing is the only way to enable the government to do that. Run-on-banks serve a very important function in the financial life: the depositors' vigilence for their own safety. When Enron committed financial fraud, it took run-on-the-bank only 9 months to finish off the company; whereas it took 5 years for the government regulators and law enforcement to bring the perpetrators to trial. Without the risk of run-on-the-bank, banks can engage in all sorts of fraudulent practices, and transfer risks to the public purse. Depositors can indulge in all sorts of pie-in-the-sky yield, with public guarantee. All that guarantee is of course not free . . . instead, it's a transfer of weath from the prudent to the imprudent, well the public at large to the well-connected.