Quotulatiousness

March 16, 2013

More on the Cyprus banking situation

Filed under: Business, Economics, Europe — Tags: , , , , — Nicholas @ 11:44

At Forbes, Tim Worstall explains why the mandatory levy on bank accounts is an epic facepalm:

There’s nothing particularly bad about making depositors carry some of the load of a bank failure. Indeed, it has something to recommend it: if it happens occasionally then people will take more care over where they put their money and what the banks do with it.

However, there’s a very great difference between allowing depositors without government insurance to take losses and actually reneging on the previously promised government insurance. And it’s that second that they’re actually doing here. [. . .]

Under the system until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn and governmental promise has been shown to be false. And not even the European Union nor the European Central Bank are going to make them stick to it. Indeed, very much the other way around. The EU and ECB are insisting that the Cyprus authorities breach this deposit insurance provision.

As I say, there’s nothing wrong with making uninsured depositors take some of the pain. Certainly nothing at all wrong with making those with large deposits take a haircut. The problem is when government has said “we’ll insure this” and when push comes to shove they say “err, no, we won’t”. And the problem with this is that it makes all future EU deposit insurance worth that much less.

February 4, 2013

A legal spectre is haunting the NFL

Filed under: Football, Health, Law, Media, USA — Tags: , , , , — Nicholas @ 10:12

In the wake of a vastly entertaining SuperBowl contest between the “San Francisco 50-1’ers”* and the “Baltimore Black Birds”*, Steve Chapman outlines the possibility that we won’t see too many more SuperBowl games:

Professional football is the most popular spectator sport in America, which is one reason yesterday’s Super Bowl was expected to draw 110 million viewers. With its famous athletes, storied franchises, and lucrative TV contracts, it’s an industry whose future appears limitless.

But football has a problem: the specter of mass brain damage among current and former players. So far, the steady trickle of disturbing revelations has had no apparent effect on ticket sales or TV ratings. What it has done, though, is more ominous: It has invited lawsuits.

If football falls into decline, it may not be the result of fans turning away, athletes avoiding it, or parents forbidding it. It may be from lawyers representing players who sustained chronic traumatic encephalopathy and expect to be compensated for the damage.

[. . .]

Walter Olson, a Cato Institute fellow, blogger (Overlawyered.com), and author of several books on liability, knows well how a tide of litigation can transform a landscape. And he has a bold prediction: “If we were to apply the same legal principles to football as we do to other industries, it would have to become extremely different, if not go out of business.”

“Seriously?” you may ask. A guy who made a good living engaging in high-speed collisions with 300-lb. blocks of granite can say he didn’t understand the risks involved? It may seem that case will be laughed out of court.

But Olson thinks not. “Courts have not been very friendly to this argument, particularly when something as grave as permanent brain damage is involved,” he told me. And it’s become apparent that while players were aware of the possibility of mangled knees, broken bones, and concussions, they didn’t grasp that repeated blows to the head could produce debilitating and irreversible mental harms.

* See the Samsung commercial in this post for explanation of the team names.

January 24, 2013

Is the media’s love affair with “extreme weather” just an elaborate insurance scam?

Filed under: Business, Cancon, Environment, Media — Tags: , , , , , , — Nicholas @ 12:04

Terence Corcoran in the Financial Post:

All it takes these days is a little normal January Canadian cold spell and all of a sudden the nation is plunged into a frenzy of chatter about “extreme weather.” The CBC led the way, aided and abetted by climate alarmists in the Canadian insurance industry, with help from an apparently leaked data point from an Environment Canada report that supposedly will show that Canadian winters are now 3.2C warmer than they used to be. Get it? It’s really cold, but that’s because of climate change, which is making Canada’s winters warmer.

If you find this confusing, well, get used to it. That may even be part of the objective, which, judging by the sudden extreme flood of media reports, seems to be keep Canada’s population agitated about global warming, a cause that has so far failed to ignite voters.

If the theory of climate change doesn’t grab people, maybe “extreme weather” will. The media certainly love it. All News Radio in Toronto now has an “Extreme Weather Centre” that rouses itself every time weather happens — snow storms, cold spells, heat waves, rain, temperature anomalies. Alarmist weather forecasting and reporting is a media staple, but the concept now appears to have reached a new level of hypedom.

[. . .]

The insurance angle was cleverly juxtaposed with a leaked bit of data from an Environment Canada report that will not be released until May. It supposedly will show that Canadian winter temperatures have risen 3.2C since Canada began keeping systematic records in 1948. As a standalone bit of data, not much can be made of it. Even less can be made of it for popular consumption if current temperatures are approaching record cold. How can we have record warm and record cold at the same time?

That’s where “extreme weather” comes in. It’s also where the Canadian insurance industry, through a front group called the Institute for Catastrophic Loss Reduction, is actively promoting extreme weather as a major vehicle for business and policy development. With offices in Toronto and the University of Western Ontario, the institute’s membership is almost exclusively insurance companies, its eight-member board is stacked with five insurance executives, and the executive director is Paul Kovacs, is former head of the Insurance Bureau of Canada.

December 27, 2012

Captives in longest hijack freed after nearly three years

Filed under: Africa, Military — Tags: , , , , , — Nicholas @ 10:27

The crew of the Iceberg 1 are now free, after enduring the longest pirate kidnapping in modern history:

How’s this for a seasonal tale to warm the hearts? After almost three years in captivity, the crew of the Iceberg 1, a cargo ship hijacked by Somali pirates, are home after finally being rescued.

For the benefit of those who haven’t followed the story — and there are probably plenty, as it’s had only scant coverage — the Iceberg 1 was captured back in March 2010, and has languished in pirate custody ever since.

As we reported back in the summer, the ship essentially fell between two stools. Its Dubai-based owner, who appears not to have been insured, refused to pay a ransom for it and simply went to ground, ignoring pleas for help from the hostages’ families.

Meanwhile, the governments representing the different sailors on board — six Indians, nine Yemenis, four Ghanaians, two Sudanese, two Pakistanis and one Filipino — were either unable or unwilling to mount a rescue attempt. So, too,was the multinational anti-piracy force, which generally prefers hijacked ships to be freed by ransom, on the basis that freeing sailors by force carries too much risk of casualties.

December 1, 2012

The problem with flood insurance

Filed under: Britain, Economics — Tags: , — Nicholas @ 09:57

Talking about a very topical issue in Britain, Tim Harford explains why flood insurance is so expensive for some areas:

I’m not sure this is really an insurance problem.

How could it not be an insurance problem?

It seems to me that there are three kinds of hard-to-insure risks. First, there are unimaginable events, “unknown unknowns”, if you like. Yet floods are all too easy to imagine. Then there are risks that are subject to what economists call adverse selection. To take an extreme example, imagine a town ruled by some all-powerful Mob. Nobody in this town is ever robbed without warning. The Mob will be sure to let you know what’s coming to you and why they think you deserve it.

[. . .]

But that doesn’t sound like a good description of flood risk.

Quite so. Now the third kind of hard-to-insure risk is stuff that’s expensive and happens quite often. I’m trying to buy a house, I’m nearly 40 and so I’m trying to buy insurance for my family in case I die or become too ill to work. This is perfectly possible: it’s just expensive, because it’s not unusual for middle-aged men to get seriously ill. This sounds like a much better description of allegedly uninsurable homes: if there is a one in five chance of a flood, and a flood is going to cost £50,000, don’t expect to pay less than £10,000 a year for flood insurance.

But that’s unaffordable for a lot of people.

Yes, but unaffordability is not uninsurability. It’s insurable but expensive.

October 13, 2012

Sometimes there’s a logical reason to discriminate in pricing

Filed under: Business, Europe — Tags: , , , — Nicholas @ 11:00

Tim Harford on the recent EU ruling that insurers will no longer be allowed to consider gender in setting insurance rates:

He: And not before time. It’s outrageous that I have to pay more for my car insurance than you do. I’m a perfectly safe driver.
She: Of course you are, dear. But you also drive a lot more than I do, which is not unusual for men. Since you drive more miles you are exposing yourself to the risk of more accidents.
He: Am I? Oh.
She: This is one of the reasons that men have more accidents than women. Another, of course, is that some young men are aggressive, overconfident idiots. But in any case you should probably put the money you save into your pension pot because you’re going to need it when you get stuck with the low annuity rates we women have had to put up with.
He: But my life expectancy is shorter. I deserve much higher annuity rates. That’s outrageous.
She: So you’re outraged that discrimination against you hasn’t ended earlier, and equally outraged that discrimination in your favour isn’t going to continue for ever?

[. . .]

She: We might not get too comfortable. Insurers will start looking at other correlates of risk. The obvious one is how far people drive: men tend to drive more than women. Then there are issues such as the choice of a sports car rather than a people carrier. Such distinctions may carry more weight in determining your premium than they do now. As for annuities, if they can’t pay any attention to your sex they might start paying more attention to your cholesterol.
He: I can see that this might get very intrusive.
She: It might. Or it might get very clumsy. Mortgage lenders used to be accused of using geography as a way of discriminating against minorities in the US, since ethnicity and postcode can be closely correlated. There are modern analogies: since women are on average smaller than men, perhaps in the future premiums will be proportionate to height. Stranger things have happened.

September 15, 2012

Our collective maladjusted attitude to small risks

Filed under: Economics, Europe, Italy — Tags: , , , , , — Nicholas @ 09:44

Tim Harford shows that you can learn a lot about economics by looking at the process of hiring a rental car:

Here’s a puzzle. If it costs €500 to hire a €25,000 car, how much should you expect to pay to hire a €50 child’s car seat to go with it? Arithmetic says €1; experience suggests you will pay 50 times that.

This was just one of a series of economics posers that raised their heads during my summer vacation – indeed, within a few minutes of clearing customs in Milan. One explanation is that the apparently extortionate price reflects some unexpected cost of cleaning, fitting or insuring the seat – possible but implausible. Or perhaps parents with young families are less sensitive to price than other travellers. This, again, is possible but unconvincing. In other contexts, such as package holidays and restaurants, children with families are often given discounts on the assumption that money is tight and bargains keenly sought.

[. . .]

After paying through the nose for the car seat we were alerted to a risk. “If your car is damaged or stolen, you are liable for the first €1,000 of any loss.” Gosh. I hadn’t really given the matter any thought but the danger suddenly felt very real. And for just €20 a day, or something like that, I could make that danger vanish.

[. . .]

What’s happening here? Behavioural economists have long known about “loss aversion”: we’re disproportionately anxious at the prospect of small but salient risks. The car hire clerk carefully created a very clear image of a loss, even though that loss was unlikely. I haven’t paid such fees for years and have saved enough cash to write off a couple of hire cars in future.

July 14, 2012

Flood policy and personal responsibility

Filed under: Britain, Environment, Government — Tags: , , , , , — Nicholas @ 00:03

James Delingpole on the British government’s latest announcements on flood policy:

Yesterday it was reported that the Coalition had decided we should all be liable for the cost of flood damage, regardless of where we live. This puzzled me, as the Coalition’s decisions so often do. The only way it would make any kind of sense would be if you believed a) flooding is a new and unnatural phenomenon resulting directly from late 20th century Man Made Climate Change or b) that everyone is now so stupid they cannot be trusted to act in their own best interests and that it is therefore government’s job to hold their hands and wipe their bottoms for them from cradle to grave.

To discount a) you only have to go somewhere like the River Severn, just below Worcester Cathedral, and look at the flood marks on the wall. Many of the most dramatic inundations happened in years long before “man made global warming” was even a sinister glint in Al Gore’s eye. This isn’t to say that the cost of flood damage hasn’t risen to unprecedented levels these last few decades. But that has more to do with our insane practice of allowing property developments to be built on flood plains, together with our unfortunate habit of paving and tarmacking everything (such as the front gardens we would once have kept as front gardens) which means that in times of high rainfall floodwater is likely to accumulate in drains more rapidly. Plus, of course, we’re all richer — so there’s more expensive property for flooding to damage.

But it’s the b) aspect I find more worrying because of the way it rides roughshod over the most basic principles of free market economics. Can we really assume that when anybody buys a house by a river — or near a floodplain — they don’t do so in the full knowledge that flood-risk is one of the prices they pay for their pleasing waterside ambience? The very idea is a nonsense. Buyers, being rational, will factor this into their calculations: “OK, so it will be great for fishing and swimming and boating. But getting insurance will be a bugger and we’d better not keep anything too precious on the ground floor.” These complexities will be reflected by the market. While the value of the property may be enhanced by its attractive location, it will simultaneously be decreased by its flood-damage potential.

July 2, 2012

Here’s what to expect to pay in Obamacare penalty tax

Filed under: Government, Health, USA — Tags: , , , — Nicholas @ 10:10

There are no easy answers in figuring out in advance exactly what taxes will apply to any given person, but Henry Blodget at Business Insider outlines what to expect in general terms:

  • The penalty/tax will be phased in from 2014 to 2016.
  • The minimum penalty/tax in 2016 will be $695 per person and up to 3-times that per family. After 2016, these amounts will increase at the rate of inflation.
  • The minimum penalty/tax per person will start at $95 in 2014 (and then increase through 2016)
  • No family will ever pay more than 3X the per-person penalty, regardless of how many people are in the family.
  • The $695 per-person penalty is only for those who make between $9,500 and ~$37,000 per year. If you make less than ~$9.500, you’re exempt. If you make more than ~$37,000, your penalty is calculated by the following formula…
  • The penalty is 2.5% of any household income above the level at which you are required to file a tax return. That level is currently $9,500 per person and $19,000 per couple. The penalty on any income above that is 2.5%. So the penalty can get expensive quickly if you make a lot of money.
  • However, the penalty can never be more than the cost of a “Bronze” heath insurance plan purchased through one of the state “exchanges” that will be created as part of Obamacare. The CBO estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.

Update: In spite of all the agonized wailing from the Republicans (especially the Tea Party folks), Steve Chapman is determined to find the limited government silver lining in the Obamacare decision:

While it was upholding the mandate, the court was striking down an equally important part of the law: the requirement that states greatly expand Medicaid coverage, at a cost of about $1 trillion between 2014 and 2022. The administration sought to force states to go along by threatening to take away all their Medicaid funds — not just those provided for the expansion. But Roberts and Co. said no.

Does it matter? You bet. It’s the first time the court has ever said Washington went too far in the conditions it places on money sent to state governments. The ruling will give states more latitude to make their own decisions in all sorts of areas.

The case also registered a victory for the notion that judges should apply the Constitution in an impartial way rather than simply impose their policy preferences. George Washington University law professor Orin Kerr, writing on the conservative-libertarian blog The Volokh Conspiracy, said the overall decision was “a largely conservative opinion that just happens to get to a liberal result.”

Equally significant is that it took a worse health care option off the table. The irony of the challenge is that if Obamacare had been struck down, supporters of universal health coverage would have been left with no good option but a “single-payer” system, also known as “Medicare for all” — which is undoubtedly constitutional.

Whatever the flaws of Obamacare, it at least builds on the existing system of private insurance. Vermont’s self-proclaimed socialist senator, Bernie Sanders, used the court’s decision to renew his call for a single-payer system. But for him, the verdict was the worst thing that could have happened.

For anyone even slightly open to evidence, letting Obamacare take effect will provide an illuminating experiment in how to afford the miracles of the American medical system to more people, including many in dire need. It may be a failure, or it may be a success. But it will not be uninformative.

June 14, 2012

The Commerce Clause: how it evolved to empower government control of everything

Filed under: History, Law, Liberty, USA — Tags: , , , — Nicholas @ 09:36

U.S. District Judge Roger Vinson ruled that because the Patient Protection and Affordable Care Act’s individual mandate to purchase health insurance is unconstitutional, the entire law “must be declared void.” Judge Vinson cites this Reason.tv video on page 47 of his decision.

May 19, 2012

Salvage operation on Costa Concordia to cost more than £200 million

Filed under: Europe, Italy — Tags: , , , — Nicholas @ 08:45

The Telegraph headline says £200 million, but the scrap value of the vessel must be much lower than that:

The operation is due to start in the next few days and is expected to take a year, with the battered ship to be towed to an Italian port in one piece and then dismantled for scrap.

“This is the largest ship removal by weight in history,” said Richard Habib, the president of Titan Salvage, the American company that has been given the job of raising the 1,000ft-long, 114,500 tonne cruise liner.

“The magnitude of the job is unprecedented. But we feel confident that we can do it and do it safely, with the least disturbance to the environment and the economy of Giglio.” The Concordia has been wedged on rocks and semi-submerged just a few yards from the coast of Giglio, an island off Tuscany, ever since it ran aground on the night of Jan 13.

[. . .]

The two companies’ plan for removing the wreck involves extracting the huge chunk of rock embedded in its side and patching up the torn hull.

Engineers and divers will then construct an underwater platform beneath the ship.

They will also fix steel compartments or ‘caissons’ to the side of the ship that is out of the water.

Two cranes will slowly pull the ship upright so that it rests on the submerged platform.

The caissons will be filled with water to help the cranes lift the massive weight of the ship.

Once the vessel is upright, more chambers will be attached to the other side of the hull.

All the caissons will then be emptied of water and filled with air, which will stabilise the ship in preparation for it being towed to a nearby port for demolition.

March 28, 2012

“[T]he Government of Canada is [like] a big national insurance company with a side business as a tax collector for the provinces”

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:17

Kevin Milligan in the Globe and Mail:

The first question to ask of any budget announcement is whether the dollars are recurring or one-time only. If we change a tax that brings in $1-billion a year, the budget changes not just this year but in future years as well. […] Politicians and commentators often choose the time frame that suits their current argument. Confusion results. A good economist keeps her eye open to these tricks and tries to ensure we compare numbers on similar time-frames.

Next up is properly adjusting future dollars to account for inflation and our ability to pay. Dollars spent in the future are different than dollars spent now. Imagine that inflation averages 2 per cent a year, and inflation-adjusted economic growth is 1.5 per cent a year on top of that. In just 20 years, prices will increase by 50 per cent and the size of our economy — and our ability to pay for programs priced in nominal dollars — will double.

[. . .]

As a final note, it is always useful when crunching the numbers to keep in mind what the Government of Canada actually does with our tax dollars. Transfers to individuals for insurance programs (such as Employment Insurance and Old Age Security) are 25 per cent of spending. Transfers to provinces and territories (health and other transfers) are another 20 per cent. Interest takes a further 11 per cent. The best way to think of the Government of Canada is a big national insurance company with a side business as a tax collector for the provinces. (This is only slightly different from the US Government, which has been called by Ezra Klein an insurance company with a standing army.) Everything else the Government of Canada does — from fisheries management to culture to the military — takes the remaining 44 per cent. Making any change to the trajectory of total spending when insurance and inter-government transfers are both projected to grow rapidly requires very large changes to that residual 44 per cent.

March 25, 2012

Reason.tv: 3 Reasons to End Obamacare Before it Begins!

Filed under: Economics, Government, Health, Law, USA — Tags: , , , , , — Nicholas @ 08:36

February 28, 2012

Yet another death due to excessive concern for ‘elf an’ safety issues

Filed under: Britain, Bureaucracy, Government, Health — Tags: , , — Nicholas @ 14:25

Bagehot blogs about the unhealthy results of paying too close attention to the health and safety regulations:

[T]he Mail on Sunday ran an interesting feature this weekend about a different example of what certainly sounded like a health and safety overreaction. It told the tale of a man who drowned in a shallow boating pond in his local park, after suffering an epileptic seizure while feeding swans. A passer-by (a woman who was in charge of a small child so did not dare enter the pond) called the emergency services. But the first firemen to show up announced that they only had Level One training, for ankle-deep water, and needed to wait for a specialist team with Level Two training for chest-deep water. By the time that team arrived, the man had been floating in the pond for 37 minutes. While waiting for that specialist help, the same firemen also strongly urged a policeman not to attempt a rescue in the pond, even refusing to lend the policeman a life-vest. Then the policeman’s control room told him not to enter the water, as the victim had been in the pond so long that it was a body retrieval mission, not a rescue.

The MoS, which sent its reporter out into the same pond equipped with no more than rubber waders, called it a story that “shames Britain”. Certainly its photograph of the eventual retrieval of the poor victim’s body, featuring 25 separate emergency workers, an inflatable tent, several fire engines and a helicopter, is suggestive of an over-reaction after an under-reaction.

It is tempting to conclude that Britain has fallen into a serious problem with regulation, red tape and crippling risk-aversion. Certainly, the newspapers have recently been filled with all manner of depressing stories about pancake races being cancelled, policemen being urged not to pursue criminals onto roof tops, party bunting being outlawed or council workers refusing to mount shoulder-height step ladders to fix broken signs without logistical back-up once reserved for the cleaning of the Sistine Chapel ceiling.

[. . .]

All of which is sensible. You don’t have to be a wild-eyed libertarian to suspect that something has gone wrong with the management of risk in Britain. It is also depressing to see so many advertisements for ambulance-chasing lawyers, urging anyone who has had the smallest accident to sue. Anecdotally, members of parliament grumble about the role played by some insurance companies who hold special advice-sessions on liability for local councils, seeking to terrify them into taking out expensive cover and in the process filling the heads of municipal bosses with all manner of scare stories.

But listening to my rather cautious Jersey host, and reading the MoS report of the pond rescue, I found myself wondering if the British character may not also play a role. Read the report by Lord Young, or even the detail of the admirably comprehensive Mail report, and the rules themselves are sometimes less the problem than their interpretation. It turns out that emergency workers can break all sorts of health and safety rules when lives are at stake, without fear of prosecution, for example. And those guidelines on Level One and Level Two water training were intended for rescuers in fast-moving flood waters, the inquest into the pond case was told.

February 21, 2012

The real problem with forcing employers’ insurance to pay for contraception

Filed under: Government, Health, Liberty, Religion, USA — Tags: , , — Nicholas @ 11:29

At the Adam Smith Institute blog, Tom Clougherty discusses the biggest problem with the current American debate over contraceptives and insurance coverage:

Now, I’m no Rick Santorum. I’m a fan of contraception. But there’s so much wrong with this story that it’s hard to know where to start. Should the government really compel you to buy a service from a private company? It’s probably better than the government nicking your money and providing that service themselves, but for a libertarian it still rankles. Then there’s the insensitivity to deeply-held religious conviction, which not only exposes the ‘liberal’ left’s inability to tolerate social mores that differ from their own, but also highlights the way big government inevitably tramples on diversity and choice with its one-size-fits-all monomania. And then there’s the idiot-economics which suggests that you can force a company to provide a service without anyone having to pay for it. In this case, assuming insurance companies can’t find a way of covertly passing on the cost of contraceptive cover to church-affiliated employers, then everyone else with insurance ends up footing the bills through higher premiums.

But perhaps the biggest problem is the one explained by Sheldon Richman in this Freeman article: contraception has nothing whatsoever to do with insurance.

    Insurance arose as a way for individuals to pool their risk of some low-probability/high-cost misfortune befalling them. It shouldn’t be necessary to point this out, but coming of child-bearing age and choosing to use contraception is not an insurable event. It’s a volitional act. It may have good consequences for the person taking the action and society at large, but it is still a volitional act. It makes no sense to talk about insuring against the eventuality that a particular person will use contraception.

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