August 07, 2002
The Profits Of War II

I have to drive to Boston in a few minutes, and won't be back until very late Friday.

Three quick remarks on my second-to-previous post before I go:

  1. I didn't mean to imply that Megan McArdle (Jane Galt) is necessarily wrong in arguing that wars can sometimes help the economy, just to say that they need not do so to be worth fighting -- and worth fighting even in crude economic terms, though there are usually better reasons than those.
  2. Will Wilkinson's reply seems awfully strained. He seems to think that if I've spent $20,000 (not $30,000) on car insurance over the last 30 years without a claim, I've lost a bet and wasted my money like a fool. I think the peace of mind was worth the price. (Perhaps I would agree with him if I were selling my car today and checking into a nursing home, never to drive again, but that's not likely to happen for another 30 years.) He says "insurance is exactly like gambling. Because it is gambling." So if I go out and wreck my car on the way to Boston, doing at least $20,001 worth of damage, I can call myself a small winner, and if I do $1,000,000 or more worth of damage, I hit the jackpot? That can't be right.
  3. In the comments to the prior post, Herr K. calls my comparison of the defense budget to car insurance "singularly inapt". I never said they were the same in every respect, only in the most pertinent one: that both are expenditures designed to avoid incurring much larger expenditures. Contrary to Wilkinson's argument, no profit is necessary. And yes, David Gillies, rottweilers and barbed wire and handguns and "the club" and padlocks and many other things are even better analogies. The big difference is that a whole nation can't avoid such expenditures by moving to a safer neighborhood, and there is no international police force to call in a national emergency. (Well, unless you're Kuwait invaded by Iraq, in which case we are the international police, or vigilantes, if you prefer.)

I'm sure I'll have more to say about this when I get back home. Thanks to all my other commentators.

Posted by Dr. Weevil at August 07, 2002 03:22 PM

Mr. Wilkinson is asking the wrong question. Insurance is all about mitigating risk. There is a cost associated with that mitigation -- it does not come for free. The fact that it is done on an actuarial basis does not mean that it is gambling.

One can make a much better argument that driving without insurance constitutes gambling.

Posted by: charles austin on August 7, 2002 09:40 PM


Sorry, "inapt" was perhaps too strong; no offence intended. Maybe "imperfect analogy" was preferable. Keep up the good work.

Ever your alienated friend,
Herr K.
c/o The Castle

Posted by: Herr K on August 8, 2002 02:11 PM