Quote:
Originally Posted by KSig RC
Well, we may have found our disagreement. Let's try this:
If someone offers you $400 if you win a coinflip, but you lose $100, a cost/benefit analysis says you should always take the flip, right?
And losing doesn't mean you made the wrong decision - it just means you hit the short side.
Obviously, risk of ruin (ROR) issues do factor in, but to pretend that this is a $75 issue is ludicrous. It's a $75/year/house issue - and instead of looking at this from a fanciful viewpoint, let's look at it from a strict economic viewpoint, based upon incentives: there's no incentive to pay the fee (which is MUCH more than $75/incident, again as I pointed out before).
In low-risk scenarios, it makes perfect sense to allow people to "opt in" - in fact, it makes so much sense that governmental organizations like the NFIP do the exact same thing. Societal issues aren't local, they're global.
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The incentive to pay the fee is not to lose your house or your life to a fire. A rural house is not inherently more flame retardant than an urban one. There are no fire plains like there are flood plains and a coin flip is not in any way comparable unless coming up tails means losing everything you own.
Your coin flip scenario is really more like "spend 75 a year and no matter whether its heads or tails someone will at least make the effort to help you" vs. "lose everything that you own including possibly your life if you flip tails 6 times in a row, but that's really unlikely so you're probably safe, right?" There is no reasonable cost/benefit analysis present.
Economists may try but life does not work like a spreadsheet.
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