
What makes gambling wrong but insurance right? - sohkamyung
http://www.bbc.com/news/business-38905963
======
MR4D
Article gives a good background, but doesn't clearly answer it's own question.
The simple answer (although not followed as closely as it should be in
regulation):

Gambling involves the creation of risk where none previously existed, while
insurance is solely about the transfer of risk from one party to another (or
more than one).

~~~
tuna-piano
Driving a motorcycle also involves the creation of risk where none previously
existed. But people seem to make a rational choice to get on their motorcycle.

The risk of losing money gambling to me seems less relevant than the risk of
getting addicted to gambling and making irrational decisions. There's a 100%
chance that when I buy a BMW that I'll lose money, but of course no one
believes there's a problem with car addicts that the government needs to
solve. There is, however, a real problem of gambling addicts, not too
different from heroin addicts.

That said, solving the problem with prohibition creates the normal prohibition
problems (rational adult gamblers lose their rights, black markets are setup,
etc). I tend to like the self banning programs that many states have set up.
If you feel you are addicted, you can sign a form banning yourself from
casinos for a period of time / life. If you go back, you can be arrested for
trespassing.

And of course, the governments do-gooder motivations seem suspect when the
government makes lotteries illegal, but then sets up their own lottery
monopoly with absurdly low payout rates.

~~~
coldtea
> _Driving a motorcycle also involves the creation of risk where none
> previously existed. But people seem to make a rational choice to get on
> their motorcycle._

That's because there are concrete benefits from doing so (going from one place
to another). And even with that, there are all sorts of regulations for
getting a license to drive a motorcycle, where and how to drive one, what to
wear while riding one (a helmet is mandatory in many countries), etc. And even
so, if motorcycle related accidents where that many that it would matter,
driving one would have been outlawed altogether probably.

> _There 's a 100% chance that when I buy a BMW that I'll lose money_

Yeah, but you also get a BMW. With gambling you on average just get nothing.

~~~
hamstercat
Gambling is entertainment, the same as going to see a movie or listening to
music. You don't get anything in return other than what you experience going
through it. I agree that comparing it to buying a physical product may not be
the best metaphor, but I can understand where it's coming from.

In the end, it becomes a problem when it's no longer entertaining (just a
game), but rather pathological.

~~~
Bartweiss
The house edge on well-played blackjack is only a few percent, and the
highest-payout slot machines are similar. Which means that a low-limit player
can keep their losses down to a few dollars pretty easily. So stingy gambling
is actually pretty similar to music and movies in dollars-per-hour terms.

I've certainly seen movies bad enough that I would have happily spent my money
playing dollar blackjack instead.

~~~
zild3d
Right, and a lot of people forget that when comps are thrown in the edge is
whittled down even more, if it exists at all. If I went to a bar I'd be
ordering drinks, maybe paying a cover charge, but instead I get "free" drinks
while I gamble.

Craps is also a very low (<1%) house edge, and it's a more social and exciting
game compared to blackjack (to me atleast)

~~~
Bartweiss
> Craps is also a very low (<1%) house edge, and it's a more social and
> exciting game compared to blackjack (to me at least)

This is an even better example. I didn't cite it because I couldn't remember
the edge on good play, but it's a solidly social experience which can be had
for a very reasonable price.

------
sverige
After working in or for the insurance industry for 15 years, I came to the
conclusion that it is not right, and that it is the moral equivalent of
gambling.

I understand that the vast majority of people rationalize insurance as a good
thing because the cost is relatively low when compared to catastrophic loss,
and even have a couple of personal anecdotes to add to those of the advocates
of insurance that demonstrate the wondrous utility of insurance, but I am
convinced that it is wrong.

I quit the insurance business and moved to a completely different career. I
only buy the insurance that is required by law (what a ridiculous concept!
does the government have to mandate that you also buy food?) and have paid the
tax penalty for foregoing Obamacare.

I know this will likely not be well received here, but I thought I'd share my
position for any who read this and wonder if they're the only ones who
understand it this way.

~~~
vog
Serious question: What is the alternative to an insurance?

The worst case would be that everybody saves huge amounts of money on their
own, not touching it, for the case of a catastrophic event. If the catastrophe
doesn't happen, or not as bad as feared, you wasted money. If the catastrophe
is larger than expected, or happens when you are too young to have saved
enough money, you are out of money despite the savings.

Either way, this is the exact opposite of solidarity. Also, in that setting,
not saving any money would be some kind of gamling, too.

Solidarity means that if somebody had really bad luck, their peer will help
them, because it could have happened to any of them. But that doesn't work
well for large groups. On the other hand, we do want large groups to cover
catastrophic events, because only then it is affordable. So we need some
entity to coordinate their efforts: An insurance, a state, or something in
between like a non-profit organization.

Or, am I overlooking something here?

~~~
sverige
I am a member of a community that takes care of its members. We are not
perfect at it, but then neither are the more common social mechanisms like
insurance. I recently had major surgery. The tremendous costs incurred are
being paid.

As fragmented as society is today, I can understand why people believe
insurance is an absolute necessity, but I also believe that mechanisms like
insurance contribute to and frequently cause that fragmentation.

Insurance in particular warps normal market forces. For example, it seems
likely to me that the very existence of huge pools of insurance money has
contributed greatly to the hyperinflation in health care costs that has
continued unabated and really unopposed for the last two generations. My
mother told me recently that it cost a total of $80 for her to give birth to
my sister in a hospital in 1959. I'm sure the billed cost for hospital birth
today is many times that amount. That is an example of the great harm that
insurance can do to society, as opposed to any perceived good.

~~~
avar

        > I am a member of a community that takes
        > care of its members.
    

So you and your friends / family / community / church / cult / whatever are
essentially implementing an insurance scheme, and yet you think insurance is a
bad thing?

    
    
        > Insurance in particular warps normal
        > market forces.
    

So would not having insurance and instead having everyone having to set up
some ad-hoc insurance scheme as part of their own community.

~~~
ozim
Yes because insurance is instutionalized by for profit organizations that do
not care about well beeing of those that buy insurance.

Where church, family can be more down to earth and driven by moral obligations
towards person that needs help.

That is how I seen stuff working in asian societies, if you are not helping
your fellows you quickly find out that no one will help you. Where for profit
institution has all incentives to not help or help as little as they are
obliged. They also can spend more on legal help which will protect them from
spending. Predatory insurance companies are not insuring people who are likely
to get sick. Family or church will provide help despite they know that person
will have expensive treatment.

Sad thing is that more and more people find themselves with no close family,
organizations, because of how society in western countries (cities) develops.

~~~
valuearb
You are a little judgmental if you think that no insurance companies care
about the welfare of their customers. If an insurance company doesn't care
about customers, soon it has none.

GEICO was founded because they though they could provide needed insurance
cheaper direct through the mail, rather than through an expensive army of
sales-people. They've saved their customers huge amounts of money over the
last 60 years (for disclosure, I don't work for or use GEICO, I actually use
USAA which is based on same premise).

In church, you have a leader who is milking the flock for an unconscionable
amount of tithing, and a bunch of people milking their religious connections
to get more business. Of course they will all tell you to help each other out,
it's part of how they scam the flock.

And insurance can only work if it's priced according to it's risks. If you
have an expensive illness or are likely to get one, it's actually selfish to
think that an insurance company will take a massive loss to help you out. If
you had purchased medical insurance from the company before you got sick,
you'd still be covered and your costs/risks would have been part of a large
pool that was correctly priced at the time.

That's the problem with Obamacare, people wanting a free lunch. It destroyed
the private insurance market by banning the consideration of prior health
conditions, so now only sick people buy Obamacare. Before Obamacare I paid
$400 a month for a $5,000 deductible coverage for my family. My first year of
the ACA a similar plan cost $1,100 a month, second year $1,300 a month, and
this year it's $1,800 a month.

So now my family is on short term insurance and if I get sick it ends after 6
months. Plus I get to pay massive tax penalties for the privilege of having
insurance that's not ACA approved. I'd like to go back to my old plan but the
ACA banned it.

~~~
eutropia
>> That's the problem with Obamacare, people wanting a free lunch. It
destroyed the private insurance market by banning the consideration of prior
health conditions, so now only sick people buy Obamacare.

This isn't true. The incentive of paying penalties is so that young healthy
people like me get insurance, so that I can dilute the risk pool for my
sicker, fellow citizens. Insurance companies denying you based off of pre-
existing conditions was the status quo because it was profitable (for the
insurance companies, not for society at large) to insurance mostly healthy
people. However, those sick people still need care, and so they end up at the
hospital anyways and in doing so, caused outsized (due to severity)
externalized costs (that the insurance companies got to avoid by pitting it
onto hospitals / government programs). I notice that everyone who claims the
ACA's fundamental premise of getting more people into the insurance pool is
flawed also mentions their insurance premiums going up. The people (companies)
getting a free lunch in this country are those who get to externalize the true
and total costs of their actions.

------
gpm
Money doesn't have a linear utility function. The more money you have, the
less the next $X are worth.

This means, even for "0 sum" games where there isn't a house taking a cut,
gambling will typically have an average net utility loss. You make as much
money as you lose, but that's money worth more when you lose it then when you
make it (past the first $epsilon).

Insurance on the other hand will typically have a net utility gain despite
being a net dollar loss. When you "win", you would otherwise have very little
money, so the money is worth a lot of utility. When you lose, you have lots of
money so it only costs you a small amount of utility.

------
iambateman
The answer to the headline question is in the book "how to lose a million
dollars", which I recommend.

The author describes four classes of financial risk-taking 1\. Investing 2\.
Speculating 3\. Market making (I think) 4\. Gambling

Investing is risking capital with a strong probability of maintaining the
principle while receiving a reasonable return.

Gambling is when you have a negative-sum chance at keeping your principle.

As a result, one person with limited information and portfolio diversity could
"gamble" on apple stock while another person with more diversity is
"investing."

Fundamentally, they're more about information and risk than anything else.

------
jknoepfler
I honestly don't understand why insurance is seen as a private affair.
Everyone who is not very wealthy requires risk management, because otherwise
they run a constant, non trivial risk of complete personal ruin (not just
financial ruin, but inability to pay for medical care). Humans are not capable
of correctly computing the acceptability of small amounts of risk of ruin. The
straightforward solution is to pool risk so that everyone pays a fraction of
each catastrophe, which should just be a federal tax.

At a minimum, if you have children, lack of insurance should not be an option.

Then again, I'm also in favor of decreasing U.S. freeway/highway speed lilims
and enforcing them strictly (like Japan) for risk reduction reasons... I
suspect that my antipathy to American libertarian machismo is far from
universal ;)

~~~
jperras
Your throwaway comment about freeway speeds is a bit odd, since there are
verifiable instances that show that absolute speed is _not_ the deciding
factor in road fatalities.

The most famous example, of course, is the German Autobahn:

"The autobahn fatality rate of 1.6 deaths per billion-travel-kilometers
compared favorably with the 4.6 rate on urban streets and 6.5 rate on rural
roads."

[https://en.wikipedia.org/wiki/Autobahn#Safety](https://en.wikipedia.org/wiki/Autobahn#Safety)

~~~
legulere
Most of the German Autobahn system has a speed limit and you have an
recommended speed of 130.

Also your link says:

> In 2012, the leading cause of autobahn accidents was "excessive speed (for
> conditions)"

~~~
jperras
Yes, I know it says that.

It's a useless "fact". What highway in any place in the world would have
something other than excessive speed (for conditions) as the leading cause of
accidents? The only thing I can think of is landslides/avalanches in very
mountainous regions, and even then I'm sure there are more than enough
accidents/fatalities due to taking a corner faster than you should.

I also stated that "absolute speed is not the deciding factor in road
fatalities". Absolute speed is different from _excessive_ speed for given
conditions. Going 60km/hr on an unplowed, snowy, black-ice ridden road can
easily be _more_ dangerous than going 160km/hr on a dry surface with clear
conditions.

------
zhengiszen
[https://en.m.wikipedia.org/wiki/Takaful](https://en.m.wikipedia.org/wiki/Takaful)

The purpose of this system is not profits, but to uphold the principle of
"bear ye one another's burden". The principles of takaful are as follows:

\- Policyholders cooperate among themselves for their common good. \-
Policyholders contributions are considered as donations to the fund (pool) \-
Every policyholder pays his subscription to help those who need assistance. \-
Losses are divided and liabilities spread according to the community pooling
system. \- Uncertainty is eliminated concerning subscription and compensation.
\- It does not derive advantage at the cost of others. ...

~~~
JetSpiegel
And yet the insurance companies are for-profit corporations. Does not compute.

------
Marazan
Gambling is an adversarial relationship. Insurance is co-operative.

When I insure my house against fire neither I nor the insurance agent want my
house to burn down.

When I gamble on Man Utd to win 2-0 with Pogba to score the bookie doesn't
want that to happen and I do.

Anything that is co-operative is insurance, anything that is adversarial is
gambling.

~~~
jkulubya
Just as a side note; A bookmaker isn't actually your adversary in the way you
mean it here.

A bookmaker (as defined) in a normal? environment shouldn't care for a
particular result in a gamble. All they care for is the profit they make from
squeezing the odds on both ends of a gamble. See
[https://en.wikipedia.org/wiki/Mathematics_of_bookmaking](https://en.wikipedia.org/wiki/Mathematics_of_bookmaking)

~~~
Marazan
I went for a relatively specialised market in the scorecast for my example as
the bookmaker won't have a balanced booked as there are just too many options
to cover.

------
ucaetano
You can look at gambling and insurance from a portfolio theory perspective.
You want to hold the portfolio that maximizes return for the level of risk
(variability) you're willing to take.

Both insurance and gambling lower your returns, but the change in variability
for insurance has a -1 correlation with a risk you currently have (canceling
it out), therefore significantly reducing the overall variability of your
portfolio.

Gambling isn't related to any other risk you already have, therefore
introducing more variability into your portfolio.

So insurance is just a form of gambling where the payout is correlated with a
risk you currently carry, instead of being "random".

------
tabeth
This raises an interesting question: is there a way to perfectly insure
yourself? Or rather, a company that you pay to insure you for everything?

My understanding of insurance is that if there's say 1/100 chance of some
event costing you 100 dollars, then you might pay $5 at some rate for some
period of time to protect you in the case that the event occurs, costing you
100 bucks.

However, if you knew the odds of certain somewhat expected events in your life
were, how could you capitalize on that? You could save, but generally people
don't make enough for that to be worthwhile.

~~~
aaron695
> but generally people don't make enough for that to be worthwhile.

Yes you do.

But it doesn't have to be a zero sum game anyway. Both you and the insurer
could be better off.

Life insurance is a dumb idea. But if you're human then sometimes dumb ideas
stress you out. So to pay to lower that stress might be worthwhile.

But it's complicated. If you have a fire in your house sure it'd be nice to be
insured.

But OMG you house just burned to the ground, you might have died, what if it
happened at night, something way worst might have happened.

Your energy is better spent on fire proofing your house. You should never plan
for events where you might die, you should reduce the risk of dying. If you
really think theres a chance you house might burn down, perhaps you should
move houses. That is more logical but less human.

~~~
pdonis
_> Life insurance is a dumb idea._

Not if your beneficiaries depend on you for support that you can no longer
provide if you're dead, and if you care about what happens to them.

~~~
ucaetano
That is correct, but disability insurance is far more important than life
insurance.

If you die, your spouse can marry again, your kids will be able to work at
some point and so on, there are no additional costs. If you're disabled, it
becomes a massive, long-term, cost burden.

~~~
runholm
You obviously have no concept of marriage or the cost of an education for your
kids. Life insurance is there to make sure your families life isn't utterly
ruined. Your suggestion is to leave the spouse forced to marry someone rich
fast and have the kids work at McDonalds.

~~~
ucaetano
Did you even read my post?

Please, compare the costs of:

* Widow(er) raising two kids

With:

* Married couple raising two kids, while one of the adults has a severe permanent disability, requiring constant care, huge medical bills, etc.

Do you understand now why disability insurance is more important than life
insurance?

~~~
runholm
I am not disagreeing with the importance of disability insurance. I am
disagreeing with your proposed solution to not having life insurance.

Remarrying rich and the kids eventually getting jobs is not a plan I would be
ok with.

~~~
ucaetano
And where exactly did I propose not having life insurance? Would you mind
copying and pasting the text here?

If you have to choose between disability and life insurance, go with
disability insurance. If you have enough money to pay for both, pay for a lot
of disability insurance and some life insurance. Probably 10-20 times more
disability than life.

~~~
runholm
Stop arguing the importance of disability insurance. You sound like a parrot.
Nobody is disagreeing.

You explained your suggested alternative to life insurance. Really don't think
I need to copy paste that to you. Try the parent button.

------
SomeStupidPoint
Insurance guarantees that you pay the expected value of the cost (plus some
premium and buffer), dropping variance in exchange for a fee.

Gambling does the reverse, turning a fixed amount of money in to bursty
payouts in exchange for a premium, adding variance.

One is basically the opposite of the other.

You can even use roulette as an event randomizer to make your trips to Vegas
more exciting. (Games with probabilistic loot are more "fun" than predictable
loot.)

------
PaulRobinson
I spent a year back in the 2000s living as a professional gambler. I know
professional poker players. I write and operate "bots" that gamble on betting
exchanges automatically (effectively the sports/games version of algotrading)
as my main hobby - 20+ hours/week, sometimes - and my accounts are net
positive to my advantage (a feat accomplished by less than 0.5% of gamblers).

Whilst I enjoy a good old punt on a horse like many a Brit or Irish racing
fan, and enjoy the odd bet on a football game or cricket match, I believe that
I - and fellow gamblers I know who make a profit - do not actually gamble the
way most people do.

We treat it more like insurers see the issuance of insurance. First, we'll
look at data. Second, we realise money management - and liability exposure vs.
income - is critical to success. We look for situations where there is an edge
in our favour which we call "value". When we see an edge we can quantify,
we'll exploit that using Kelly or Maximal Exponential Growth strategies.

Genuinely, I look at some sports events using techniques and strategies that
would not look alien to a statistician who has trained to become an actuary.
They have more data with stronger statistical significance, and their thinking
may be more rigorous, but they are my inspiration: with the right numbers, you
can model risk, and identify what odds you're prepared to accept and what odds
you're not.

I will play in casino games for recreational fun, not for profit. Same with
slots/fruit machines, lotteries, and so on. Tiny amounts of money. It is
impossible to beat these beyond the medium term without some form of luck. In
the long run, games with house advantage will only ever be won by the house
who has the advantage.

Sport though? Something where I can do some data analysis and start finding
informational arbitrage over others in the market? That's potentially
investment. And so far, it's done me well.

And so the honest answer is, nothing much is different, it's just that most
gamblers and most people who buy insurance are people who do so without
thinking and without understanding mathematics and liability, etc.

A few of us though, a small number on Betfair or perhaps inside the sacred
walls of Lloyds of London, see the World a little differently and play a game
with maths at our side that few others are interested in playing.

------
Spooky23
It's pretty obvious. Gambling by its nature creates a situation where the
"game" is there to induce a biological response where you're either rewarded
or punished asked on your performance.

Insurance is different -- its there to pool and quantify risk. That's why we
don't have people hopelessly addicted to buying car insurance. It's not there
to give you a rush.

------
kemonocode
Unlike with betting though, it is seen as acceptable for insurance companies
to weasel out of their obligations when paying out insurance.

------
analog31
I wonder if an alternative to moral and economic analysis would be empirical:
Look at how gambling and insurance affect people and communities. How many
lives are ruined by gambling? How many lives are ruined by insurance? There
must already be known issues with both gambling and insurance, because both
are heavily regulated.

~~~
chillacy
Yes, I think the answer to the headline is entirely that. The reason gambling
is regulated is that it's fun and tends to draw the "wrong" type of crowd.
It's like asking why we regulate alcoholic drinks but still use ethanol
(albeit denatured) in fuel and medicine. Just look at what they're used for.

~~~
analog31
Perhaps another reason is that gambling devastates people who don't understand
it and can ill afford it, whereas anybody who loses money in the insurance
industry is presumably a "qualified" investor who knows how much they can
afford to bet.

------
kirykl
I think the right/wrong is in the apparatus. Gambling is usually repetitive
and involves operative conditioning, which can be addictive.

Insurance is too but to a much lesser degree. If I buy fire insurance and my
house burns down, I get rewarded (as in operant conditioning). But only
punished when my house lasts until I die or sell it.

~~~
smallnamespace
There's another, more direct reason: insurance is _only_ supposed to allow you
to 'hedge out' risks that you already have, whereas gambling or speculation is
unrestricted.

In the case where your house burns down, you're 'rewarded' in the insurance
contract, but you should be close to net indifferent (after insurance) over
whether your house burned down or not.

That's why we don't let people buy insurance on other people's houses -- it
creates a perverse incentive for the insurance purchaser to force a certain
outcome.

------
peternilson
My opinion is that insurance is vastly misunderstood, just as gambling is
vastly misunderstood. In insurance, it's the low premiums on high valued
assets that obscure peoples thinking and in gambling it's often small wagers
offered in return for potentially large payoffs. I know of people who could
afford to replace a phone if it was stolen, but still take insurance on it
because the small premium on the insurance seems like a good deal. There is
just no way that these type of insurance contracts have a positive expected
value to the individual. However, if you're a single Mom making ends meet, who
needs to drop her kids at school every morning, please insure your car. The
utility of losing the car and not being able to get to work etc. is just too
negative.

------
kriro
“Inn-sewer-ants,” repeated Rincewind. “Tha’s a funny word. Wossit mean?”

“Well, suppose you have a ship loaded with, say, gold bars. It might run into
storms or, or be taken by pirates. You don’t want that to happen, so you take
out an inn-sewer-ants-polly-sea. I work out the odds against the cargo being
lost, based on weather reports and piracy records for the last twenty years,
then I add a bit, then you pay me some money based on those odds—“

Color of Magic, Terry Pratchett, page 45

That's the passage I found googling. It actually goes on and compares
insurance and gambling. Highly recommended book (as is almost everything by
the author of course)

------
Chris2048
Insurance places don't have shiny bells and whistles encouraging you to take
risks, if anything the red tape actively discourages your success in
transferring risk to them.

It's hard to sell insurance based on the promise of riches, the best you could
do is fear-mongering risks of not having insurance.

------
jaclaz
Add what about tontines?

[https://en.wikipedia.org/wiki/Tontine](https://en.wikipedia.org/wiki/Tontine)

They are not mentioned in the article, but they are (were) IMHO the missing
link between life insurance and gambling.

------
Nomentatus
Not mentioned is that life insurance began as a form of gambling during the
Civil War; but the original form was the reverse of the modern idea of
insurance: soldiers formed a pool and the last man alive (long after the war,
presumably) would inherit it all.

------
pmoriarty
Could "betting" with insurance be made as fun as gambling?

~~~
dest
I have been dreaming for years of a casino where gambling results are tied to
insured events. Risk averse people would meet people looking for risk. I am
not sure it is a good idea thought.

One difficulty is the discrepancy in the probabilities of outcome. Insured
events are rare and cost a lot. Gambling often cost you a little bit but
sometimes you earn a lot.

~~~
ryhamz
Sounds like you want to start an insurance company or a VC firm.

~~~
dest
I am not sure I want that.

When you go to a casino to gamble, your gains expectancy is negative because
of the house's cut. You pay to have more risk. When you go to your insurance
company, your gains expectancy is negative as well, because the insurance
company is profitable. You pay to have less risk.

So people pay to have more risk, and other people pay to have less. I'd like
to know if those two groups can meet.

------
milkers
ASAP(as simple as possible), for the first you consider to pay money expecting
that you are lucky, for the letter you pay money expecting that you are
unlucky.

------
colinmegill
Uh... the downside isn't inevitable?

~~~
Buge
Both have possible upsides. And both have negative expected value.

~~~
coralreef
How do you figure that gambling or insurance have negative expected value?

~~~
Buge
If you multiply the gambling reward with the probability of winning, it will
be less than the cost to play. This is the house edge. It's how the casino
makes money.

It's the same thing with insurance. If you multiply the size of the payout
with the probability of getting a payout, it will be less that your insurance
premiums. It's how the insurance company makes money.

[https://en.wikipedia.org/wiki/Expected_value](https://en.wikipedia.org/wiki/Expected_value)

E[x] = prize*winning_probability - cost < 0

------
k__
Insurance is betting on your bad luck and gambling is betting on the bad luck
of others.

------
eveningcoffee
Difference is in the intent.

------
jlebrech
yes it's gambling, and so is a pension.

------
brilliantcode
because the world is corrupt and created after men who seemingly look to
exploit and take, like their forefathers did.

------
sumedh
What if a new born baby has condition which needs an expensive surgery, how
will parents pay for it, how does that fit in your everyone dies model?

~~~
4ad
Not the grandparent, and slightly offtopic, but I think it is inhumane to
raise children with problems that would affect their quality of life.
Preferably this should be detected before birth, but if it's not possible but
becomes obvious just after birth I would prefer to euthanise my baby than a
life in pain.

~~~
Sephiroth87
A condition that requires surgery doesn't necessarily means a life in pain...

~~~
4ad
No, it doesn't, and obviously every situation is different and needs a
different analysis. Personally, I would err towards having healthy children
that do not require invasive medical procedure to survive at the expense of
simply making another child.

Of course this is all theoretical as baby euthanasia is illegal.

~~~
dagw
_simply making another child_

Making another child is many times far from "simply"

------
lucisferre
In a word. Math.

~~~
colorincorrect
what do you mean? in both cases the odds are against you.

~~~
logfromblammo
In gambling, you are concentrating risk. In insurance, you are diffusing risk.

Both rely on the expected value calculation.

If you own an object that has a 10% chance in any given year to spontaneously
self-annihilate (and a 90% chance to continue existing as usual), then you
would expect that its value next year will be ( 0.1 * 0 + 0.9 * v = ) 0.9
times its value right now.

Gambling is to watch it for a year. If it continues to exist, you still have
it, and it is worth the same. You beat the odds. But if it vanishes, you lost
everything.

Insurance is to accept the reality that you can't keep winning that game
forever. You can spread the risk of loss over multiple years, while abandoning
any gambling windfalls you might have enjoyed. You pay 10% of the value of the
object every year to your [mathematically simplified] insurer, who agrees to
pay 100% of its value in the event it is lost. In any year it still exists,
you "lost" 0.1 of the value you "won" by still having it. In the year it
vanishes, you lost 1.0 the value of the item itself, but got a net 0.9 of the
value of the item in non-self-destructing cash, "losing" 0.1 total. From your
end, you get exactly the value you expect mathematically from owning the item,
year after year, with zero risk to you.

The non-simplified math is a bit more complex, but ensures that while you will
always eventually lose the self-destructing object itself, you will never lose
all of its value _all at once_. It also means your insurer is essentially
investing the gains you would have otherwise realized by gambling. Once _their
bet_ is closed by disappearance of your object, they pay you off from their
investment portfolio and pocket the difference or absorb the loss.

The smart play _for you_ would be to neither gamble nor insure, sell the self-
destructing asset right away, and invest the proceeds normally, in something
that has a positive expected value. _Eliminating_ the risk is always worth
more than _managing_ it.

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id122015
Sometimes dealing with HR departments is like gambling. The house always win
and you loose.

With insurance you might win exactly when you need it.

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kazinator
> _What makes gambling wrong but insurance right?_

Is this serious?

In insurance, I cannot say, "I want to quintuple-down on having a car accident
this year; let me pay a $5000 premium instead of $1000 for a 5X payout!"

Insurance typically covers specified perils. When they occur, the payout is in
proportion to the _actual_ damages, not to the rarity of the odds.

If insurance were like gambling: "Oh man, I won the insurance jackpot! My
house was leveled by a rare meteor---500:1 payout---not just your everyday 4:1
fire."

Also, there is the obvious general observation: insurance compensates for
losses. You don't win; you lose stuff and are compensated. You don't get
compensated unless you lose first. People don't always feel adequately
compensated by money. Money won't bring back the memorabilia you lost that got
burned up in the fire. It won't grow back a severed arm, or replace people who
died.

In gambling you don't lose anything to win; just your time and the bets, which
loosely correspond to insurance premiums. The win is a pure win, not a
compensation for loss.

`Nuff said.

