Episode 56 – How the disincentive of untransferred risk helps to regulate the market

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untransferred risk

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Sometimes people are just so wrong that you rebut them twice!

This is the case with Matthew Green, a cryptography professor at John Hopkins University, who recently made the following tweets:

The problem I have with libertarianism is the assumption that humans won’t, given the opportunity, build condos on top of a live volcano.  The second problem I have with libertarianism is the assumption that your neighborhood bank won’t invest your savings into those condos.

Rollo covered a few aspects of why he is wrong in an article posted yesterday.  Here’s a snippet:

Green’s biggest mistake is that his argument is a non sequitur.  Yes, it is true that zoning laws and other state laws and regulations are often designed to prevent people from harming themselves.  However, that does not mean that the state action is the reason for people not doing stupid things.  Let’s apply Green’s logic elsewhere.  Does the existence of food safety laws prevent someone from serving toilet water instead of beer at a bar?  Or does he avoid that since it would be terrible for his business?

But there is even more to talk about.  The inability to transfer risk is a huge disincentive to live on top of a live volcano.  Yet if someone really wanted to do that anyway, he could.  But he’d have to deal with the consequences.

Links
Matthew Green’s tweet
Rollo’s original rebuttal to Matthew Green: No, Matthew Green, libertarianism won’t feature people building condos on live volcanos

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