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Moral hazard, via dumb commercials

Nov 25, ’09 12:42 PM

Another commercial which I’ve always wondered about is this one for Traveler’s insurance:

The trouble with the commercial is that the dog, after seeking out ways to protect his most prized possession, finds a solution in purchasing insurance. Keep it on your person? Too hard. Put it in a bank? Too risky. But with insurance, you can just leave it out in plain sight and go out to play.

This is of course a problem known as moral hazard. The shifting of risk from the original owner of an interest to an external organization causes the owner to act in ever more risky ways. Imagine if everyone just got insurance and then instead of protecting their business/car/house went outside to play. I mean, what the hell, if you’re paying for insurance you might as well not worry about it.

In the real world, insurance companies protect themselves against moral hazard by doing things like dropping you from your car insurance if you make more than 3 claims in a 5 year period. Or penalizing you (or dropping you) on your health insurance for gaining too much weight. In the finance world, we can arguably trace some of the roots of the 2007-now financial crisis to the fact that banks laid off their risks onto someone else, allowing them to take some fees and sleep better at night.

In short, the ad with the dog is almost exactly what insurance companies do not want you to do. What they want is for you to continue to act paranoid, but after doing everything possible to reduce your own risk, not worry about what’s left over. The thing is, carrying some risk – maybe a lot, maybe some – makes you more responsible. This crazy mutt has no more skin in the game…

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Pitch perfect comedy

Nov 6, ’09 11:06 AM

I don’t always love 30 Rock, but this week’s episode hit exactly the perfect New York spot (apologies in advance for the advertisement):
[sorry, hulu just does not play nice embedded]

For people who don’t live in NYC, the joke is about Alec Baldwin having bedbugs and finding himself an outcast, finally reduced to asking for help on the subway. Which was kind of funny.

But what makes it brilliant is this ending. Like almost every New Yorker not named Michael Bloomberg, I get asked for money pretty much everyday. If not everyday, every few days. I can say that in 6 years of living here, I’ve never gone a full week without someone on the subway or street, performing, begging, shouting, but somehow asking me for money. Dealing personally (do you ignore? give food? give money? get involved?) with dramatic inequality and homelessness is simply part of living in an urban environment.

And in the constellation of homeless people on the subway, these guys are absolutely perfect. They are real guys, and this is indeed the song they sing all the time. You cannot help but smile when these guys are singing, and somehow this hits the incredibly sweet spot at the intersection of parody, comedy, and reality. When Baldwin takes a swig and gets out the bag, it is just so damn funny. Thank you for this, 30 Rock writers!

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If you're going to do hip hop at the White House…

Nov 4, ’09 4:26 PM

Awesome tribute to our first Secretary of the Treasury. Compares favorably to 99 Problems but a Bitch ain’t One:

Geek rap is so sexy. h/t James Fallows.

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NBC and Jay Leno

Nov 2, ’09 8:31 PM

Gabriel had a thoughtful post about Jay Leno, comparing his programming to NPR and classical music over the past couple decades. I’m much more sympathetic to Grant McCracken’s view of Leno as a failure because he misses the contemporary moment’s desire for specificity and instead provides the blandest of something-for-everyone variety. Though McCracken and Rossman are not quite speaking to each other here, to be sure.

Now I read that NBC is about to get swallowed by Comcast, and I think it’s a matter of time before we see the tick-tock of Leno’s contribution to this overall state of the media world. For what it’s worth, I think Leno is truly, truly bad, both an unabashed corporate sellout shill and a terrible interviewer to boot.

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Go bag

Nov 1, ’09 5:56 PM

It’s that time of year again, when I first got freaked out about emergency preparedness by watching 28 Days Later. And it’s the time when I review and renew my emergency go kit. For peace of mind, this is the fanny pack that you can walk out of your house in 10 seconds with. It comes from Jim Macdonald’s post over at Making Light. He also has pages for other kinds of emergencies, including a highly useful flu kit.

In any case, enjoy, and hopefully you’ll never need it: Emergency Go Bag Inventory

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on the right side of history

Oct 22, ’09 8:22 AM

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what to do when a smart person says a crazy thing?

Oct 15, ’09 9:54 PM

One of the founders of string theory in physics made the case this week that the Large Hadron Collider will fail to produce/discover the Higgs boson because its very existence is so abhorrent to nature that the attempt to create it sabotages itself.

The upshot is that we can expect seemingly strange delays and chronic problems to plague CERN interminably. This has to be one of the better physics theory in the world today, frankly. Perhaps there is a similar explanation for why I can never find the elusive Skinny Cow Cookies-N-Cream flavored ice cream sandwiches..their deliciousness is so antithetical to nature that somehow it’s rippling backwards through time.

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game night?

Oct 12, ’09 5:01 PM

Shouldn’t there be some kind of Mario Kart sociology meetup again sometime soon? It feels like it’s been a really long time…Let’s get a move on, Scatterplot!

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more nudging

Oct 12, ’09 9:23 AM

Here is another one from the series of Volkswagon’s ‘fun theory’ design projects, this one a bottomless garbage can to induce people to throw away trash:

The whole shebang is worth noting, for its effects on behavior and its bigger-issue demonstration of the contextualization of rationality. Plus, honestly, it’s a fun video. I don’t know that I’d like all my trash bins singing at me, but I’m trying to imagine how this might work for a classroom, or for finance, etc. Obviously, this is a field that has been trodden upon before.

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the inducements of rationality

Oct 9, ’09 7:01 AM

Economic sociologists have long wrestled with the microfoundations of market rationality, and attempted to understand the embeddedness of behavior in the cultural context in which it rests…oh, hell, I just want to post this video of the subway stairs in Stockholm:

Have a nice Friday, peoples!

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