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Lumifer comments on Systemic risk: a moral tale of ten insurance companies - Less Wrong Discussion
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Comments (18)
Looks like you discovered diversification :-)
In your scenario each insurance company gained the benefits of diversification but the industry overall lost is (as all companies are exactly the same now). But I don't understand what does the adjective "moral" in the title refer to.
I knew the result; it just felt good to have a clear model :-)
It becomes even clearer if, post-diversification, instead of 10 insurance companies which are absolutely identical you just have one. In this case that one company internalizes the benefits of diversification while it's obvious that the industry composed now of a single company has no diversification at all.
I think it's moral in the same way as the tragedy of the commons is moral.
That may well be so, because I don't understand what does the adjective "moral" have to do with the tragedy of the commons, too.
It has to do with reasoning about good and bad outcomes, incentives, choices of action ... in what way is that not moral reasoning?
If you stick your hand into the fire you'll get burned. If you don't, you won't. See: "reasoning about good and bad outcomes, incentives, choices of action". Is that moral reasoning?
Quite a lot of both traditional and philosophical moral views attribute negative value to self-destructive behavior, actually.
I don't see anything self-destructive about sticking your hand into a fire. I've done it and I'm still around :-P
On a bit more serious note, you're confusing moral reasoning itself with the subject of moral reasoning.