Role of the Dice

purple_philo

 

2014-02-18 – Insurance used to be considered gambling. Think about it, you pay a bookie on a long shot bet, and most of the time the bookie walks away with your money. You collect only if the long-shot event happens. If you’re betting on a horse, it’s gambling. If you’re betting on your life, or your health, or the safety of you house or car, it’s called insurance.

Once upon a time, gambling was considered a sin, and contracts for a wager were considered illegal and unenforceable.

At some point, however, insurance began to be thought of as socially useful. Unlike normal gambling, which increases a gambler’s financial risk, insurance was seen as a type of wager that reduces risk. Insurance contracts were characterized as “aleatory” contracts and pronounced enforceable. The word aleatory comes from the French “alea,” which means dice.

This type of contract reduces risk because it pays you only if you have a loss. The payment may not erase the loss, but it reduces the severity of it by minimizing the financial consequences. You have a car accident, the insurance pays. You go to the hospital, the insurance pays. Your house burns down, the insurance pays. You die, the insurance pays.

Sometime in the 1970s (by my memory), gambling began to lose its stigma. I remember buying a ticket in the first Ohio lottery (where I lived at the time) and winning 10 or 20 dollars. Since then, lotteries have spread to most states. Win at PowerBall and you become part of the 1%.

And stock market  speculation—something that has always been with us—has been elevated from being thought of as somewhat shady to the prime aspiration of A+ students across the country.

At the same time, insurance, which was the good kind of gambling, is now seen by many as vaguely socialist. (Or not so vaguely socialist.)

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