Podcast:The Marginal Revolution Podcast Published On: Tue Nov 19 2024 Description: In this episode, Alex and Tyler dive deep into the fascinating and often misunderstood world of insurance, exploring how this trillion-dollar industry underpins modern economies while shaping human behavior in surprising ways. From its ancient roots in maritime adventures to the revolutionary development of life insurance, they unravel the economic logic and social norms that made this market possible. Along the way, they grapple with enduring puzzles: Why do people insure against some risks but not others? Why did life insurance once seem repugnant, only to become a moral imperative? How has the industry's ability to manage moral hazard and agency problems evolved—or not? From mutual aid in Indian villages to the legacy of 17th-century tontines, the conversation illuminates the ways in which insurance reflects both the limits of human foresight and our relentless attempts to navigate an uncertain world. Recorded March 14, 2024 Transcript and links: https://www.mercatus.org/marginal-revolution-podcast/economics-insurance Stay connected: Follow Alex on X: https://x.com/ATabarrok Follow Tyler on X: https://x.com/tylercowen See Alex and Tyler's recent posts on Marginal Revolution: https://marginalrevolution.com/ Chapters 00:00 - The size and benefits of the insurance industry 02:35 - Insurance as a transaction enabler 10:13 - Nicholas Barbon, Robin Hanson, and insurance bundling 18:22 - The effect of advances in mathematics on insurance 23:45 -Tradable insurance as an early prediction market 32:54 - Risks we don't insure against 37:12 - Charles Ives and changing social attitudes around life insurance 41:33 - Will repugnance fade for paid organ donations as it did for life insurance? 45:31 - Have the agency problems behind insurance been fully solved? 54:44 Good books on insurance and takeaways