Neglecting Disaster: Why Don't People Insure Against Large Losses?

This paper provides a theoretical explanation for the common observation that people often fail to purchase insurance against low-probability high-loss events even when it is offered at favorable premiums. We hypothesize that individuals maximize expected utility but face an explicit or implicit cost to discovering the true probability of rare events. This cost constitutes a threshold that may inhibit purchase but may be offset in several ways by suppliers of insurers and state regulators.     

Explaining third-party success in gubernatorial elections: The cases of Alaska, Connecticut, Maine and Minnesota

In the 1990s alone, four states elected third-party governors. Walter Hickel of Alaska and Lowell Weicker of Connecticut were elected in 1990. Maine elected Angus King in 1994. And Jesse Ventura was elected governor of Minnesota in 1998. In this article, I examine these four cases in an attempt to identify the factors that contribute to third-party electoral success. I apply two models to these cases. The first model, “alternative culture,” holds that certain voters—regardless of specific context—are predisposed to support alternative candidates. The second model, “institutional context,” looks at factors such as name recognition, resources, and access to media as explanations of third-party success. I find that except for the influence of “partisan independence,” there is little evidence to support the persistence of an alternative culture of third-party voting. Rather, these four cases are linked by a context particularly favorable to these alternative candidates.     

Framing,probability distortions,and insurance decisions

A series of studies examines whether certain biases in probability assessments and perceptions of loss, previously found in experimental studies, affect consumers' decisions about insurance. Framing manipulations lead the consumers studied here to make hypothetical insurance-purchase choices that violate basic laws of probability and value. Subjects exhibit distortions in their perception of risk and framing effects in evaluating premiums and benefits. Illustrations from insurance markets suggest that the same effects occur when consumers make actual insurance purchases.Presented at the Conference onMaking Decisions about Liability and Insurance, The Wharton School, University of Pennsylvania, Philadelphia, PA, 6–7 December, 1991. This research is supported by National Science Foundation Grant SES88-09299. The authors thank Jon Baron, Colin Camerer, Neil Doherty, Paul Kleindorfer, Amos Tversky, and two anonymous referees for many helpful comments. We particularly acknowledge the efforts of Matthew Robinson and Penny Pollister for their help with data analysis.     

Risk,ambiguity, and insurance

In a series of experiments, economically sophisticated subjects, including professional actuaries, priced insurance both as consumers and as firms under conditions of ambiguity. Findings support implications of the Einhorn-Hogarth ambiguity model: (1) For low probability-of-loss events, prices of both consumers and firms indicated aversion to ambiguity; (2) As probabilities of losses increased, aversion to ambiguity decreased, with consumers exhibiting ambiguity preference for high probability-of-loss events; and (3) Firms showed greater aversion to ambiguity than consumers. The results are shown to be incompatible with traditional economic analysis of insurance markets and are discussed with respect to the effects of ambiguity on the supply and demand for insurance.University of Chicago Graduate School of BusinessUniversity of Pennsylvania The Wharton School     

Developing Models for Day Services

This paper reports an evaluation of a rural activity project for people with learning difficulties. The project is situated in (but not a regular part of) an agriculture college. Both statutory and voluntary interests are represented in the management of the scheme, which is funded by the All Wales Strategy for the Mentally Handicapped through the local authority. Despite the widespread presence of ideas about normalization and carer participation, key stakeholders in the project appeared to draw on various aspects of three different models in describing, assessing and participating in the work of the scheme: a training for work model, a personal and social growth model, and an education for life model. We explore the question of whether such contrasting views can be tolerated in a single project, and their implications for policy and practice decisions. Each model has its distinctive consequences for project aims, selection, programme planning, staffing requirements, future development objectives and desirable project outcomes. The debate has implications for the way in which policies of normalization are operationalized in and beyond the field of learning difficulties.     

The Effects of Allostatic Load on Racial/Ethnic Mortality Differences in the United States

This study expands on previous findings of racial/ethnic and allostatic load (AL) associations with mortality by addressing whether differential AL levels by race/ethnicity may explain all-cause mortality differences. This study used data from the third National Health and Nutrition Survey public-use file, gathered between 1988 and 1994, with up to 18 years of mortality follow-up (n = 11,733). AL scores were calculated using a 10-biomarker algorithm based on clinically determined thresholds. Results of discrete-time hazard models suggest that AL is associated with increased mortality risks, independent of other factors, including race/ethnicity and SES. The results also suggest that the AL–mortality association is stronger for non-Hispanic blacks than for non-Hispanic whites, and that at low levels of AL observed mortality differences between non-Hispanic blacks and non-Hispanic whites are non-significant. These findings suggest that mortality differences between non-Hispanic blacks and non-Hispanic whites may be the result of how early life exposure causes premature aging and increased mortality risks. More attention to resource allocation and local environments is needed to understand why non-Hispanic blacks experience premature aging that leads to differential mortality risks compared to non-Hispanic whites.     

“Moving from transactional government to enablement” in Indigenous service delivery: The era of New Public Management,service innovation and urban Aboriginal community development

Over the last 40 years, Aboriginal Community Based Organisations have played a distinctive role in society in relation to urban Aboriginal peoples and their rights to self‐determination and community development in the Australian city of Newcastle. They have proven essential to advocacy, the maintenance of community development, and the creation of new Aboriginal social infrastructure (community organisations, facilities, services, and supporting infrastructure). Autonomy has been empowering for local Aboriginal people. Major reforms to the delivery of government social services, particularly government enablement of a new social service market based on New Public Management principles, threaten this success. This interpretive, qualitative case study illustrates the effects of social service market enablement. It draws on a case study of the effects of social service market enablement on urban Aboriginal Community Based Organisations in Newcastle, showing the antagonistic relationship between social service market enablement and Aboriginal community enablement and development. It ends with a discussion of how Aboriginal community development in this city could be re‐enabled in light of the Prime Minister's arguments in his 2017 Annual Parliamentary Closing the Gap speech providing particular value in the context of policy discussions about moving from transactional government to enablement in Indigenous affairs.     

Social Contagion and General Diffusion Models of Adolescent Religious Transitions: A Tutorial,and EMOSA Applications

Epidemic Models of the Onset of Social Activities (EMOSA) describe behaviors that spread through social networks. Two social influence methods are represented, social contagion (one-to-one spread) and general diffusion (spread through cultural channels). Past models explain problem behaviors—smoking, drinking, sexuality, and delinquency. We provide review, and a tutorial (including examples). Following, we present new EMOSA models explaining changes in adolescent and young adult religious participation. We fit the model to 10 years of data from the 1997 U.S. National Longitudinal Survey of Youth. Innovations include a three-stage bi-directional model, Bayesian Markov Chain Monte Carlo (MCMC) estimation, graphical innovations, and empirical validation. General diffusion dominated rapid reduction in church attendance during adolescence; both diffusion and social contagion explained church attendance stability in early adulthood.