Money Talks

A supply and demand graph.

When I was in high school, I was an excellent math student. I did well enough that when I got to college, I was told to take a course called “Elementary Calculus” as my first math course. I thought “Elementary Calculus” would be no problem. But after the first day, it became clear to me that “elementary” did not mean what I thought it meant. I lasted for about two days and then dropped down to a course for people who wouldn’t be majoring in math. It was my last math course. Because I love math, I regret not trying harder. I learned later that the class was meant to weed out people like me who did not really belong in the math department. Anyway, that was the end of my math career and my career in rigorous quantitative courses. With one exception: microeconomics.

Prof. Uwe Reinhardt receiving an award.

Microeconomics made a real impression on me. Even today, it shapes the way I think about a lot of social and political issues. Our professor was a healthcare economist, Dr. Uwe Reinhardt, and I was taking the class in the early 90s, when health care reform was at the top of the political agenda. He glowed with worldly relevance each day. One of the lessons I took from the class was the sheer usefulness of prices as a way of learning things about the world.

If you want to know about the real risks of climate change, talk to property insurers. We can listen to all the happy talk we want to hear, but try to get affordable flood insurance for houses near the water, or fire insurance for houses in the path of the new breed of wildfires, and you get a sense of the seriousness of the problem. Insurers are not listening to happy talk. They are putting real money on the table and are listening to the people with the soundest methodologies and the best estimates about the future.

Here is an example from today. I was working with a colleague on finding insurance for an event to be put on by the folks in the Boston-area Jewish community in the near future. Here is what an insurance broker had to say:

No one is underwriting for anything with an Israeli affiliation, and even our Jewish institutional clients are facing unprecedented obstacles, with flat-out no responses to new policies for Jewish or Israeli identified organizations.

This is saying that the supply of insurance for Israelis and Jews is way down, or alternatively, since Jews and Israelis need just as much insurance now as ever, the price is way up.

Listen to all the happy talk you want to hear. But if you want to know whether Jews and Jewish institutions in America are at unprecedented risk, listen to the people who have to pay real money when there’s a loss. They may be telling you something that you don’t want to hear.

Image credit: 總統府 (CC BY)

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