19 March 2011

Developing a Theory

I'm slowly developing my own views about global climate change.

Don't anybody rush me.

One aspect of my emerging view is that markets are rational, and unbiased by any of the various factors that may bias scientists with or even without political interference. So where market rationality seems likely to be strongest, believe it over even the best credentialed experts.

Look at the earthquake in Japan, unpredicted by any scientists, but predicted by Dennis Gartman, author of a widely followed investment letter.

But in the matter of climate change, the news would come from, say, increasing flood insurance premiums.

Unfortunately, in the U.S. and in much of the rest of the world, flood insurance is a heavily socialized and political matter.

Anyway, I have discovered even since beginning work on this post that Matthew Kahn, a guest blogger at The Volokh Conspiracy, has been way ahead of me.

Back in November, Kahn wrote that for-profit insurance companies must be allowed to engage in price gouging, because price gouging is exactly what the price signalling will look like if the market for flood insurance does begin to reflect oncoming climate change and rising sea levels.

So: are there places where such price gouging is allowed by law, and where govt doesn't discourage it by in effect offering a competing subsidized product. And, if so: has that gouging become more successful, more profitable, of late? are there new entrants into those markets? This is where we should be looking, if we hope to understand the direction of climate change.

3 comments:

Henry said...

Matthew Kahn recently became a regular blogger at the Reality-Based Community: www.samefact.com.

Henry said...

Sorry, that's www.samefacts.com.

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