You are treating “investing in preventing X” as the same thing as “insuring against X.” They are not the same thing. And they are doubly not the same thing on a society-wide level.
Fair enough, certainly one can draw a distinction between spreading risks around and reducing risks; even though in practice, the distinction is a bit muddled inasmuch as insurance companies invest heavily in reducing net risk by fighting moral hazard, funding prevention research, establishing industry-wide codes, withholding insurance unless best-practices are implemented.
So go back to my isomorphic argument, and for every mention of insurance, replace it with some personal action that reduces the risk eg. for ‘health insurance’, swap in ‘exercise’ or ‘caloric restriction’ or ‘daily wine consumption’.
Does this instantly rescue Cochrane’s argument and the isomorphism sound equally sensible? “You shouldn’t try to quit eating so much junk food because while that reduces your health risks, there are so many risks you could be reducing that it makes no sense to try to reduce all of them and hence by the fallacy of division, no sense to try to reduce any of them!”
As Lumifer points out, trying to make your house fire-proof (or prevent any of the other risks you list) really would be ruinously expensive.
So you resolve Cochrane’s argument by denying the equality of the risks.
I think you’re misreading Cochrane. He approvingly quotes Pindyck who says “society cannot afford to respond strongly to all those threats” and points out that picking which ones to respond to is hard. Notably, Cochrane says “I’m not convinced our political system is ready to do a very good job of prioritizing outsize expenditures on small ambiguous-probability events.”
All that doesn’t necessarily imply that you should nothing—just that selecting the low-probability threats to respond to is not trivial and that our current sociopolitical system is likely to make a mess out of it. Both of these assertions sound true to me.
Fair enough, certainly one can draw a distinction between spreading risks around and reducing risks; even though in practice, the distinction is a bit muddled inasmuch as insurance companies invest heavily in reducing net risk by fighting moral hazard, funding prevention research, establishing industry-wide codes, withholding insurance unless best-practices are implemented.
So go back to my isomorphic argument, and for every mention of insurance, replace it with some personal action that reduces the risk eg. for ‘health insurance’, swap in ‘exercise’ or ‘caloric restriction’ or ‘daily wine consumption’.
Does this instantly rescue Cochrane’s argument and the isomorphism sound equally sensible? “You shouldn’t try to quit eating so much junk food because while that reduces your health risks, there are so many risks you could be reducing that it makes no sense to try to reduce all of them and hence by the fallacy of division, no sense to try to reduce any of them!”
So you resolve Cochrane’s argument by denying the equality of the risks.
I think you’re misreading Cochrane. He approvingly quotes Pindyck who says “society cannot afford to respond strongly to all those threats” and points out that picking which ones to respond to is hard. Notably, Cochrane says “I’m not convinced our political system is ready to do a very good job of prioritizing outsize expenditures on small ambiguous-probability events.”
All that doesn’t necessarily imply that you should nothing—just that selecting the low-probability threats to respond to is not trivial and that our current sociopolitical system is likely to make a mess out of it. Both of these assertions sound true to me.