Just a quick thought about global warming rhetoric, which came to mind while reading this Marginal Revolution post and the linked posts by Jim Manzi. Some of those who advocate taking major steps (starting with a hefty carbon tax) to stop global warming say doing so is a way of “buying insurance” against a major catastrophic event. Their point is that the really really bad scenarios, like a complete melting of the polar ice caps, might be very unlikely, but the consequences are sufficiently bad that we should act anyway.
As policy, there is something to this position. But calling the measures in question “catastrophe insurance” is akin to calling new brake pads “car insurance.” An action designed to reduce the risk of something is not the same as an action that insures against the risk of something. New brake pads reduce your risk of getting into an accident. Car insurance, on the other hand, doesn’t reduce your risk of an accident; it just pays for your losses if an accident occurs. The policies being advocated, insofar as they are supposed to reduce the likelihood of catastrophic climate change, are more like the brake pads. If you’re looking for policies that take the form of insurance, think investments in air-conditioning and dike-building technologies that will be mostly useless unless the crazy stuff really does happen.
It is true that people might buy insurance and adopt preemptive/ameliorative policies for similar reasons. If you’re risk averse, you want to both reduce risk and buy insurance. (Though not necessarily both; if you can reduce risk, it’s not as necessary to insure against it, and vice versa.) But despite similar justifications, the mechanisms are different.