Econ 1-10

Front 1

Realmof uncertainty and risk properly understood.

Back 1

Earthquake, war, and hurricane may be in the category ofrealm of uncertainty rather then risk understood.

Front 2

Earliestforms of insurance

Back 2

BurialSocieties, which set aside resources to guarantee a tribe member a decentinterment.

Front 3

Inventionof the insurance fund

Back 3

· Scotland ministers invented the insurance fund in 1744.

Front 4

Limitedliability and insurance (Sun Insurance Office)=

Back 4

1710Limited liability came to the insurance business with the founding of suninsurance.

Front 5

Sixtheoretical factors that evaluate risk (late 17th century)

Back 5

· Probability, life expectancy, certainty, normaldistribution, Utility, inference.

Front 6

Importanceof Scottish Ministers’ Widows’ Fund

Back 6

· First insurance fund to operate on the maximum principle,with capital being accumulated until interest and contributions would sufficeto pay the maximum amount of annuities likely to arise.

Front 7

Firstsystem of compulsory state health insurance

Back 7

Introducedin Germany, and it was an example the British took more than 20 years later.

Front 8

Argumentsfor state insurance

Back 8

1: State could step where private fears, nosales campaign or costly advertising, The larger number of combined forms morestable averages for the statistical experience. Exploited economies of scale.

Front 9

Intimatelink between welfare and warfare state (e.g., Japan)=

Back 9

Allof the wars and disasters in Japan made it clear that the world was todangerous a place for private insurance markets to cope with. Therefore the government set forward tocreate a universal healthcare.

Front 10

Fatalflaw in design of post warfare-welfare state

Back 10

· Removed the incentives without which a capitalist economysimply could not function. It workedwell in Japan but not in the Western World. Different cultures.

Front 11

Japaneseegalitarianism versus English individualism

Back 11

· Japan firms and families continued to play substantialsupporting roles in the welfare system. Culture of social conformism. English people are much more individualistic and more likely to careabout themselves.

Front 12

Importanceof the “Chicago and Harvard Boys” on Chile

Back 12

· Exchange students from Chile who studied at Chicago wantedto tighten the budget, balance the budget, tighten money supply. They where Friedman’s foot solders and theywrote El Ladrillo a detailed program of reform.

Front 13

Economicpolicies of Jose Pinera

Back 13

· Key was not just to reduce inflation but also foster a linkbetween property rights and political rights. Overhaul the welfare state. Hecreated pension, disability, and life insurance premium.

Front 14

Successof Chilean economic policies and reforms

Back 14

· The change worked and workers went with the new system. Total government expenditures went down from34 to 22.

Front 15

Presentstate of U.S. welfare / health system

Back 15

Veryexpensive and less redistributive than the European systems. Almost entirely provided by private sector. 47 million Americans do not have privateinsurance policy because they tend to only be available in full time jobs. Not comprehensive.

Front 16

Originsof hedging

Back 16

agricultural, they make a contract that saysthat a merchant must buy the crop when at a price agreed upon duringseeding. The merchant then hopes thatthe market price is higher then the price they agreed upon leaving him aprofit.

Front 17

Futuresand forward contracts

Back 17

· Forward contracts are simply an agreement between seller andbuyer. A future was created in Chicagoin 1874 (Permanet future exchanges). Afuture is issued by a futures exchange and is hence tradable.

Front 18

Typesof derivatives

Back 18

Options-has the right but not obligation to buy an agreed upon quantity at a certaintime for a certain price. Putoption- Buyer had the right in this onenot the obligation, to sell an agreed upon of something to the seller of theoption. Swap- which is effectively a betbetween two parties. Weather derivatives-natural disaster insurance.

Front 19

Financialrevolution in derivative contracts

Back 19

Derivativesused to be standardized products on exchanges like the Chicago Mercantile. Now however the vast proportion are sold overthe counter often by banks.