Mutual Insurance Companies

From Answers.com comes a useful article:

Over 200 mutual life insurance companies have demutualized since 1930. At the end of the 20th century and beginning of the 21st century numerous large mutuals such as Prudential, MetLife, John Hancock, Mutual of New York, Manufacturers Life, Sun Life, Principal, and Phoenix Mutual decided to demutualize and return to policyowners all the profits they had accumulated as mutual life insurers. Policyowners were awarded cash, stock and policy credits exceeding $100 billion in a wave of demutualizations, which have been regarded as socially desirable.

Other large mutual life insurance companies decided to not return their accumulated profits to policyowners. The boards of directors of these other companies, which include Northwestern Mutual, Massachusetts Mutual, New York Life, Pacific Life, Penn Mutual, Guardian Life, Minnesota Life, Ohio National Life, National Life of Vermont, Union Central Life, Acacia Life, and Ameritas Life decided to either remain mutual or they decided to form mutual insurance holding companies. In either case, policyowners were awarded nothing. At the end of 2006 there were less than 80 mutual life insurers in the United States whose continued existence as mutuals rests largely on the financial ignorance of their policyowners....

A mutual holding company is a hybrid concept, part stock company and part mutual company. Technically, the members still own over 50% of the company as a whole. Because of this, they are generally not significantly compensated for what would otherwise be viewed as loss of property. (This is also why many jurisdictions, including Canada,[1] disallow the formation of MHCs.) The core participants are isolated into a special segement of the company, still viewed as "mutual". The rest is a stock company. This part of the business might be publicly traded, or held as a wholly owned subsidiary until such time that the organization should choose to go public.

Mutual holding companies are not allowed in New York where attempts by mutual insurance to pass permissible legislation failed. Opponents of mutual insurance holding companies referred to the establishment of mutual holding companies in New York as “Legalized Theft.”

Deriving Utilitarianism from First Principles

(revised May 14, May 16, June 2, in light of the objection that the argument doesn't have several people's small gains justifying one person's big loss; that characteristics shouldn't matter)

I heard Professor Terence Irwin talk on 'Prudence, morality, and the importance of persons: a dilemma for Sidgwick' yesterday. He said that Sidgwick does a poor job of moving from his two axioms to utilitarianism, which is correct. Even the axioms aren't spelled out very clearly, it seems. Here's a fix-up.

Axiom A1. Pareto Improvements Are Good. If you can make one person better off without hurting anybody else, do it.

Axiom A2. Impartiality. Whether a change in welfare is good or bad shouldn't depend on the identity of the particular person affected or any personal characteristics. more precisely, whether an action that changes welfare by amount A affects person i instead of person j does not affect the action's moral goodness.

Result R1. By A1, if Jones can take an action that increases his welfare by 800 utils, he should do it.

Result R2. Suppose Jones can either do nothing or take the trio of actions T1:
Action X reduces Jones's welfare by 2000 utils.
Action Y1 increases Jones's welfare by 700 utils.
Action Z1 increases Jones's welfare by 500 utils.

By R1, Jones should take the trio of actions T1.

Result R3. Suppose Jones can either do nothing or take the trio of actions T2:
Action X reduces Jones's welfare by 2000 utils.
Action Y2 increases Smith's welfare by 700 utils.
Action Z2 increases Lee's welfare by 500 utils.

By A2 and R2, Jones should take this trio of actions T2.

Result R4. R3 would remain true for any trio of numbers (a,b,c) such that a is less than b+c. Thus, we have utilitarianism.

A possible flaw: Trio T1 has the same identity label for both actions, whereas Trio T2 has a different identity label for each action. Does A2 really require them to be treated in the same way?

Axiom 2 is different from saying that welfare pairs (2,3) and (3,2) are equivalent, and stronger. Even if (2,3) and (3,2) are equivalent, that does not imply that (3,3) and (2,4) are equivalent. Using Axiom 2, though, if start by saying (2,3) and (3,2) are equivalent, then the actions of "give 1 to person 1" and "give 1 to person 2" are equivalent, so we do get the implication that (3,3) and (2,4) are equivalent. Probably we can derive that (x,y) and (y,x) are equivalent too, from Axiom 2, though I don't see how immediately.

Now that I think about it, Axiom 2 is not so different from the contractarian axiom that if a person is willing to accept a gamble, then he should not complain if he is the loser. A contractarian introduces probability, though, and so needs expected utility perhaps-- or at least some comment on what happens to non-expected-utility maximizers.

Seminar Presentation Ideas

I thought of two ways to improve seminars today:

1. Put all my references on a slide, so people can tell me if I am missing anything. Do this AFTER the model is presented, so they know what is relevant.

2. Start the presentation on the blackboard and put the notation and main proposition there, and diagrams, for later reference. Then go to the projector. This is a substitute or supplement for a handout.

Democracy: Elections and Referenda. At my workshop today at the business school, the issue came up of whether people's votes express their preferences or whether they are too easily misled. Can we decide the intensity of feeling over abortion by seeing which candidate wins an election? A referendum would not work as well, since it is a vote on a single issue, so there is no opportunity for tradeoff. Everyone who voted would vote their preference, intense or mild, and the only opportunities for intense preferences to count for more would be in turnout and in spending on advertising to convince those with mild preferences. Interestingly enough, in such a case the presence of many almost indifferent voters could be very helpful in making the vote display intensity too. Someone who is almost indifferent is up for grabs, and so the intensity of other voters can obtain a double vote where it could not if the voter had somewhat stronger views. The danger from a tyranny of the majority is greatest not when there is a large number of voters with weak views, but where there are few such people, but many whose views are just strong to induce them to vote on their own initiative and to be immune to persuasion by the efforts of those with intense feelings.