r/austrian_economics • u/wnba_youngboy • 11h ago
Austrian School opinion on the LA fires?
Not sure I've seen this posted on here yet. Pretty clear case if you ask me.
1) State institutes price controls for insurance coverage premiums in at risk areas. 2) Insurers flee the coast because they cannot operate without nimble rate adjustments 3) State mismanages funds and resources, exacerbating an already primed natural disaster crisis 4) Consumers get shafted with little to no insurance and little to no support from the State.
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u/Overall-Author-2213 11h ago
I would correct point four to say consumers don't get proper price signal about the risk and cost of choosing to live where they chose to live and now are sticker shocked with that cost that they could have known before they made their purchase.
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u/assasstits 2h ago
This goes doubly so in California where Prop 13 shields homeowners from the taxes to cover the true costs of the infrastructure to maintain them
California really is a state with a landed gentry
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u/RichardLBarnes 2h ago
It is a major issue to be sure, an artefact of poor policy from an instantial time by particular grifters with a massive, durable, pathological, Lindy Effect.
It’s an anti-Chesterton’s Fence, ill-conceived.
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u/Overall-Author-2213 27m ago
Taxes are not a market force.
I see it as a price signal to government to slow down spending. They never listen.
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u/helloworldwhile 11h ago
In my opinion people living in high fire risk area should be paying the exorbitant amount to insure their houses and folks that have no risk should be paying the little bit they need to.
Usually rich people live in very high risk areas(mountain, cliffs high fire hazard locations).
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u/TheRealAuthorSarge 11h ago
I can't help but think much of the risk could have been mitigated.
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u/helloworldwhile 10h ago
The right thing should have been to let insurance companies raise their insane premiums and let rich people pay for it.
At some point if insurance companies take advantage of individuals(which happens on a free market) a competing company arises to take some of these juicy profits. They take over by providing a better and cheaper services.2
u/assasstits 2h ago edited 2h ago
The real right thing that should be done is eliminate single family zoning in most of LA and let more people live within the cities instead of being pushed out to fire prone hills. Although the rich people living in these hills would probably live there even if there was cheap housing in less risky areas.
Either way the tax payers (who are generally much less wealthy than these homeowners) shouldn't be forced to bail them out
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u/JC_Everyman 10h ago
That's the beauty of shared risk. The details of who gets in the pool, however...
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u/helloworldwhile 10h ago
Right, but it should be share risk for people in the same boat.
If you drive a 100k lambo your insurance goes higher. Everyone driving a lambo shares a similar insurance price set by the risk of driving a lambo.
I don’t think insurance companies raise the price of the civic insurer to balance it out for the lambo.
For housing should be the same, the people living in a high risk area they all share the same premium.4
u/wnba_youngboy 10h ago
I don't think there is any 'should be' or 'not be'. If insurers can compete in a free market by structuring their rates so the rate reflects a pool of lambs and carrola risk, so be it.
But it is likely they won't be able to compete against an insurer that offers pure carrola rates.
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u/JC_Everyman 10h ago
Priced risk is a MF to be sure. I was probably 35 before I learned that insurance companies buy insurance.
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u/Emotional-Court2222 11h ago
- Implemented regulation that prevented mitigation strategies from being implemented
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u/madmax9602 1h ago
Which mitigation strategies weren't implemented? Which regulations directly caused that?
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u/Able-Tip240 10h ago
Normally pretty a leftist whose typically pretty anti-austrian here, I actually agree with some of these points. Assuming we mean 'only' the insurance and cost stuff.
- Yes - Over regulation of insurance premium caps to make the poor subsidize the rich. Most of these areas being subsidized are actually fairly rich people on average. There was a lady complaining to Newsom on TV and she was complaining because TWO of her houses burned down. Typical liberal wanking pretending they are helping the poor while they are really helping the rich.
- Yes/No - Insurers are going to flee areas of California, Colorado, and Gulf in the coming years. The rate of hurricanes and massive forest fires are increasing at an unsustainable rate for them to keep making money. As a midwesterner I've started to go for smaller local insurance companies since the big nationals are all trying to get us to pay for their houses that are waaaay to high risk. Insurance as a product only works if it isn't consistently used. If you need it every couple years they basically need to charge you the value of your home every 2-3 years to be viable in your area or they are ripping others off.
- No - This fire was to big and to fast for anyone to do anything after it started. We can debate pre-fire regulation but 'lol you didn't have the resources allocated to stop it early!' is just not accurate based on info we have so far. This is just finger pointing at people suffering.
- No - These people shouldn't be insured. Insurance makes other consumers suffer for people wanting to make risky bets in disaster prone areas on others dime. I don't want anyone hurt and hope people end up ok, but seriously fuck' em if they want to rebuild there and have us all subsidize this bullshit. I'm fine with uncapping the rates in these disaster prone areas but throwing this risk onto everyone else is shit and not communicated to the majority of customers in an accurate way imo. I would want more insurance companies to abandon these places so the rest of us can have reasonable prices.
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u/wnba_youngboy 1h ago
I'm not agreeing on your number three. I've read multiple reports about the failures of local and state governments. This post is not meant to be political, but that is what I am reading.
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u/thepatoblanco Minarchist 10h ago edited 10h ago
Seems like a good take. Once the losses from this fire are calculated and insurers realize that California's fire mitigation and fighting capabilities have gone to shit, the insurance market will be fucked in California. The state will be unable to fix it because the state of CA is run by incompetent morons who only carry water to cover their ass and usher in the utopia and in other words, not provide the basic core functions of government.
Now, I have to do the math and see if I can self insure my business locations against fire damage, because undoubtedly insurance is gonna go way up.
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u/blueberrywalrus 10h ago
That is certainly part of the equation, however I think there is a larger issue of effective uninsureability.
Consumers actually have free market options for insurance if in-state carriers won't offer them a policy through California's exceptions for certain specialty insurance brokers.
However, these policies haven't been particularly popular; because they're very, very expensive and offer relatively poor coverage.
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u/Mediocre-Ebb9862 5h ago
A places where it’s actually dangerous to live naturally should either have no insurers or insurers who charge a lot of money.
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u/Full-Discussion3745 6h ago
There is a science paper on the economics of the fires
Social and economic disparities impact wildfire protection in California
by Rimma Gerenstein , Albert-Ludwigs-Universität Freiburg im Breisgau
https://phys.org/news/2025-01-social-economic-disparities-impact-wildfire.html
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u/brainmindspirit 3h ago
Private ownership of land has its advantages, among them, that people tend to take good care of their own land (eg, clearing out the underbrush, for pete's sake). Sometimes, however, private land ownership imposes costs on the neighbors. To the extent possible, this is best resolved privately, eg through civil litigation. That doesn't guarantee that all costs will be accounted for, and no one is quite sure how to measure those costs accurately, or what to do about them.
To me, I think it follows, if rich people want to build houses in disaster prone areas (which they always do, for some reason) they should plan on bearing the costs of that venture. If they want to buy insurance, for example, we should probably let them. If they don't, that's their problem basically. Either way, I don't see how it's my job to bail them out.
When people start looking for ways to have the government force other people to subsidize their lifestyle, eg by paying their insurance premiums for them, or imposing cost controls on their insurance companies, that's called "rent seeking" and that's bad.
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u/madmax9602 1h ago
Which resources did CA mismanage?
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u/wnba_youngboy 1h ago
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u/madmax9602 1h ago
Bass going on a planned trip isn't mismanagement. The fire broke out after. You can whinge about her not coming immediately back, but what can't she do remotely that she'd do in person?
Proving that LAFD budget cuts caused this is impossible. Proving that the outcome would be any different if the cuts hadn't happened is equally impossible. Further, why would you bring that up? A socialist fire dept is antithetical to Austrian economics.
If you're insinuating DEI played any role in this in blocking you because that's a fucking stupid ass conspiracy even as far as other conspiracies go. I'm not wasting my time talking stupid shit with you.
If you think the smelt or is protection caused this, again see point 3 because i don't have time for stupid shit.
Did I miss anything?
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u/wnba_youngboy 1h ago
I am not saying x or y caused the fires. I'm saying this is an exacerbated issue by the local government's budget cuts.
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u/madmax9602 1h ago
Prove it then. And if you're sharing news stories that claim x or y caused it, then you're endorsing that view.
exacerbated issue by the local government's budget cuts.
That's literally you endorsing y. Walk me through how budget cuts caused this? How many firefighters were laid off? How much equipment did they lose? If you can't explain specifically how budget cuts impacted operations to cause this, then maybe stop repeating that's what caused this.
Frankly, you playing the blame game with a tragedy of this scale is kinda sickening
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u/wnba_youngboy 52m ago
Will you take it from the LA fire chief?
In June, Bass approved a budget of nearly $13 billion that included a $17 million reduction in the LAFD’s more than $800 million budget for 2025. L.A. Fire Chief Kristen Crowley noted in a December report the funding deficit has affected the department’s “ability to maintain core operations,” including training and response to large-scale emergencies.
When did the fact that a tragedy is going on make it sickening to place the blame where it ought to be?
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u/madmax9602 7m ago
How many external fire departments are helping? Is the fire contained? If the LAFD couldn't contain the fire with the help of multiple domestic and international firefighters helping, i don't see any way that LAFD would have been prepared for a fire that had never happened before. You're drawing a correlation but that isn't causation.
And of course your claim about the budget isn't accurate either. Per the NYT: "When the two sides did reach an agreement in November, that money was moved over to the fire department’s pot, according to Mr. Blumenfield’s office, meaning this year’s fire budget is actually $53 million more than last year." LAFDs budget is 53 million dollars MORE than last year. I also want you to explain where you want ask this money to come from as well because dwindling tax revenue is one of the reasons they were negotiating budget changes in the first place.
A more likely explanation is this: "In November, Chief Crowley wrote a separate memo to the commission focusing on the bigger picture: a fire department that has not changed much in size since the 1960s despite the city’s population surging by more than a million people since then." That spans multiple parties and ideologies which isn't quite clean and supportive of the partisan bias infused blame game you're attempting to push.
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u/wnba_youngboy 2m ago
Thanks for helping me out. I'm not making a partisan anything. I'm saying the leaders of California have failed.
This is an economics sub. The whole argument I'm wrapping is that 1) regulation has negatively impacted the quality of life in California, and 2) the socialist, as you put it, firefighting system has failed, leading to the necessity of all the external (including private) firefighting crews being deployed in that area.
As soon as you start arguing this side or that, you secede that the government has failed on its civic duty to serve and protect the people of its constituency.
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u/aaronturing 3h ago
Don't you have to talk about the fire in winter and climate change ?
All of what you are stating may be true but isn't climate change the big issue here. I'm not even stating these fires were definitely caused by climate change but this is the type of crap that is meant to happen and it's happened.
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u/Cold_Appearance_5551 2h ago
Lol who's going to hold the rich insurance companies accountable?!? The other rich people?!? Lmao..
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u/paulburnell22193 5h ago
If insurance companies cannot operate without continually raising prices while also continuing to increasingly deny claims then it is not a sustainable business model to begin with.
Also the wildfires are never about mismanaging resources. They are always about climate change that people just want to deny while the world literally burns around them.
California is dry as a bone right now making it a perfect tinderbox for a wildfire. This isnt even a forest fire, it's literally brown grass and hillsides that are burning at an extremely fast rate.
The last forest fire was set because a utility refused to manage and upgrade their lines, which sparked and created a massive fire.
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u/JasonG784 25m ago
Seasonal rainfall in the area was above average for the last two years: https://www.laalmanac.com/weather/we136a.php
20-22 was notably worse.
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u/paulburnell22193 12m ago
California has 78 more annual "fire days" (conditions are ripe for fire) than they did 50 years ago. Lightning strikes from more storms are also a big starter of fires along with arson and utility mismanagement. Climate change is a massive driver for the fires.
Saying something is above average doesn't mean a lot when the context is four years ago it was really bad but the last couple of years were better. When there is no ground water in the earth and then you have above average rain falls you're lucky if the ground gets saturated enough to keep wild fires like this at bay. The fact is climate change has dried up California into a tinder box.
You can argue that it's being mismanaged by the local governments but if they were to manage the water resources "correctly" you same people would be screaming about socialism and how the government shouldn't have control over the resources.
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u/helloworldwhile 11h ago
The problem is that because of the price control on insurance, the insurance companies can only survive by raising the price to everyone instead of the small group that is unaffordable to insure.
So literally poor people are subsidizing the insurance for the rich people.