So,

obviously society puts limitations on risk toleration and deems all low probability risk with a big negative payout a common problem. Example earthquake, natural disasters, epidemics etc.

Obviously some work harder, longer and sacrifice short term benefits to mitigate that risk. (ex. smart people wear a seat-belt in cars to mitigate risk of serious injury or death in low probability car accident).

The question: if risk doesn't have a terminal life risk in it isn't the equilibrium move not to do anything about it if society will help you? And since my observation shows that this indeed is the case with majority of people the best move is to scale your risk payout to the extreme losing point....(maximal gain, zero loss).

And we have a birth of the modern banking, euro zone, nuclear plants, soviet submarine Kursk, space garbage etc.

Long term stability is a illusion, isn't it?

Your illustration of "seat-belt in a crash" doesn't really seem to have anything to do with "work harder, longer and sacrifice..." Can you give a different illustration?

Also what real life scenarios can an INDIVIDUAL benefit by scaling their risk payout to the extreme losing point; what is a situation where a person can expect maximal gain and zero loss?

I see your point about modern banking etc. but how is this a plus EV line of thinking for an individual who isn't guaranteed to be helped by society?

May or may not be related but AFAIK insurance against nuclear catastrophes don't exist in Germany (there are no insurance companies willing to insure that)

It was just a point about how smart people recognize risk better. The real question is should you pay for your treatment in the hospital if you didn't have a seatbelt on (for the excess injury)? Different example: 3 out of 4 regions in my country payed for flood protection (it wasn't mandatory) - the 4-th one didn't and on the flooding day they had the military and other personnel in the reserve build sandbags, evacuate people etc. All was payed by the taxpayers + was billed as overtime. I think a lot of examples could be found.

Not sure. Personally I think it is better to minimize the risk then to run with the crowd. But it does raise a question of helping others after the fact?

Individual involvement in a project that has that kind of hidden risk, I would skip that. Obviously JP Morgan CIO and their VaR as an example. I think a lot of smart people actually see the risk but decide to go with the crowd. Since this debacle is exact as LTMC in its core.

Yea, I've been involved in some risk analysis and for nuclear plants it was a consensus that the risk was understated 10:1 and in reality there isn't enough money to be insured properly. Japan will have a big long term cost on the latest debacle.

I just realized I've been all over this. Tbh I didn't have a specific point in mind. Just want to see other opinions.

It all came from this questions:

It seems that the point you are making is that it's not fair that you are (through taxes) obligated to help out those who didn't avoid fat-tail risk, and I would agree with you. However you're clearly obligated in a sense since you pay taxes.

But look at your situation vs "the crowd's" situation; I am willing to bet that you, as someone who has been defending yourself against fat-tail risks, are safely miles ahead of the "crowd" even given that you had to pay money for their poor decisions. Not fair:yes; an argument to follow the crowd:no.

Good example makes sense.

guys , be honest , this thread has a far greater importance than just flood/earthquake scenarios.

Every single day most people go to work from 9 to 5 while the lazy one coast on government money.

Is it fair for people to struggle and offer something to society , while others just reap its benefits and contribute nothing to it ?

People only help out if they want to, no one is holding a gun to their head.

As you have presented the problem, yes. It is completely fair.

Unfair games involve those in which the dice are loaded, not within which a better strategy than the one you have taken works better.

If you are unhappy with your strategy in the game, you are either an idiot or should change your strategy because you were an idiot a little bit ago.

I suggest trying to live on assistance for a bit and seeing if you like it better than your current life.

Or, to make it more plain, stop your whining. I would put several hundred bucks on the line that I pay more in taxes than you do, and am happy with my fortunate circumstances.

maybe, a lot of assumptions were not mentioned

I would say life is unfair, the start of a game isn't same for everyone (USA vs Africa for example), information advantage, monopolies etc.

agree

The law of conversion of energy applies to all. People living on assistance are simply living of another worker, monetary analysis and current purchasing power of that money give us an easy way to measure that.

irrelevant, but good point of not caring about things that are not in your control; factor them in, adjust and move on

Tons of assumptions. The chiefly being that everyone has the same goals, and that those goals are unchanging.

Even on a smaller scale, there is unfairness.

However, I assume that you (human, right?) have some discomfort with this. Social animals, we are.

I assume that you want a level playing field.

Nah. It isn't conservation of energy, it is whether making efforts is expected to lead to results. They just are going with the best strategy available to them.

I would be on assistance if I hadn't been lucky and have had a guide.

The equations obviously change if you have brown skin. Expecting brown people to believe that they have the same odds as pale people is just expecting them to be stupid. No point in playing a game if you get points deducted for being who you are.

I thought it was the most relevant point.