Friday, August 27, 2004

Marginal Revolution: The economics of Mexican kidnapping

Tyler Cowen takes time out from his travels to ponder the mysterious ways in which the finuding provided by insurance can produce behaviors quite contrary to its intent.

5. Can we not think of the insurance company as an institution that helps the kidnappers make credible commitments? The company certifies which kidnappers will in fact return a live body in return for the money. The company is a kind of Better Business Bureau for the kidnappers.

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