I know that most economists here frown upon the econometric analysis when it is used in an attempt to predict human action. Given this, people are quick to give advice to each other (advice is cheap as many economists state) and that advice is normally built on some intuitive econometric model of their individual history and education. For example, you may tell your child not to play near a certain street where individuals speed and instead to play near another street (that may have a higher volume of traffic, but less accidents). These probabilities do not assure your child against an accident but it may decrease the likelihood based on your insider information.
Therefore, with a series of insider information a company could likely offer you a major decrease in probability of some horrible act (what has come to be known as risk assessment).
Take for example this rape function I threw together years back…
R = f (L,S/C, T, Li, C, D, A, W/M, S, A, P, S, Po)
R= Rape
L = Location
S/C = Skin to clothing ratio
T = Time of day
Li - Lighting of area
C = Company or number in group
D = Defense against the attacker
A= Attractiveness
W/M= Ratio of woman to men
A = Aphrodisiac consumption
P = Supply of prostitutes
S= Size comparison between attacker and victim, Po = accessibility to porn
With proper access to information one could likely decrease their chances of rape by following certain rules. This in no way predicts human action but it does draw inference from it. Are we to believe there is no value in models like these? Would a free market for insurance companies seek refuge in econometric analysis so they may access risk better?
These are exercises in formalising thymological and historical understanding. if it brings you benefits great. but you have to keep it in context and not idolise it or make grandiose claims about it.
I think there can be some value in such models only if one remembers that they are still useless in the absence of entrepreneurship.
Free market insurance seeks refuge in analysis based on actuarial science. Human action cannot be insured so there would be no insurance of business activity no matter what. At least nothing that could be sustainable.
Your model lacks considerations for testosterone levels for guaging aggression (since measuring such things on an individual basis would be a ridiculous undertaking we’ll use an aggregate), aggregate sexual satisfaction levels, average wage for the given region (for as Notorious once said, “If I was dead broke you wouldn’t notice me”), and, since rape is actually about power and control; an average measure of a population’s penchant for pursuing power.
Also, if I learned anything from George Carlin it’s that on a per-capita basis there’s less rape at the equator than further northward so the correlation between clothing coverage breaks down depending on where on the planet you find yourself.
Could you expand on what you mean by “Human action cannot be insured so there would be no insurance of business activity no matter what. At least nothing that could be sustainable”
Business falls within the realm of human action and is therefore associated with uncertainty and not risk. Uncertainty cannot be insurable because human action itself affects the outcome of the event. For an event to be insurable, there cannot be a dependence between the insurance itself and the insured event. Only events in which the human actor himself has no influence over, such as sudden death, fire, etc… can there be a calculated risk that can be associated to such an event when it is properly categorized as part of a large population of similar events with similar risks.
Mises himself contributed to this greatly by making the fine distinction between events that can be insurable and therefore classified into what he called class probability, and events that are not insurable and are classified into what he called case probability.
This is highly recommended : Human Action VI - Uncertainty .