Government leaders often fail to understand what information is needed, and they often ignore it for political reasons
ANALYSIS/OPINION:
Why would an insurance company pay a private meteorological company a fee to provide them with information — about the likelihood of a hurricane landfall and severity and timing in a specific location — when the Weather Bureau provides the information for free?
The short answer is some teams of private meteorologists have a track record of being more accurate. This increase in accuracy enables those who buy the information to take actions to save more money than the cost of the information.
The auto insurance business is highly competitive. If one company charges too much, they lose business to their competitors; and if they charge too little, the cost of claims can destroy the company. So, having precise information as to the probability of an individual customer getting into an accident as well as the likely cost of the claim from the accident is vital information for the company to properly price their policies.
Private companies of all stripes that are profitable over long periods of time clearly know how to properly price their products –- which indicates they also know how much to spend on good information.
The disasters of the Suez Canal shutdown, the Mexican border crisis and the COVID-19 mess in New York, New Jersey, Illinois and California can all be attributed in part to bad decisions resulting from the failure to properly evaluate information.
Governments, by contrast, often overspend on many activities while underspending on other activities. Part of the problem is government leaders often fail to understand what information they need and, even when they receive good information, they ignore it for political reasons. The response to COVID-19 required governors to make a number of tradeoff decisions.
