# kaal:claim:3782220-012

**Claim.** Automating insurance away with smart contracts risks a race to the bottom, because foregoing insurance is more efficient in the short term for an individual, yet the resulting rare unprotected tragedies can chill the entire system.

**Type.** failure  **Support.** argued

**Holds when.**

- automated smart contract insurance
- individually optimizing agents

**Source quote.**

> we must avoid a race to the bottom. It's more efficient in the short term for an individual to forego any insurance, so some will outcompete others if they are lucky enough to avoid rare tragedies. But the rare unprotected tragedies can chill the entire system.

**From.** Craig Calcaterra, Wulf A. Kaal, *The Importance of Transcendental Unifying Values for Decentralization* (2021), Integrating polar values, page 4

**Cite as.** Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220

**Verify.** sha256 of source PDF `f0bf1e80c6da60a6f8ba20630562bdf1dab171ccb5267f497dc0b815113cde99` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20and%20Kaal%20-%202021%20-%20The%20Importance%20of%20Transcendental%20Unifying%20Values%20for%20Decentralization.pdf

**Failure mode.** insurance race to the bottom  (family: collective-action-and-coordination-failure)

**Topics.** smart-contracts, systemic-risk, risk-and-incentives, institutional-design

**Keywords.** insurance, smart-contracts, race-to-the-bottom, systemic-risk, overhead-institutions

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