Monday, May 3, 2010

Prenuptual Bliss

Actuaries put a monetary value on life. Insurance rates are computed on the basis of life expectancy, and it wouldn’t be at all surprising to find out that there are those who hedge their bets in derivative markets based on whether life expectancy is going up or down. Friday’s Times reported that a market had actually been formed to bet on the fortunes of Lloyd Blankfein, the beleaguered Goldman Sachs executive, speculating not on his life expectancy but on the length of his tenure (“Think Blankfein Will Resign? Want to Bet?” NYT, April 29, 2010). The firm that handles these wagers is called Intrade and hails from Dublin. It’s apparently still a long shot that Blankfein will be deposed because of the financial instruments Goldman created to deal with mortgage crisis, in particular the now-infamous Abacus 2007-AC1.  There is something faintly reassuring in knowing that all the questioning about the fate of the individual and the meaning of life undertaken by existentialist philosophers like Albert Camus (who argued, “there is but one truly serious philosophical problem, and that is suicide") can be reduced to tables. For instance, one wonders if Intrade has created any markets for Reed College or Sweden, both of which at one point were considered leaders in suicide rates among campuses and countries, respectively. Will Intrade be able to deal with such subjects as depression rates and recidivism among criminals? Which brings us to the subject of divorce, a truly pregnant area when it comes to prediction. Prenuptial agreements are not only commonplace, they are as American as apple pie and as Western as Plato’s Republic. What about the market in prenups? Let’s say that instead of choosing a lawyer, you go to your Harvard Law School educated Goldman investment banker for the prenup. Though it’s a happy occasion, he won’t be able to stop himself from contemplating the risk. It’s something that comes naturally to him. Don’t be shocked when he advises you to short the prospect of your own happiness. You’ll be thanking him when the credit default swap written against your marriage turns trauma to profit.

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