Hurricane Katrina and the terrorist attacks of 9/11 2001 have focused attention on the appropriate role of government in providing insurance against catastrophes. This paper argues that wherever possible governments should follow policies which enable the continuation of a private insurance market. In the event that government must itself provide catastrophe insurance it should follow the same actuarially based pricing and reserving rules that would be followed by a competitive private market.

Insurance offers three important benefits that help an economy deal with the catastrophic losses that arise from both natural disasters and man-made events: risk sharing, mitigation, and price discovery. This paper develops the role insurance can play in dealing with the losses that could be created by terrorists attacks using weapons of mass destruction (WMD). Although the benefits of insurance would generally rise with the size of the possible loss, private insurers have generally been unwilling to cover the largest of all risks, a WMD terrorist attack. Policy proposals to solve this market failure have been both politically and economically contentious. This paper provides a comprehensive survey of the issues that arise in providing insurance against WMD terrorist attacks and evaluates alternative solutions for the United States. It describes the range of governmental solutions that have been tried or are currently proposed for insuring terrorism risks and provide an analysis of the issues and an evaluation of the best means for providing viable WMD terrorism insurance for individuals and firms.

Detection of visual borders is an essential function for transforming the visual scene into perceivable boundaries. Avian predators, for example, are able to recognize complex textured borders of conspicuous prey. It has been suggested that the process of border perception begins as early as in the retina through a class of ganglion cell, the local edge detector (LED), which responds selectively to luminance edges. But what neuronal circuitry is used to accomplish this, and can this circuitry also be used to detect complex textured borders? Here we use patch-clamp electrophysiology to show that selectivity to luminance edges in the LED is accomplished by surround-originated feedback inhibition that suppresses excitation via GABAa and GABAc receptors. Furthermore, we find that excitatory circuitry has several characteristics that facilitate independent responses of individual bipolar cells to features as small as one-eighth the size of the LED's receptive field. This enables the LED to respond to areas of texture even if they contain no net luminance change. We observed that feedback inhibition is similarly activated by small features, which in turn causes excitation not only to respond selectively to luminance edges, but also to boundaries of luminance-neutral texture in synthetic and natural scenes, as well as a noise-suppression function suggested by modeling. We also characterized direct feedforward inhibition to the LED, and found it to be cospatial with excitation, glycinergic, and sensitive to small features as well. These characteristics enable the suppression of spikes during rapid luminance shifts, encoding an "edge in time". Our results suggest mechanisms by which three kinds of edges can be encoded by the retina and transmitted through a specialized channel to higher visual areas in the brain.