Asymmetrical Information

Social insurance is the same as charity?

"Which is probably one of the most frustrating battles for the policy-making elite of academics, journalists, and so forth. The language of policy-making is rational. But it takes place within a framework of emotion-laden value judgements and intuitive boundaries that confound any true attempt at rationally reasoning out a policy from first principles. And selling those policies to the public is generally entirely dependant on our politicians' abilities to push certain buttons located deep in the reptilian sectors of our brains, rather than on the policy's objective worth. This is why journalists (and academics) spend so much time sputtering about how debased the whole process is. "

I think this is the fancy-talk version of "I don't like emotional appeals I disagree with." You can take about morality on the estate tax, but not on health care!

Nice post, and a good summary of the problems with compartmentalized modes of thinking, which often commit vile acts against pragmatism when confronted by the inevitable necessities of the real world.

No government system can survive if paying a small amount of taxes entitles everyone to an even larger amount of benefits.

Well, it certainly couldn't if the calculus applied to everyone. But James Buchanan has suggested a flat tax coupled with a demogrant (everyone pays a flat percentage of their income, and everyone receives a flat amount, as an equal portion of the tax revenues raised that have not been spent for defense and governance). The percentage of the flat tax can vary from 0 to 100 percent, and the amount of the demogrant is strictly determined by the excess revenue. This is clearly redistributive if there is an excess revenue, and inevitably someone will receive a larger grant than they paid out in taxes.

Nonetheless if the choice of where to set the tax rate is determined by the electorate (through some system of accountability and adjustment) the result will fall on the "diagonal" of the game theory matrix, and over time will trend toward greater efficiency. No "needs based" redistribution regime is required in order to achieve a redistributive result that ultimately rules out "welfare churning." The key is the frequent adjustment of the tax rate subject to public, er... choice.

Redistribution won't work, cuzz many people like me who would see their hard earned income reduced to poverty-level income wouold immediately stop working and become takers from the system. Why should I work to improve and apply my skills for no personal gains? I'll just suck on the gov't teat like all the wellfare recipients do now. And I'll be touting how great our country is too.

Did some more thinking about this today, and I think I figured out why the professor's analogy between national health care and African aid falls flat.

You mention this as "hunter-gatherer" tribal thinking, but I don't think that's seriously considering it.

For example, why do so many people support welfare - but only if there's a work requirement? Why do so many people support social security? I suspect it's because of the work requirement.

National health insurance would be, well, insurance - you pay into the pool, and get benefits if you strike out. Handing money to Africans goes into an entirely different ethical framework - it's charity.

You can't just compare insurance to charity without further analysis; there's entirely different goals and requirements of participants.

This ignores the various technical arguments against costing riskier people like this, but I'll leave that to dsquared.

Carl Sagan wrote a book called the The Dragons of Eden that discusses how human beings have reptilian biological structures as a basis of our anatomy. Is it surprising that humans might react in reptilian fashion to specific stimulus?

Jason: Correct. And this is also why FDR and most politicians since him have misrepresented Social Security as "insurance" when it is really income redistribution.

As Arnold Kling recently pointed out, almost nobody in the U.S. has health insurance. An insurance policy is a bet that something bad will happen to you, with the insurer offering long odds that it won't. Thus, only a major medical policy for a healthy young person meets the definition.

The assumption for many in this comments section seems to be that healthcare, that is the application of products and services to improve a state of health, is a right. From my relatively logical position, consumption of such services is a privilege.

If healthcare, or being "healthy", is a right, where does it stop? Organically grown food is healthier (supposedly), vitamins make you healthier, red wine (my favorite) helps keep arteries clean. Where does it end?

I believe that our contract with the government includes existing in an environment that does not make you unhealthy (and even this position has problems). It does not include all the tools, products and services needed to make you healthy.

"Social insurance is the same as charity?"

Well, it either involves a certain amount of charity, or it's completely superfluous.

In the case of health care, a "health plan" where everyone pays the same rate regardless of age or risk factor is a form of charity to those who are more expensive to insure than average. Of course, by dressing it up as "insurance", the beneficiaries can pretend that they are not receiving charity.

Another comeback for the economics professor is that one is is stopping the English professor from equalizing the inequities by giving up her salary.

The economics professor is clever but it is a scholastic red herring he is throwing out to end the argument.

The right answer is related to taxes, it is a question of who we are responsible for as democratic citizens. The obvious answer being that we are responsible to each other within the polity. The next question is to what degree are we responsible for each other. The answer to that is that there is no fixed answer, it is constiently up for debate and revision. It lies in the realm of politics guided by moral philosophy and tradition. In this sense universal health care is completely disconnected to salvation of the worlds huddled masses. The starving masses are a red herring to avoid talking about health care for american citizens.

People have a right to BUY (participate in lawful transactions) insurance, but they don't have the right to HAVE insurance. HAVING/OWNING insurance is a PRIVILEGE (albeit, purchased with money). Basically, rights aren't bought, privileges are.

In this sense universal health care is completely disconnected to salvation of the worlds huddled masses.

"In that sense..." yes, but that wasn't the argument AFAICT.

The starving masses are a red herring to avoid talking about health care for american citizens.

How so? According to Jane, the English prof was making the argument that it's not "fair" for those with genetic disease predispositions to pay higher insurance rates. Maybe not, but fairness in that sense is strictly a subjective value judgement; if the best answer she could generate for the econ prof's comparative was a resort to transactional rights, then clearly she doesn't believe in fairness quite the way she claimed.

It would be nice to believe that everyone could pay low insurance rates and go home happy, but in practice that won't happen -- either you have a system where the risky pay high and the unrisky pay low for a given risk factor, or else everyone pays somewhere in the middle. In other words, the unrisky are subsidizing the risky. Now, that is indeed a question of where to draw social responsibility lines (as you noted), but then 'fairness' comes in direct conflict with the 'transactional rights' of the low-risk group.

In short, the econ prof's question revealed that the English prof beleives in her own transactional rights to health care, yet she wants to apply fairness where her ideals dictate. That raises a question of consistency, which could still potentially be argued around, but her reaction suggests that she hadn't really thought about it.

"Well, it either involves a certain amount of charity, or it's completely superfluous."

Is homeowner's insurance charity for the people whose houses don't burn down?

"Is homeowner's insurance charity for the people whose houses don't burn down?"

Of course not, just like a jackpot in a casino isn't charity. The insurance company gets to charge individual homeowners according to the risk that the home will take damage, because the insurance company is being paid to take on that risk on behalf of the homeowner, who would otherwise bear that risk himself. There is a market price for assuming that risk, related, naturally, to the amount of risk being assumed. People who pay that rate are getting neither subsidized or ripped off.

"The obvious answer being that we are responsible to each other within the polity. The next question is to what degree are we responsible for each other. "

This is not obvious unless 'to what degree' includes 0% responsibility. The first statement implies that there is some level of responsibility greater than none. I'm not so sure of that.

The irony is it's not just politicians that "push certain buttons located deep in the reptilian sectors of our brains." Anyone who's ever taken more than a cursory glance at sales & marketing techniques knows this practice is not limited to the public sector. In fact, the innovation in this practice comes from the private sector. In everything from TV advertising to direct mail to how to manage a national political convention, politicians learned their lessons from the private sector, which of course includes insurance companies.

"The obvious answer being that we are responsible to each other within the polity. The next question is to what degree are we responsible for each other. "

I would prefer to decide for myself who I will be responsible for, as well. For the government and/or policy makers/thinkers to decide for the masses what there responsibilities to others are is arrogant. My responsibilities to others is to obey the law, period. The expansion of governtment into our lives, seeming to start in the 30's and certainly accelerating in the 60's and 70's, is intrusive and at odds with the spirit of the Declaration of Independence and the Constitution. All those people in DC, think tanks and institutes of 'higher' learning want to change the world/ make it better, whatever. Great for you. I'm proud of your commitment to fellow man. Do the world a favor and get out of government and do some charity work.

"...the health care dollars..."

re: the difference in life expectancy between rich and poor Americans

I think you can find that less than HALF of the difference in life expectancy is a cause-and-effect relationship to financial standing("...the health care dollars...".) The difference in life expectancy(LE) has remained rather uniform as the LE(life expectancy) has significanly increased over the last century. Some of the LE difference is a reflection of lifestyle factors: behavior which weighs toward improved health also weighs toward improved financial standing.

Increased LE - for all citizens - is dominated by improved non-high-tech but extremely efficacious public health measures, by antibiotics & vaccines, and by high tech emergency medicine. Nearly all of this set is available to all citizens(in fact, the benefit via herd immunity MUST apply to all citizens.)

It ain't in any way DOMINATED by heart bypass surgery or improved chemotherapy. We all wish for better medical care, but it does not necessarily lead to a significantly longer or better life. (Its most significant benefit is probably peace of mind.)

Much of the liberal campaign about health care for the poor, is driven by a campaign for increased government influence. Much of the conservative campaign about health care for the poor, is driven by a campaign for decreased government influence. One paradigm(or kneejerk) opposes its counterpart.

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