Is insurance a form of Socialism?

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GE Morton
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Re: Is insurance a form of Socialism?

Post by GE Morton » October 14th, 2017, 10:07 pm

Londoner wrote:It works better if you read the whole post, rather than replying to each sentence one at a time.
No, it doesn't. An argument consists of propositions. If one of the propositions is false, then the conclusion will not follow, and is likely to also be false. So we examine the propositions one by one.
That assumes first that we can know which sick people have diseases are communicable. To find that out you need to provide a health service.
Of course we need health services. The question is not whether the service is needed, but who performs it and who pays for it. Which is more cost-effective --- paying for comprehensive health care services for everyone, to avoid (actually, only reduce) the risk of contracting a communicable disease from an undiagnosed, untreated person, or immunizing yourself against those diseases?
It also assumes that the person makes no economic contribution to society. If firms have to pay the costs associated with sick staff, ultimately that cost gets passed on to the consumer.
Yes, it does. But since the employer operates in a competitive market he will have an incentive to minimize those costs, either by health screening and/or by offering insurance. Moreover, people get sick whether they have insurance or not. Again, the question is: Who pays for it?
If the employee has to buy health insurance, they need higher wages and that cost too will ultimately be paid by the consumer.
That argument is a non-starter. You could also argue that the employee needs food, shelter, clothing, a certain amount of entertainment and recreation, etc. Such needs do not determine wages. The market sets wages, and the employee must figure out how to meet his various needs and desires within that income, or alternatively, figure out a way to increase his income (typically by acquiring more valuable skills).
Or the cost can be met by the consumer through taxes. Which method of paying we pick is a calculation, but there is no way of avoiding it. It is nothing to do with morality, it is simply the nature of complex societies where we all depend on each other.
But the extent and nature of those dependencies vary with every pair of persons. I will pay the price asked for a product or service, part of which payment pays employee wages and benefits, if I deem that product or service sufficiently valuable to me. Someone else may deem that product or service less valuable, and decline to purchase it at the asking price. Only a market can correctly identify and measure the "dependencies" you mention between any pair of agents, and assure that consumers pay only the production costs of products or services they deem valuable enough to purchase.

And the question certainly does have something to do with morality. It raises the basic moral question underlying all theories of government: For what purposes, and under what circumstances, may one moral agent exert force against another moral agent?
But the individual members cannot meet their own interests. I cannot be my own surgeon, I cannot build the roads I need. I need others, some things I need can only be provided collectively. Therefore I have to take the needs of others into account.
Yes, some things can only be provided collectively. In economics those are called "public goods." They are goods which are non-rivalrous and non-excludable. National defense and police services are examples. Most goods, however, including health care, are private goods, and can be readily provided privately.

Chili
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Re: Is insurance a form of Socialism?

Post by Chili » October 14th, 2017, 10:59 pm

GE Morton wrote:Yes, some things can only be provided collectively. In economics those are called "public goods." They are goods which are non-rivalrous and non-excludable. National defense and police services are examples. Most goods, however, including health care, are private goods, and can be readily provided privately.
National defense and police are examples of completely necessary services. So is heath care. If someone fails to save for heath care, or decides to go without e.g. vaccinations, the result could be catastrophic for a whole society.

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LuckyR
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Re: Is insurance a form of Socialism?

Post by LuckyR » October 15th, 2017, 2:17 am

Chili wrote:
GE Morton wrote:Yes, some things can only be provided collectively. In economics those are called "public goods." They are goods which are non-rivalrous and non-excludable. National defense and police services are examples. Most goods, however, including health care, are private goods, and can be readily provided privately.
National defense and police are examples of completely necessary services. So is heath care. If someone fails to save for heath care, or decides to go without e.g. vaccinations, the result could be catastrophic for a whole society.
Healthcare and retirement savings are only the two most obvious examples of areas where everyone will incur high expenses, typically at a remote time, whereas most folks earn money slowly over a long period of time. Unfortunately too many don't have the fiscal discipline to set aside resources for these very predictable future expenses. What to do? Libertarians find it easy to shrug and reply it is the fault of the poor planners and if they go bankrupt, die prematurely or eat cat food in retirement, so be it. This attitude makes complete logical sense... for a machine. Anyone with any empathy would come up with a way to prevent these predictable catastrophies, say by coming up with insurance or social security.
"As usual... it depends."

Londoner
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Re: Is insurance a form of Socialism?

Post by Londoner » October 15th, 2017, 8:47 am

GE Morton wrote:
No, it doesn't. An argument consists of propositions. If one of the propositions is false, then the conclusion will not follow, and is likely to also be false. So we examine the propositions one by one .
A proposition is something in logic, where it has a truth value, either T or F. But here we are dealing with descriptions of the world, where the truth is not binary. For example, we are discussing the nature of 'insurance'; the fact we are having a discussion is evidence that everyone does not see insurance the same way. Since everyone does not see it the same way then we cannot reduce it to a simple binary proposition.
Of course we need health services. The question is not whether the service is needed, but who performs it and who pays for it. Which is more cost-effective --- paying for comprehensive health care services for everyone, to avoid (actually, only reduce) the risk of contracting a communicable disease from an undiagnosed, untreated person, or immunizing yourself against those diseases?
Yes, we are both agreed we need health services and that they need to be paid for.
Again, the question is: Who pays for it?
Those who can afford it. We agree that it is good for everyone if there is some sort of universal health service. If there were no poor people and everyone could afford to pay their own way, then that would work. But if some people can't afford to pay, but we still want them treated, then the people who can afford it will have to pay for them.
Me: If the employee has to buy health insurance, they need higher wages and that cost too will ultimately be paid by the consumer.

That argument is a non-starter. You could also argue that the employee needs food, shelter, clothing, a certain amount of entertainment and recreation, etc. Such needs do not determine wages. The market sets wages, and the employee must figure out how to meet his various needs and desires within that income, or alternatively, figure out a way to increase his income (typically by acquiring more valuable skills).
Yes, the employee does need those things, so of course those needs do determine wages.

For example, in my city accommodation costs are high. If you want to employ somebody and need them to live near you, then you have to pay them enough to cover their accommodation costs. It is no good just saying the employee must 'figure out' a way round it, they can't. If the employer wants to employ them then the employer must accept that this is a cost of doing business. They will either be in a business in which they can pass on those costs to their customers, or they will have to find another way of making a living.
Me: Or the cost can be met by the consumer through taxes. Which method of paying we pick is a calculation, but there is no way of avoiding it. It is nothing to do with morality, it is simply the nature of complex societies where we all depend on each other.

But the extent and nature of those dependencies vary with every pair of persons. I will pay the price asked for a product or service, part of which payment pays employee wages and benefits, if I deem that product or service sufficiently valuable to me. Someone else may deem that product or service less valuable, and decline to purchase it at the asking price. Only a market can correctly identify and measure the "dependencies" you mention between any pair of agents, and assure that consumers pay only the production costs of products or services they deem valuable enough to purchase.
But we do not have simple pairs of agents. For example, if you use a public road, who is the other agent? And how would we maintain a road network if I only paid according to how valuable I considered a particular journey? Rather, I value the existence of the road network as a whole, even the bits I will never use myself, because they are used by others with whom I have an economic relationship, and these others have an economic relationship with a wider circle....And of course the road network does not stand alone either; it needs police and courts and planning authorities and academics... There is no product or service in which there is only a simple two-party transaction.
And the question certainly does have something to do with morality. It raises the basic moral question underlying all theories of government: For what purposes, and under what circumstances, may one moral agent exert force against another moral agent?
I do not see why those things are connected. I can decide it is a good idea to have a road network, and that building one must be a collective undertaking, on purely pragmatic grounds. Just as I can calculate that providing some sort of health care for the poorer members of society is a good idea, even if I have no empathy with them as people.
Yes, some things can only be provided collectively. In economics those are called "public goods." They are goods which are non-rivalrous and non-excludable. National defense and police services are examples. Most goods, however, including health care, are private goods, and can be readily provided privately.
I do not think there is any real distinction. Everyone could be their own policeman, but it would be inconvenient and inefficient. As to whether the same is true for other functions, that is a pragmatic matter. In a crowded city, collective transportation systems work better than cars. Out in the country it is the other way round. I don't see that as a moral issue.

GE Morton
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Re: Is insurance a form of Socialism?

Post by GE Morton » October 15th, 2017, 9:10 am

Chili wrote:National defense and police are examples of completely necessary services. So is heath care.
How necessary a service may be has no bearing on whether or not it is a public good "which can only be provided collectively," which was the claim addressed.
If someone fails to save for heath care, or decides to go without e.g. vaccinations, the result could be catastrophic for a whole society.
Well, I suppose it could be, in some imaginary disaster scenario. But in the real world the consequences are not nearly so grave, as evidenced by the fact that tens of thousands, if not millions, of people do exactly that every day. So far society has escaped the catastrophe you envision.

-- Updated October 15th, 2017, 9:28 am to add the following --
LuckyR wrote:Anyone with any empathy would come up with a way to prevent these predictable catastrophies, say by coming up with insurance or social security.
"Catastrophies"? A bit of hyperbole there, don't you think?

There are ways to prevent at least some such "catastrophies" --- you can educate people regarding the consequences of failing to provide for those needs, and you can contribute to a charity to aid those who didn't get the message.

Empathy is not a philosophically sound basis for public policies, for two reasons. First, it varies from person to person, both with respect to its strength and the persons for whom it is felt. Secondly, it is an emotional reaction (like hate and anger), and hence, non-rational.

-- Updated October 15th, 2017, 11:12 am to add the following --

[
Londoner wrote:For example, we are discussing the nature of 'insurance'; the fact we are having a discussion is evidence that everyone does not see insurance the same way. Since everyone does not see it the same way then we cannot reduce it to a simple binary proposition.
Well, in that case what is needed is a definition of "insurance." I'm using the term as it is understood in economics, and by actuaries. I.e., a pooling of calculable risks, with each member of the pool paying a premium proportionate to the risk he adds to the pool. To what different understanding do you refer?
Again, the question is: Who pays for it?
Those who can afford it. We agree that it is good for everyone if there is some sort of universal health service.
Well, no, we have not agreed that it is "good for everyone if there is some sort of universal health service," if you mean by a "universal health service" one which is available to everyone, regardless of ability to pay. Such a service will entail that Alfie will be forced to pay for Bruno's health care, which will be good for Bruno, but certainly not for Alfie.
But if some people can't afford to pay, but we still want them treated, then the people who can afford it will have to pay for them.
That is a glaring non sequitur. It involves the 4-term fallacy: the "we" in the antecedent clause is not equivalent to the "people who can pay for it" in the consequent clause. The correct conclusion would be, "We who want them treated must pay for it." The "people who can pay for it" may or may not want them treated (at their expense).
Yes, the employee does need those things, so of course those needs do determine wages.
Sorry, but per accepted economic theory production costs do not determine prices. Worker needs are worker production costs, and their wages are the price of labor. Like all prices they are determined solely by the market --- what buyers have proved willing to pay for them. If a worker's services are only worth $10/hour on the market, then that is all he will be paid, regardless of his needs.
For example, in my city accommodation costs are high. If you want to employ somebody and need them to live near you, then you have to pay them enough to cover their accommodation costs. It is no good just saying the employee must 'figure out' a way round it, they can't. If the employer wants to employ them then the employer must accept that this is a cost of doing business. They will either be in a business in which they can pass on those costs to their customers, or they will have to find another way of making a living.
The market is still determining wages in that scenario. The cost of housing will affect the availability of labor. Employers will offer higher wages until an adequate supply of labor is secured --- or, in many cases, move their operations to China, where labor costs and government overhead will be lower.
But we do not have simple pairs of agents. For example, if you use a public road, who is the other agent? And how would we maintain a road network if I only paid according to how valuable I considered a particular journey? Rather, I value the existence of the road network as a whole, even the bits I will never use myself, because they are used by others with whom I have an economic relationship, and these others have an economic relationship with a wider circle....And of course the road network does not stand alone either; it needs police and courts and planning authorities and academics... There is no product or service in which there is only a simple two-party transaction.
Roads, police, courts are public goods (as earlier defined). Schools ("academics") are private goods. "Planning authorities" are not marketable goods at all (no one would freely pay for them). Public goods, as mentioned, cannot be provided privately. For all private goods, there are one-to-one dependencies between consumers of that good and the producers of it. I have a dependency relationship with the crew who mow my lawn. I have no dependency relationship with the dealer from whom my neighbor bought his car. If that dealer's business folded tomorrow my life would not be affected in the slightest way.

Roads are an interesting case. In the US state and federal highways are primarily funded through fuel taxes, plus for trucks, the weight of the loaded vehicle. Thus drivers pay roughly in proportion to the extent that they use and contribute wear and tea on the roads. City streets are paid for primarily through property taxes, roughly in proportion to the access benefit each property owner receives from the street (as measured by front footage).
And the question certainly does have something to do with morality. It raises the basic moral question underlying all theories of government: For what purposes, and under what circumstances, may one moral agent exert force against another moral agent?
I do not see why those things are connected. I can decide it is a good idea to have a road network, and that building one must be a collective undertaking, on purely pragmatic grounds. Just as I can calculate that providing some sort of health care for the poorer members of society is a good idea, even if I have no empathy with them as people.
The connection is obvious. Your "good idea" and pragmatic approach requires the use of force. Hence the moral issue is raised. Your answer to the moral question seems to be, "A moral agent may force other moral agents to support whatever he deems to be a good idea."
I do not think there is any real distinction. Everyone could be their own policeman, but it would be inconvenient and inefficient.
No, they can't. It would be worse than inconvenient and inefficient; it would be chaotic and result in many injustices.
In a crowded city, collective transportation systems work better than cars.
No, they don't (in most crowded cities). As evidenced by the fact that 90% of commuters (on average across US cities) prefer their cars. Bicycling and public transit apparently does not work better for them.

Londoner
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Re: Is insurance a form of Socialism?

Post by Londoner » October 15th, 2017, 12:53 pm

GE Morton wrote:
Well, in that case what is needed is a definition of "insurance." I'm using the term as it is understood in economics, and by actuaries. I.e., a pooling of calculable risks, with each member of the pool paying a premium proportionate to the risk he adds to the pool. To what different understanding do you refer?
Yes, 'insurance' in economics meas 'insurance'. The difference in understanding of insurance we are discussing in this thread concerns what degree insurance is similar to socialism.
Well, no, we have not agreed that it is "good for everyone if there is some sort of universal health service," if you mean by a "universal health service" one which is available to everyone, regardless of ability to pay. Such a service will entail that Alfie will be forced to pay for Bruno's health care, which will be good for Bruno, but certainly not for Alfie.
I thought you agreed that it was good to keep the population generally healthy on the grounds that diseases can travel from poor people to rich people. But if you don't, you don't.
Me: But if some people can't afford to pay, but we still want them treated, then the people who can afford it will have to pay for them.

That is a glaring non sequitur. It involves the 4-term fallacy: the "we" in the antecedent clause is not equivalent to the "people who can pay for it" in the consequent clause. The correct conclusion would be, "We who want them treated must pay for it." The "people who can pay for it" may or may not want them treated (at their expense).
That's correct. If I meant the 'we' to mean the same as 'people who can pay for it' I should have chosen my words better, but I didn't. 'We' would be people who think it is a good idea not to be surrounded by a population ravaged by diseases, which fortunately describes most people.
Sorry, but per accepted economic theory production costs do not determine prices. Worker needs are worker production costs, and their wages are the price of labor. Like all prices they are determined solely by the market --- what buyers have proved willing to pay for them. If a worker's services are only worth $10/hour on the market, then that is all he will be paid, regardless of his needs.
They may be determined by the market, but there are different markets. If you want to employ a cleaner in central London you will have to pay more than if you employ a cleaner in Cairo. That is not because the cleaner in London cleans any better than the cleaner in Cairo, such that their services are worth more.

If you ask a cleaner in central London why they want so much money, they will explain that the costs of either living in London, or travelling in from outside, are such that it would not be worth while taking the job unless those costs were covered. It is no good the employer insisting that they think the cleaning job is only worth a smaller amount to them. If the employer cannot meet the employee's costs, then the cleaner will not have a job and the employer will not have a cleaner. The cleaner will instead find work with a Russian oligarch who has a better grasp of how markets work.
The market is still determining wages in that scenario. The cost of housing will affect the availability of labor. Employers will offer higher wages until an adequate supply of labor is secured --- or, in many cases, move their operations to China, where labor costs and government overhead will be lower.
Yes. What point are you making?
Roads, police, courts are public goods (as earlier defined). Schools ("academics") are private goods. "Planning authorities" are not marketable goods at all (no one would freely pay for them). Public goods, as mentioned, cannot be provided privately. For all private goods, there are one-to-one dependencies between consumers of that good and the producers of it. I have a dependency relationship with the crew who mow my lawn. I have no dependency relationship with the dealer from whom my neighbor bought his car. If that dealer's business folded tomorrow my life would not be affected in the slightest way.
Personally, I would pay for planning authorities because I want to make sure new developments do not harm existing properties, like mine, that bridges I need to cross don't fall down, and so on. When I sell goods privately, I know that if one side does not deliver I can take them to court, where a publicly funded system that is independent of both parties will decide the case. When my neighbour buys a car, I would like to think that the car is roadworthy, and that my neighbour knows how to drive, otherwise he might run me over. If my neighbour buys from a business that goes bust, it is in my interests that his problem is dealt with in a proper way, since tomorrow the same thing may happen to me.
The connection is obvious. Your "good idea" and pragmatic approach requires the use of force. Hence the moral issue is raised. Your answer to the moral question seems to be, "A moral agent may force other moral agents to support whatever he deems to be a good idea."
The issue of if and when it is right to use force is indeed a moral issue, but it isn't specific to the topic we are discussing. Putting criminals in prison, or war, or stealing from old ladies are also examples of using force on others, but they have nothing to do with insurance.
Me: In a crowded city, collective transportation systems work better than cars.

No, they don't (in most crowded cities). As evidenced by the fact that 90% of commuters (on average across US cities) prefer their cars. Bicycling and public transit apparently does not work better for them.
But we are not talking of average US cities, which are not average since many date from the age of mass car ownership and thus have better road systems. By crowded cities I mean places like New York or London or Mumbai. But now I think you are just being contrary for the sake of it.

Steve3007
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Re: Is insurance a form of Socialism?

Post by Steve3007 » October 15th, 2017, 2:27 pm

Sorry, it looks like I'm late coming back to this.

GE Morton, starting at post #13:

Me:
If this principle is taken to its logical conclusion then it wouldn't be insurance at all because each person would be in a "pool" of one person - the one person with precisely that level of risk. That doesn't happen. Assessing the level of risk, and placing people with similar but not exactly the same risk in their own pools reduces the size of the pool but it doesn't change the general principle of pooled risk and subsidy.
GE Morton:
That doesn't follow. It doesn't matter what level of risk the individual brings to the pool, as long as each pays a premium reflective of that risk.
OK. Understood. I was thinking of insurance policies which contain a smaller pool of customers by specialising in particular risk-level groups. I think actually you're right here and "subsidy" is the wrong word.


Then, you were explaining to me why you think that in the US free market insurance for health care worked for decades until the emergence of the Nanny State, beginning in the 1930s.
Prior to WWII Americans paid 90% of their health care costs out of their pockets. If your kid fell out of a tree and broke her arm, or you needed a course of penicillin to treat bacterial pneumonia, you paid the doc when you left the clinic. If they carried insurance it was "major medical," which kicked in when expenses exceeded some (fairly high) threshold. Comprehensive health insurance became popular during WWII. Because so many men were overseas fighting the war, labor was scarce. But wage and price controls were in effect, and employers could not offer higher wages to attract workers. But fringe benefits were not covered by the controls. So employers began offering comprehensive health insurance policies.
OK. Understood. In the US, privately provided comprehensive health cover came about because it was essentially a way to get around wage controls and attract scarce employees with non-wage benefits. That's interesting. I didn't know that.
Then the government began covering the heath care costs of many people, via Medicare and various welfare programs. As a result, only about 15% of health care costs are now paid out of the patients' pockets (which includes insurance premiums, co-pays and deductibles)...
This doesn't seem to me to be directly related to the first part of the story where you described how widespread comprehensive healthcare came about. The fact that it's comprehensive, rather than "major medical" doesn't seem to be the relevant point. The point seems to be the introduction of taxpayer funded healthcare, as opposed to market-provided healthcare, regardless of the type of healthcare that it is.

What do you conclude from this? Do you think it was a mistake to introduce Medicare and Medicaid? That appears to be what you're implying. If the provision of healthcare in the US for the poor and the elderly had been left to the market, as you seem to think should have happened, do you have any thoughts as to what might have happened?
...and many people now believe that someone else is responsible for their health care, that they have "right" to health care. Which, of course, they don't.
Again, I think you're drifting slightly here. This is a wider problem with welfare, and in fact with modern affluent societies as a whole. Inevitably people get used to whatever situation they've lived their whole lives in and see that situation as "normal" or "natural". We certainly do easily forget history. We forget that not so long ago (and still, in some parts of the world) "normality" means starving if you don't work.

But what do you propose we do about that?

Personally, I agree that it's not healthy for people to remember their rights more than their obligations and forget that the benefits of living in a complex smoothly functioning society are not laws of nature. But I don't think the solution to that is to remove those benefits. I think the solution is to educate people about the way their society works and the reasons why it's possible for them to take various things for granted that earlier generations would have seen as unattainable luxuries.

---

On the general theme of free markets versus taxpayer provision, that you're discussing with Londoner:

Clearly you're making the completely free-market "everybody should be left alone so long as they don't harm others" argument. I think the crux of the argument is where you've asserted that nobody has the right to impose their private morality on others and that they should instead donate to a charity. It seems to me that nobody has yet succeeded in creating a society - a group of deeply interdependent people - in which that is possible. And it's not clear to me how you could. In a democracy, for example, clearly the whole system of rule by the government which won a majority is all about the majority imposing their moral values on the whole.

Can you imagine a way that this kind of society that you seem to want could emerge? What would it be like to live in that society, I wonder?

---

In arguments like these I like to try to cut through the disagreements that revolve around facts and try to see if there is a genuine difference in basic values that the two parties see as axiomatic and therefore cannot rationally argue about (and must either agree to disagree or fight!) In other words, it's interesting to try to work out whether the posters disagree about ends or whether they merely disagree about means. I usually find it surprisingly hard to do that. I'm still working on it here.

-- Updated Sun Oct 15, 2017 7:45 pm to add the following --

---

LuckyR:
Healthcare and retirement savings are only the two most obvious examples of areas where everyone will incur high expenses, typically at a remote time, whereas most folks earn money slowly over a long period of time. Unfortunately too many don't have the fiscal discipline to set aside resources for these very predictable future expenses. What to do? Libertarians find it easy to shrug and reply it is the fault of the poor planners and if they go bankrupt, die prematurely or eat cat food in retirement, so be it. This attitude makes complete logical sense... for a machine. Anyone with any empathy would come up with a way to prevent these predictable catastrophies, say by coming up with insurance or social security.
It's interesting that you say this, because it's a style of argument that free-market advocates/libertarians often object to. They see it as simply asserting the moral high ground. They would say that it's no good having compassion and empathy if the result is that everybody loses. They would say that you have to make rational arguments as to how you achieve the end of making everybody better off. They would say that equality is not an end in itself. There's nothing inherently good about equality.

I have various issues with what they say, but I can see their point. It's a point that is often made by a right-wing political commentator in the UK called Melanie Phillips. I disagree with most of her actual political views, but I take her point on this more general theme.

-- Updated Sun Oct 15, 2017 8:42 pm to add the following --

Incidentally, for reference, this is quite interesting:

visual.ons.gov.uk/how-does-uk-healthcar ... ationally/

The bar chart about halfway down that page shows how healthcare is funded in each of the G7 group of countries. Germany, Japan and France have very large compulsory insurance schemes. The UK, Italy and Canada have a lot of taxpayer funded healthcare. And the USA has a mix, but with a relatively large proportion of non-compulsory private insurance.
For evil views to flourish, it only requires good people to say nothing.

Togo1
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Re: Is insurance a form of Socialism?

Post by Togo1 » October 15th, 2017, 6:10 pm

In no particular order...

Of course insurance is socialist. It's a system whereby everyone pools resoruces and applies them to those who need it the most, thus providing a net benefit. Like most forms of socialism, you can run it in conjunction with (relatively) free markets, or not, as you wish.

People do not pay into insurance pools simply on the basis of their own risk, because your risk depends in part on other people. If you regularly drive on roads with uninsured drivers, then your rates will go up, because extracting payment from an uninsured driver who causes an accident is very difficult, and the insurance company will struggle to do it in practice. Ensuring that all drivers need to be insured, and that uninsured drivers are kept off the roads, lowers your personal risk.

Similarly with health care. Being around a lot of sick people raises your risk of getting sick, so having health care for everyone makes the provision of healthcare cheaper for each individual.

People can, have, and do pay for their own planning authorities. Many financial regulators are set up by their members rather than by government, although the government ends up adminstrating them. A NIMBY protest organisation is in effect a planning regulator paid for by it's members, and effective planning regulation increases the value of neighbourhoods. After all, you won't have a local park unless people are prevented from building there, and you won't have a great view of the bay unless you and your neighbours are prevented from building in each other's way.

It's easy to lose sight of the fact that 'socialism' and people getting together to pay for stuff in a pool, are the same thing, following the same principles, and working on the same basis. A market economy wouldn't work without it.

Steve3007
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Re: Is insurance a form of Socialism?

Post by Steve3007 » October 16th, 2017, 3:29 am

Togo1:
Of course insurance is socialist. It's a system whereby everyone pools resoruces and applies them to those who need it the most, thus providing a net benefit.
But isn't the key difference the fact that insurance operates as part of a free market? It's a product that we choose to buy, or not. Socialism, in its various degrees, is a political system which is imposed on the whole population of a society either by dictatorship or by majority vote.
For evil views to flourish, it only requires good people to say nothing.

Londoner
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Re: Is insurance a form of Socialism?

Post by Londoner » October 16th, 2017, 4:13 am

Steve3007 wrote: But isn't the key difference the fact that insurance operates as part of a free market? It's a product that we choose to buy, or not. Socialism, in its various degrees, is a political system which is imposed on the whole population of a society either by dictatorship or by majority vote.
The same is true of any political system.

That you put it like that suggests that the system in the USA or wherever you live is somehow the natural one, or no system at all. It is a good trick by the conservatives, since it puts into people's head the idea that any attempt to change it is bound to fail, since it goes against nature. Or wicked because it is an attempt to impose something on a nation that currently enjoys complete freedom. But it isn't true, all systems are artificial and held together by legislation; that is why the USA is full of lawyers!

It is spun into the language; 'free market' sounds good because it contains the word 'free'. But there are no examples of 'free markets'; it is an abstract concept. It is a generalised diagram of economic forces, not a photograph of any specific activity that exists anywhere.

The same is true of discussions of 'socialism'. It is not the sort of idea that maps onto any particular system. You can call insurance socialist because it collectivists risk, but if you do then you find you have to call the fire brigade or police force socialist. If not allocating resources according to market forces is socialist, then the way families look after each other is socialist. And so on.

Steve3007
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Re: Is insurance a form of Socialism?

Post by Steve3007 » October 16th, 2017, 4:40 am

Londoner:
The same is true of any political system.
That it can be regarded as a product that we either choose to "buy" or not? Or that it is imposed?

I think that there is a sense in which both are true, at least in a democracy. So even the political system which states "everything should be regarded as a product which we can choose to buy or not to buy" is a product that we can choose to buy or not to buy. And all political systems are invented by people and imposed, either by a majority or a dictatorship. Even the ones that claim to be describing natural laws.

I suspect that a free-market advocate like GE Morton would emphasise that when we "buy" a political system by voting we also impose it on others who didn't buy it.

But maybe you would then point out (as you do later in the post that I'm addressing here) that the idea that free markets are truly free is a myth. Generally speaking, workers aren't free to sell their labour as if it was a commodity. So both ideas involve an element of imposition.
It is spun into the language; 'free market' sounds good because it contains the word 'free'.
Yes. I should point out that when I say "free market" I use that term because it is the standard one, and I think almost everyone knows what I am referring to. I agree with your general point that "free" is, to some extent, a misnomer.

Personally I regard the "free" market concept as a tool like any other. Sometimes useful. Sometimes not. Like any other tool.

-- Updated Mon Oct 16, 2017 9:55 am to add the following --

A general point about the way I use the terms "free market" and "socialist" in the OP and subsequent posts:

As I said, "free market" is, in my view, a particular type of economic tool with particular applications, with well documented characteristics, pros and cons.

I use the word "socialism" to mean the part of any political system which involves taxing the population in order to fund public services.

Maybe not the way that everyone uses those terms. I just think they're convenient words to use for these ideas.
For evil views to flourish, it only requires good people to say nothing.

Togo1
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Re: Is insurance a form of Socialism?

Post by Togo1 » October 16th, 2017, 8:32 am

Steve3007 wrote:Togo1:
Of course insurance is socialist. It's a system whereby everyone pools resoruces and applies them to those who need it the most, thus providing a net benefit.
But isn't the key difference the fact that insurance operates as part of a free market? It's a product that we choose to buy, or not. Socialism, in its various degrees, is a political system.
Do you choose to buy it?

Car insurance is compulsory. Professional liability insurance is compulsory. Building insurance is compulsory. International trades, like shipping, need to be insured in order to do business within most markets. Mail order has an insurance component, again not voluntary. Power generation and hazardous waste is subject to government guarentee in return for expenditure on safety. Financial transactions and balances are both insured and guarenteed at a national level. Anything where you are expected to have responsibilites to live up to, it's compulsory. Home and contents is essentially a top-up. We've socialised the risk to human life and major destruction via socialised flood controls, emergency services, policing, and so on, so all that's left is the fairly trivial damage to deocrations and possessions, which is why it's fairly cheap, and the rate is set largely on the effectiveness of socialised public services in your area. Business interruption insurance of various kinds, ditto.

What does that leave?
Pet insurance is a product, sure, because the major influences on risk are how much money you have and how much you care about the pet, both of which are very well predicted by the propensity to buy pet insurance. Similarly insurance against specific disasters, or specific outcomes (a model insuring their face, for example). But this is all very small potatoes.

It seems like the vast bulk of the insurance market is around the coverage of risk that is either compulsory, or a top up on risks already socialised through tax and government.

The weird one here is Health Insurance, which is socialised to an extent in the US, but to an inadequate level. It is largely something bought by employers, again on what is in effect is a compulsory basis, and then resold to employees. This happens for reasons that can best be described as ideological. That alone may explain why it's so inefficient in the US, because they're trying to use a market model for coverage that, in practice, the country can't afford people not to have.

Most insurance risk in the US is fully or partly socialised. The mass socialisation of risk is both socialism, and an important function in how markets operate.

Steve3007
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Re: Is insurance a form of Socialism?

Post by Steve3007 » October 16th, 2017, 8:50 am

Togo1:
The weird one here is Health Insurance, which is socialised to an extent in the US, but to an inadequate level. It is largely something bought by employers, again on what is in effect is a compulsory basis, and then resold to employees. This happens for reasons that can best be described as ideological. That alone may explain why it's so inefficient in the US, because they're trying to use a market model for coverage that, in practice, the country can't afford people not to have.

Most insurance risk in the US is fully or partly socialised. The mass socialisation of risk is both socialism, and an important function in how markets operate.
This was what I was beginning to discuss with GE Morton, who appears to be American and who was giving me some history on US health insurance and his/her thoughts as to why the introduction of government funded programmes like Medicare and Medicaid got in the way of the private insurance market working properly. I'll see if he/she wants to add anything to that.

My own view is more or less the same as yours: that the "free market" model, though often the most efficient way to deliver goods and services, doesn't always appear to be so. So it's best to be pragmatic, not have an ideological attachment to one system or another, and simply try to work out what works best. But then, maybe that's largely because of where I live. Maybe if I was American I'd think differently.

One thing that is clear from the statistics website that I posted earlier is that here in the UK we spend a lot less per person on healthcare than in lots of other countries. Considerably less than half of what is spent per person in the US, for example. So if we're sticking with the NHS maybe we need to fund it better.
For evil views to flourish, it only requires good people to say nothing.

Chili
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Re: Is insurance a form of Socialism?

Post by Chili » October 16th, 2017, 9:08 am

Steve3007 wrote: My own view is more or less the same as yours: that the "free market" model, though often the most efficient way to deliver goods and services, doesn't always appear to be so. So it's best to be pragmatic, not have an ideological attachment to one system or another, and simply try to work out what works best. But then, maybe that's largely because of where I live. Maybe if I was American I'd think differently.

One thing that is clear from the statistics website that I posted earlier is that here in the UK we spend a lot less per person on healthcare than in lots of other countries. Considerably less than half of what is spent per person in the US, for example. So if we're sticking with the NHS maybe we need to fund it better.
Depends if right-libertarian brainwashed American, or educated / interested regarding what works elsewhere.

GE Morton
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Re: Is insurance a form of Socialism?

Post by GE Morton » October 16th, 2017, 9:25 am

Yours first, since it is the shortest . . .
Togo1 wrote:In no particular order...

Of course insurance is socialist. It's a system whereby everyone pools resoruces and applies them to those who need it the most, thus providing a net benefit. Like most forms of socialism, you can run it in conjunction with (relatively) free markets, or not, as you wish.
You seem to be counting as "socialist" any collective or cooperative endeavor in which people engage. That is an unconventional, and disingenuous, use of the term. A socialist system, as normally understood, is a system in which the means of production and most services are in the hands of the State, to the support of which all persons are compelled to contribute.

https://www.merriam-webster.com/dictionary/socialism

People engage voluntarily in all kinds of cooperative activities, of which risk pooling is one. They are not all "socialist."

Nor is insurance a system "whereby everyone pools resources and applies them to those who need it most." "Everyone" does not pool resources. Only those who who desire a particular type of coverage and consider it cost-effective for them join such pools. Nor do payouts go to "those who need it the most." They go to anyone who has a valid claim, per the terms of the insurance contract. Needs have nothing to do with it.
People do not pay into insurance pools simply on the basis of their own risk, because your risk depends in part on other people.
It doesn't matter on what the risk depends. As long as it is calculable it it will determine the premium you must pay to cover it.
If you regularly drive on roads with uninsured drivers, then your rates will go up, because extracting payment from an uninsured driver who causes an accident is very difficult, and the insurance company will struggle to do it in practice. Ensuring that all drivers need to be insured, and that uninsured drivers are kept off the roads, lowers your personal risk.
That's correct. Your rates for uninsured motorist coverage will be higher if the State is lax or ineffective in keeping uninsured drivers off the road.
Similarly with health care. Being around a lot of sick people raises your risk of getting sick, so having health care for everyone makes the provision of healthcare cheaper for each individual.
It does no such thing. Being around a lot of sick people raises your risk of getting sick only if the sickness is a communicable disease. My suffering from cancer, heart disease, or a broken arm poses no risk to you. Immunizations are available for most communicable diseases. They are far more cost-effective than paying for health care for thousands or millions of people. They are also far more effective in reducing your risks --- that a person sick with a communicable disease has health insurance reduces your risk of contracting it only slightly. He will still be infectious for a time. The cost-effectiveness argument is a loser.

We're getting a bit off-topic here, but . . .
People can, have, and do pay for their own planning authorities. Many financial regulators are set up by their members rather than by government . . .
You're again equating voluntary agreements into which people enter with "socialism." I assume that by "planning authorities," the author meant State bureaucrats empowered to draw plans for a community's growth and development and prohibit developments inconsistent with their plans. Every builder and developer, of a house, office building, or subdivision, draws plans for his intended project. Few, if any, of them and few citizens at large would willingly pay that bureaucrat for his superfluous and officious "services."
A NIMBY protest organisation is in effect a planning regulator paid for by it's members, and effective planning regulation increases the value of neighbourhoods.
Not, it is not, and no, it does not. A NIMBY organization is not a "planning regulator." It is an advocacy group; the regulation is carried out by the State, if the advocacy is effective. And the advocacy group certainly does not pay for the bureaucrats who do the actual regulating. All citizens are compelled to pay for it. Nor does urban planning "increase the value of neighborhoods," in most cases. It tends to prevent properties from being to developed to their "highest and best use."
After all, you won't have a local park unless people are prevented from building there, and you won't have a great view of the bay unless you and your neighbours are prevented from building in each other's way.
Of course you can have a local park --- persuade your neighbors to join with you in setting up a corporation, pool your money, buy the land you need, and develop a park. Or persuade the city to condemn the land, pay the current owners fair market value, and let it build the park. And unless you have view easements across intervening properties you have no right to a "great view of the bay." If you had one before some proposed development you were lucky. The owners of those properties have no duties to maintain their properties for your pleasure and benefit.

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