Beyond Viagra Analogies
Matt Miller wrote an op-ed today calling for truth telling by both parties. Novel idea. Anyway, he declares that Democrats "must stop pretending that mandates on business (for health coverage, say) are 'free' ways to get social results Democrats like - when such mandates impose costs ultimately borne by workers or consumers." Literally, that's right, although he doesn't explain why workers and consumers, rather than stockholders, end up footing the bill.
Importantly, though, there are good reasons to impose mandates on employers. One reason has to do with asymmetric information. Health insurance is cheaper to buy for a large group of people randomly chosen from the population than it is for an individual. That's because healthy individuals buy less insurance, so insurance companies know to charge more than they would for the average person. On the other hand, with a large group aggregated for non-health reasons, such as a corporation, this problem doesn't exist and insurance is cheaper. Mandating health insurance can thus be an efficiency-improving policy. This means that we're not just shifting costs onto consumers and workers - we're actually creating wealth. This isn't exactly "free," but it's a relatively painless way to overcome market failure.
The real point is that Miller hasn't thought very hard about the things Democrats need to face up to, or he is just too scared to point out a real problem in the Democratic party. Before you can speak truth to power, you have to both grasp the truth and stand up against the powerful. Miller would rather make Viagra jokes.
UPDATE: Matthew Yglesias piles on.
Importantly, though, there are good reasons to impose mandates on employers. One reason has to do with asymmetric information. Health insurance is cheaper to buy for a large group of people randomly chosen from the population than it is for an individual. That's because healthy individuals buy less insurance, so insurance companies know to charge more than they would for the average person. On the other hand, with a large group aggregated for non-health reasons, such as a corporation, this problem doesn't exist and insurance is cheaper. Mandating health insurance can thus be an efficiency-improving policy. This means that we're not just shifting costs onto consumers and workers - we're actually creating wealth. This isn't exactly "free," but it's a relatively painless way to overcome market failure.
The real point is that Miller hasn't thought very hard about the things Democrats need to face up to, or he is just too scared to point out a real problem in the Democratic party. Before you can speak truth to power, you have to both grasp the truth and stand up against the powerful. Miller would rather make Viagra jokes.
UPDATE: Matthew Yglesias piles on.
posted by James | 1:03 AM
1 Comments:
"he doesn't explain why workers and consumers, rather than stockholders, end up footing the bill"
It's because in a competitive market, differences in cost lead to differences in price. A corporation, faced with new additional costs, either reduces costs elsewhere (e.g. by lowering wages) or raises its prices. Taking a smaller profit isn't an option, because if it made economic sense to do that, the corporation (or one of its competitors) would have lowered prices already.
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