Breaking: Right-wing Economist Does Not Understand Difficult Concept of “Insurance.”

CATO scholar Arnold Kling (whose economic views seem to vary a lot depending on who is president) reacts to a piece by Ezra Kline by writing:


“My view of the American health care system is that it hardly rations health care at all. That is why we spend so much more than other countries. I wish we put more responsibility on individuals. Instead, we have this delusion that we cannot possibly afford health care if we pay for it individually, but of course we can afford it if we pay for it collectively.

What’s the fallacy in Kling’s logic? The fallacy, quite simply, is that Kling does not understand the idea of shared risk. He does not understand the purpose of insurance. He does not understand why the collective might want to pay for services that are rendered, at any given time, only to a subset of that collective.

Medical treatment is expensive, and in many cases, treatments may prove too expensive for any one individual to afford. But accidents and illnesses are also somewhat random in their distribution across a population. Therefore, by creating a risk pool and having all members of that pool pay into it, society can ensure that the unlucky few who are stricken by disease or who are injured in an accident can pay for the medical treatment they need by drawing from that pool.

The question is not whether a “collective” can afford medical treatments that individuals cannot (this issue has been settled beyond dispute, and it is embarrassing to have to explain a concept so basic and trivial as “insurance” to an economist like Kling) the issue is whether a scheme of private, non-mandatory insurance coverage can do the job more effectively than a public, government-run, single-payer system.


11:02 am • Wednesday • April 8, 2009

You didn’t get the memo?
Insurance = Socialism.

11:02 am • Wednesday • April 8, 2009

As one of the few Stinquers who actually lives in a place with Socializm Medicizm Healthcare, I think I can speak somewhat about this.

Overhead (aka executive wages and administrative costs) for Canada City HC as a % of the total cost (1999). Less than 8%.

Overhead (aka executive wages and administrative costs) for US America patchwork private HC as a % of the total cost (1999). Around 24%.

From Canada City Propaganda sheet…

Single payer means Walmart style Cost REDUCTIONs (ie: beating up suppliers to get a better price) on equipment and drugs.

In this case a monopoly means good things for the owners (taxpayers) and not the service providers (HC insurance and drugcos.)

But what the hell do I know?

11:14 am • Wednesday • April 8, 2009

Besides CATO is well known to be one of the biggest corporate whore “tink” tanks anyway. Not well respected by libertarians that I’ve read.

11:24 am • Wednesday • April 8, 2009


My view of Right-wing think tanks is that they’re much more “tank” than “think.” So much of the “research” that emanates from them is just laughably disingenuous justifications of failed policy.

1:26 pm • Wednesday • April 8, 2009

When I was a kid, the term “think-tank” troubled me to no end. I pictured an enormous, tank-sized robot sitting down and contemplating its knuckles.

1:48 pm • Wednesday • April 8, 2009

@IanJ: See, I pictured the thinkers sitting around in a big tank of water while they thought. When you consider that most of them look like Kling, it wasn’t a pretty picture.

2:18 pm • Wednesday • April 8, 2009

@Mistress Cynica: I also thought of a big tank, like a water tank, but filled with people thinking, brows furrowed.

3:57 pm • Wednesday • April 8, 2009

@Prommie: I thought of a giant fort that looked like a tank that would shoot people who dared to come near and disturbed the thinking going on inside. A heavily armed fortress of solitude if you will. Made me really want to work for a think tank as a kid.

I’d still like to go there … as long as there is internet access.

4:26 pm • Wednesday • April 8, 2009

@Mistress Cynica: Obviously I read too much scifi as a kid.

8:14 pm • Wednesday • April 8, 2009

As long as health insurance is provided by companies with shareholders, their emphasis will always be cutting costs to maximize dividends. Cutting costs can be translated as paying out as few claims as possible.

Add a comment