Smartass said:
But disallowing force and fraud is also imposing a moral “consensus” that conflicts with the moral codes of some individuals. Some people have no moral objection to stealing, cheating, or using violence, and are willing to take the risk of suffering those things at the hands of others. Sure, most people agree that peacefulness and honesty are good things morally, but they’d say the same about compassion and social responsibility. Why should government necessarily mandate the one and not the other? Saying “All citizens must refrain from the use of force” or “All citizens must abide by their contracts” is no less an act of moral coercion than saying “All citizens must share some of their goods with others.” Imposing moral codes on individuals is just part of what societies do, and Libertarianism is not free from that.
I don’t agree that when it comes to solving problems, there’s absolutely no middle ground between supporting bad government and ceasing to support government at all. People can also demand that government stop doing the thing that’s failing miserably and try a different approach. Our laws and the people who make them are changed all the time in response to citizen demand; I’ve personally been involved in one or two (very small, but successful) efforts to change a government’s policies. Yup, it takes a long time and a lot of work, but perhaps things that affect a lot of people in important ways shouldn’t be changed at the drop of a hat. I have enough faith in people to think that they’ll eventually put in the necessary effort to change the government’s approach to the things they really care about.
So according to Libertarian principles, disaster relief should be paid for by private insurance premiums? Okeydoke, let’s run the numbers and see what comes out. (This is the part I always like best; guess I’m just a policy wonk at heart. :)) I did a brief search on “flood damage” and came up with the tidbits that there was $1 billion worth of damage in Florida from the 1999 hurricane season, and $6 billion worth of damage in North Carolina from one 1999 hurricane alone. Admittedly, 1999 was a bad hurricane year, but on the other hand those numbers didn’t include the costs of rescue and evacuation, emergency food and shelter, etc., nor flood devastation in any other areas. Let’s be very very modest in our estimates and assume that the devastation caused to individuals (leaving businesses out of the scenario) by floods could be satisfactorily handled for $5 billion per year for the entire country—including not only the costs of compensation, rescue and relief efforts, and rebuilding for the policy-holders, but necessary overhead (training and paying helicopter pilots, advertising, office staffs, etc.) and enough profits to make it a paying proposition for the insurance companies. This figure looks extremely low—I’d guess I’m off by at least half an order of magnitude—but we’ll go with it as a very modest estimate.
Now, where are we going to get this money? There are about 275 million people in the US, or say one hundred million families. If every family paid $50 in flood insurance, we’d have all our costs and profits covered according to the above estimate. Is every family going to think they need even fifty dollars’ worth of flood insurance? Not hardly. Well, if only one in ten families paid $500 for flood insurance annually, that would still cover it. Is every tenth family in the whole country going to take $500 out of their income every year for flood insurance, considering everything else they need to spend money on? I seriously doubt it: think of the thousands of families in each of hundreds of cities who have no realistic use for flood insurance at all, as well as the thousands of people who might actually be in danger from floods but don’t know it, don’t care, or are willing to take the risk. We’ve got a serious shortfall.
So okay, there’s a terrible hurricane and a devastating flood. Even assuming the insurance companies have enough money to pay for rescuing and compensating all their policy-holders (and—cough—people who are quietly left to drown don’t submit nasty expensive claims or file nasty inconvenient lawsuits—and in the midst of a devastating flood, who has time to notice whether the companies’ helicopter pilots are acting more for the benefit of their policy-holders or their stockholders?), the comfortably rescued and compensated citizens are now cheek by jowl with a slew of starving, homeless, and penniless ones. The self-interest of this latter group has undergone a huge shift: suddenly it makes a lot more economic sense to use force and fraud on their more prudent neighbors and take their chances with the law. (Heck, some of them might start stealing just so they’d get hauled off to a nice dry jail cell.) More property loss, more non-productive social turmoil, more drains on law enforcement and the criminal justice system.
Even without rights infringements, this is a perfect example of externality problems. Take the case of Paul and Marcia Libertarian, who bought flood insurance when they moved to Riverville even though there hasn’t been a flood there in seventy-five years and hardly any of their neighbors carry personal flood insurance anymore. Well, it turns out to have been a wise choice, because the river did flood this year and there’s hardly a house left standing. Prudent Paul and Marcia and their family are rescued, sheltered, and compensated for their property losses: let’s hear it for the efficiency of the market! What’s more, their neighbors (unlike the criminal hoodlums of the previous paragraph) all remain true to the same Libertarian principles and are resolutely prepared to drown, starve, or freeze rather than entrench upon Paul and Marcia’s inalienable property rights. Unfortunately, most of the survivors are now about twice as poor as dirt and can barely scratch out a subsistence living, much less contribute to the needs of the community in rebuilding roads and schools and supporting local businesses. If Paul and Marcia want a decent life for themselves and their family, they’re either going to have to make a hugely inequitable investment in rebuilding (and they probably couldn’t afford what it would cost anyway), or sell their house (and who will want to buy property in a dead town like Riverville now?) and move. Poor Paul and Marcia have been blindsided by a market externality: the insurance premiums they paid didn’t take into account the fact that insurance compensation is much more effective when coverage is universal. They paid the insurance company a fair price for the costs of rescue and resettlement, and that’s what they got; but now they’re also going to have to pay a lot more to start their new life, just because their neighbors chose not to pay for the same thing. The other folks in Riverville certainly didn’t violate anybody’s rights by choosing not to buy flood insurance, but it sure ended up costing Paul and Marcia a bunch of money in the long run.
And we haven’t even looked at the costs of dealing with earthquakes, fires, and tornadoes, all of which are going to require their own insurance premiums and all of which are going to cause huge problems for the underinsured and everyone around them. Is this ultimately better and cheaper than mandating universal contributions for disaster relief and providing universal coverage, even if it’s not optimally efficient? I’ve seen no reason to think so, and I don’t think that repeating the mantra “markets good, government bad” is going to change that.
Kimstu