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March 09, 2012

In the Future, Socialism Will Advance Through "Insurance"

I forget who said that. I think it's insightful and correct.

There are two functions of real insurance: hedging against a risk and risk-sharing for those risks we choose to share.

One in ten thousand people might suffer rectal cancer. It probably makes sense for most people, on a voluntary basis, to decide (voluntarily) to pay in a little money for insurance so that if they suffer such a catastrophic and expensive illness, they'll be covered.

If they're one of the lucky ones -- well, they're out a little bit of money, but they are one of the lucky ones.

Insurance makes sense in this situation, for most people, as most people would like to reduce the impact of serious risks that strike like lightning. They are unpredictable, and when they hit, they require major changes in lifestyle. Most people -- especially with children, who must be planned for whether their parents are sick or healthy, alive for dead -- are willing to pay a little into an insurance pool to manage this risk.

On the other hand there are things which are not risks: Cost of housing. Food costs. Voluntary contraception costs. These are not risks, as the "odds" such costs will be incurred is 100%, and hence cannot be "insured" against.

Do you want to eat? You're going to have to budget for food. No one can insure you against the possibility you might need food.

You can buy some kind of food plan -- like they have at college eating halls, or diet companies like The Zone offer -- but that's not "insurance." That's just you paying for the cost of food, plus production and transportation costs, plus profit.

But increasingly we are going to see advocates like Sandra Fluke insist that each and every cost of everyday, workaday livin' be "insured" in some manner.

That each of these costs will have to be cross-subsidized.

That's just socialism, of course. If Man A and Man B are forced, by law, to pool costs, and pay for each other's costs, they're socializing each other's costs of living.

Now insurance isn't socialism, but it does have that socialism-like feature of risk-pooling and cost-sharing. What makes it "not socialism" is the fact that it applies only to catastrophic, rare, or unpredictable costs -- costs which are actually quite small per capita, because while the costs of cancer treatment are very high, fortunately very few people suffer from such a horrible disease.

And what makes it "not socialism" is that insurance contracts are entered into on a voluntarily basis. If the costs of insuring a risk are too high, people don't buy the product. It's cheaper to just absorb the cost.

But when you have "risk pools" paying everyone out for costs that are incurred every single day, it becomes very expensive indeed, because while the cost-per-purchase are low, if everyone is drawing out of the pool on a daily basis, that's a lot of money.

At this point, they're not "risk pools" of course. It's just a kind of Commune system. You take from the Pile of Free Money what you need, I'll take what I need.

This is an attractive proposition for those who have little money and high costs. For those who have some money, and manageable costs, well, their costs are now quite high because they're now paying for everyone in the country.

But this is how socialism will insinuate itself further and further into our lives: Virtually every expense that one incurs in one's daily life -- costs one once simply paid for out of pocket (what a hateful, retrograde idea!) -- will be moved into the pile of things we must be "insured against," and for which we must all "pool our risks" and cross-subsidize each other.

The endgame is just that no one actually pays for anything; the government, or a co-opted government-controlled industry which provides the functions of a socialist government ("insurance companies" which no longer insure anything, but merely send checks to people), simply takes over almost all costs in life.

And there we are.

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posted by Ace at 05:58 PM

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