ARNOLD KLING
October 22, 2011
Scott Sumner, for the Myth of the Macroeconomy File
October 21, 2011
True Monopoly or False Dichotomy?
October 21, 2011
The Construction Sector and the Economy
October 20, 2011
Wesley Mouch Update
October 20, 2011
Daniel Kahneman's Thinking
BRYAN CAPLAN
October 22, 2011
David on 2nd-Best Immigration Policy
October 21, 2011
Paying to Immigrate: Admission Fees vs. Surtaxes
October 20, 2011
How Kahneman Underestimates Luck
October 19, 2011
Quiggin the Pacifist?
October 19, 2011
The Toothpick Problem
DAVID HENDERSON
October 22, 2011
A Tax and Transfer Company with an Army
October 22, 2011
Immigration: Taxes vs. Fees
October 21, 2011
My Friend Sarah
October 20, 2011
Abba Lerner on Consumer Sovereignty
October 19, 2011
Uwe Reinhardt Nails It
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The problem with this idea is that govenments don't just spread risk, they transfer it. This leads to transfer payments and moral hazard. The classic example are homes built in hazardous areas are "insured" by the govenment because there is no market for private insurance of these homes. People pay far less for this government "insurance" than they would for real insuance. Homes get built that otherwise wouldn't have. The need for government "insurance" grows. Those of us who don't own these hazard homes pay for those who do.
To put it another another way, the government is essentially the world's biggest CDPC, the super-senior protection seller of last resort. AIGFP had nothing on USG.
But seriously, I often hear the suggestion bandied about that if they want to help the economy, the government should just literally sell super-senior protection in size. It's the fact that in a sense it's already doing that in various, less transparent ways that gives me pause and makes me think the idea might not be entirely insane.