Arnold Kling  

Paul Krugman Chooses a Word Carelessly

Bastiat's "What Is Seen and Wh... Brink, Me, and Human Capita...

He wrote,

Your federal government is basically an insurance company with an army.

You and I would read that as an insurance company backed by coercion. Frances Woolley took it that way, and started into the pros and cons of introducing coercion into the provision of insurance, concluding

Christian churches have never been able to raise more than a tithe, or 1/10th, of people's incomes, even when they were the major providers of social security. Taxes are the only feasible means of paying for the public services required with current levels of life expectancy,

Of course, if you go back to read Krugman in the original context, he meant to say that the federal government is basically an insurance company plus an army, not an insurance company with an army. The last thing he meant to do was call attention to the coercion behind the insurance function.

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COMMENTS (17 to date)
Nick Rowe writes:

Typo: Frances, with an E.

plasticmoney888 writes:

Justifying the role of big government is one thing but Krugman goes much further he continues to convince is prestigious cult, audience that the productive sector actually needs the non productive monster in order to become productive.

The Government is not a source of energy that can continues indefinitely without any external source. All it can do is spend or dilute existing energy.

I's nice to posses notoriety and uncontested knowledge backed by a Nobel prize.
In real life, such as sport or business you cant fall a sleep on past successes or you will be eaten alive.

Lord writes:

Of course all insurance companies are backed by armies, police, and courts. It is what allows them to function by protecting their contracts and property rights, just as their customers are also to see they can collect.

kebko writes:

Stop paying your life insurance bill and your social security tax. One of them will respond with force.

Joe Cushing writes:

I could be wrong but I think this is the first time I've heard about coercion in this way on this blog. The internet is a buzz with it elsewhere though. The idea that taxation is theft has also been in the comments here. I'm glad to see it brought to the surface by Arnold. There are more than just economic reasons to be for small or no government, there are moral reasons. This movement against our enslavement will never win on economic logic alone. We must have appeals to morals. The opposition uses such appeals against us. Their appeals are flawed though and it's up to us to point that out. I think that is a place where libertarians have not done well. We come to our views through logic and we assume we can convince others with it, but emotion is what moves people. Morals grab attention by appealing to the emotions.

Plasticmoney888 writes:

Let the witch doctor who does not choose to accept the validity of sensory perception, try to prove it without using the data he obtained by sensory perception. (Ayn Rand)

Lord writes:

And if the insurance company doesn't pay a claim, one of them will resort to force as well.

kebko writes:


There is a huge difference between being forced to honor a contract and being forced to enter one.

MG writes:

Krugman's statement is also revealing in that it acknowledges that government is no longer in the business of providing for public goods. (So if none of us can claim to have build "that", then neither can the Federal government.)

This still leaves the following to be discussed: How well is this monopolist insurance business delivering for its insured and stakeholders? Badly, on almost performance metric I can think off. Its "premiums paid to claims/benefits ratios" range from horrible(e.g., poverty programs)to actuarially unsustainable (e.g., SS, DI, Medicare, etc). Problematic is the fact, government insurance appears to be the only kind of insurance in which the insurer incentivizes risky private behavior at the expense of prudency (from the financial regulation of fat cats to the accommodation and support of myriad bevarioral pathologies of the clients of the walfare state). Worse yet is the fact that its managers are not required to raise capital to continue in operation (since debt appears to be capital in their universe).

Steven Kopits writes:

It is a charity and an army. An insurance company pools risk by charging its members premiums. But to get a pay out, you must pay in. There is no such requirement for the government, thus, it is better described as a charity than an insurance company.

Floccina writes:
Taxes are the only feasible means of paying for the public services required with current levels of life expectancy,

Though that might be true, it still may be impossible for Government in some countries to collect enough taxes to cover the spending so spending must be minimized.

SS as currently structured is not good insurance or charity. It could be improved by paying everyone the same amount of money in retirement and this should be on the low end. Even though the average payout is $1,230 many of the least capable people get under $700/month. It would be more rational IMO to give everyone who is eligible about $700/month.

Thomas Sewell writes:

Steven Kopits:
Your argument against government as an insurance company is valid, but a similar argument holds against considering it a charity. Charity is voluntary (Google define:charity). Also, most of what the government redistributes doesn't end up with the "less fortunate" among us. Quite the opposite.

I think you could also say that government is a pack of thieves with the biggest army in a particular geographic locale. I'm trying to come up with a less pejorative term than "thief" for someone who takes from another using force, but I haven't been able to think of one. If you do, please substitute it in the above as appropriate.

mark writes:

A side point: Ezra Klein had made that "insurance company with an army" characterization in a Feb 14 2011 column.

The Krugman post you link to is dated October 2011, 8 months later. Yet he does not cite or acknowledge that he is repeating Klein's statement. Isn't that plagiarism?

clickwhistle writes:

@ Steven Kopits
@ Thomas Sewell

On the other hand, the Salvation Army is a charity and an army, albeit one equipped with bells not guns. Then again, that could make for some wonderfully absurd imagery ;P

Michael writes:

Sorry Mark no "got-ya"

"loosely speaking, the post-cold-war federal government is a big pension fund that also happens to have an army."

Krugman, Paul. "Outside the Box." New York Times (July 11 , 2001), p. A17.

Frances Woolley writes:

I'm not even sure that the idea of a government as an insurance company + an army is originally Krugman's, but I couldn't find any other source for the quote.

I agree with those who've pointed out that private insurance companies, too, depend upon the force of law. Take a look at my original post here - it's mostly about old English churches and feeling good about giving to the poor and aged.

mark writes:

Michael, unless there is a typo in the date you provide, I don't see that your observation changes anything. July 2011 is also after Ezra Klein's Feb 2011 column so Krugman still should have cited to Klein under normal rules of authorship.

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