In seeking an economic justification for the welfare state…we must look not merely for ways in which state welfare services provide economic benefits. We must look for ways in which state welfare services provide benefits that private actors in private markets cannot. We must look for ways in which markets would necessarily fail. [….] The private analogue to the social insurance programs which constitute the bulk (if not the whole) of welfare state activities would be private insurance programs. There are various ways in which private insurance markets might fail....
Indeed, and Goodin's first example involves the problem of “adverse selection,” the remedy for which is of course compulsory insurance. Yet private markets remains susceptible to the problem of “interdependent risks,” thus premiums collected from those who do not suffer from the insured-against contingency (‘winners’) do not suffice to meet claims from “losers:”
Consider the example of unemployment insurance. The probability of any given individual’s being unemployed is not just a function of trends within his own firm or industry. It is also a function of the state of the national economy in general. Under such circumstances, it would be impossible to guarantee the financial integrity of any mutual insurance scheme. The problem is not just that actuaries are unable to set the right rate for premiums. What is worse, with interdependent risks there can be no guarantee (as there can, through the law of large numbers, with independent risks) that premiums from ‘winners’ (e.g., those still in work) will suffice to cover claims from ‘losers’ (those out of work) whatever rate that is set.
That market failure is perhaps the most important argument for collective intervention in certain insurance markets. The government must act as underwriter of last resort, providing re-insurance out of general-fund revenues as necessary. Social insurance must, in that way at least, supplant purely private insurance.
To be clear, Goodin is not suggesting that the true justification of the welfare state is “to be found in the rigidly economistic logic of correcting market failures, narrowly conceived. Instead, it is to be found in the role of the welfare state in safeguarding the preconditions of the market,” which he proceeds to specify and elaborate.
I'm not here concerned with Goodin's compelling argument for the welfare state but wanted simply to introduce the subject of private insurance markets and social insurance to whet your appetite for an excellent article posted at SSRN by Robert C. Hockett: "Making (Some) Sense of the Health Care Reform Debate: Social Science, Social Insurance, Social-'ism,' and So On." The article is due to appear in the economic policy journal Challenge. Professor Hockett is now blogging at Dorf on Law and Mirror of Justice (the latter a blog for Catholic legal theory). I happen to think Bob is far and away one of the brightest intellectuals in the legal academy. By way of illustrious examples of his work, I cite just two of my favorites: "The Limits of Their World," 90 Minnesota Law Review (2006): 1720-90 (review of Jack L. Goldsmith & Eric A. Posner, The Limits of International Law, 2005), and "Three (Potential) Pillars of Transnational Economic Justice: The Bretton Woods Institutions as Guarantors of Global Equal Treatment and Market Completion," 36 Metaphilosophy 93 (2005), also in Christian Barry and Thomas W. Pogge, eds., Global Institutions and Responsibilities: Achieving Global Justice (Malden, MA: Blackwell, 2005).
In conjunction with the aforementioned essay on the "health care reform debate" by Hockett, I would ask you, dear reader, to also keep in mind the following from a volume edited by Goodin, et al., The Real Worlds of Welfare Capitalism (1999), for I think it goes to the heart of an assumption that animates the more articulate naysayers in this frequently intemperate national discussion:
According to traditional wisdom, we are forced to choose between the liberal regime (which promotes greater economic efficiency) and the social democratic regime (which promotes greater social justice), with corporatist regime offering itself as a good compromise between them (coming in a strong second in both respects). According to traditional wisdom, our choice between these regimes will necessarily be dictated by the relative weights we assign to those two sorts of objectives.
Our authors provide us with an impressive examination of the latest comparative empirical data that provide a basis from which to assess the ability of these various welfare state regimes to meet such moral and political values as promoting efficiency; reducing poverty; promoting equality; promoting social integration and avoiding social inclusion; promoting social stability; and promoting autonomy. And their conclusion is unambiguous:
Far from being a matter of ‘horses for courses,’ it turns out that the social democratic welfare regime is ‘the best of all possible worlds.’ The social democratic welfare regime turns out to be the best choice, regardless of what you want it to do. The social democratic welfare regime is clearly best on its home ground of minimizing inequality. But it also turns out to be better at reducing poverty than the liberal welfare regime, which targets its welfare policy on that to the exclusion of all else. The social democratic welfare regime is also at least as good promoting stability (and arguably at least as good at promoting social integration) as is the corporatist welfare regime, which ostensibly attaches most importance to those goals. The social democratic regime is also best at promoting key elements of autonomy, something valued by all regimes if not necessarily prioritized by any. Thus, no matter which of those goals you set for your welfare regime, the social democratic model is at least as good as (and typically better than) any other for attaining it.
I raise the issue of the comparative value (in light of the criteria enumerated above) of different welfare regimes because it is germane to the fact that health care reform, however necessary, fails to confront more difficult and intransigent topics that have to do with existing inequalities in health as such (and that entail, for instance, an appreciation of the 'social determinants of health'). For an introduction to this subject, as well as a bibliography of titles that treat the question of health as it relates to social justice, ethics, and law, please see our previous post. In a time and place where both political parties pride themselves on dismantling whatever welfare state regime still exists in this country, I suppose it is hoping against hope to imagine the emergence of a social democratic welfare regime capable of sytematically addressing gross inequalities in health that are "closely tied to inequalities in the most basic freedoms and opportunities that people enjoy."