Liberty Defined: 50 Essential Issues That Affect Our Freedom by Ron Paul

Author:Ron Paul
Language: eng
Format: mobi, epub, azw
Tags: Political Ideologies, Political Freedom & Security, Philosophy, Political, Liberty, General, United States, Political Science
ISBN: 9781455501458
Publisher: Hachette Digital, Inc.
Published: 2011-04-19T00:00:00+00:00

INSURANCE

One of the most serious misconceptions in public affairs today is related to an erroneous understanding of government insurance. Once government gets involved in providing insurance for any economic purpose, it no longer qualifies as insurance.

Insurance is about measuring risk and finding market opportunities to reduce the consequences associated with inescapable risk that exists as part of our lives. The market provides insurance against untimely death, against automotive accidents, against fire in our homes, against burglary, and the like. The market does not provide insurance against risk that we create on our own. For example, you cannot buy insurance against losing the lottery, against business failure, against losing a sports match. This is because those are risks we create on our own. Market-based insurance is about cushioning the results of inadvertent events that negatively affect our lives.

Insurance is only profitable for both the insurer and the insured if risk is properly measured and priced. Only the competitive market can measure risk and find a price for the insurance. In the same way that the failure of socialism is inevitable due to the absence of free market pricing, government subsidized or regulated insurance will always fail in the same fashion, because there is a moral hazard embedded as part of its underlying structure: It is not properly priced according to the level of risk. Regardless of how we behave or what we do, our premiums do not change and the payout does not change. Moral hazard, that is, the tendency to adopt the very behaviors against which we are being insured, is all but guaranteed.

The government’s definition of insurance is grossly misleading. Social Security is not, properly considered, insurance. Government-provided health benefits are not insurance either. And even such institutions as tax-funded flood insurance are not really insurance. All these programs are more accurately considered transfer payments. They redistribute wealth from one group to another. The rhetoric about insurance is just a cover to give these institutions legitimacy, effectively fooling people as to their true nature.

In fact, the term “government insurance” is an oxymoron—a total contradiction. And this applies to all government “insurance” programs. It comes from the deliberate twisting of language by those who know better, and economic ignorance on the part of others. Many believe—at least they want to believe—the government is quite capable of “insuring” all of us against risks: economic, personal, and foreign.

When government provides “free” benefits or services, people prefer not to admit they are actually receiving a subsidy or welfare. People feel good that they can “pay their own way,” not realizing that the program or assistance would cost a lot more or wouldn’t be available without government. The future harm done and the penalty that inevitably is paid far surpass facing up to the truth that government has nothing to give to some, other than that which they steal from others.

One approach is accomplished by voluntary choices; the other depends on an authoritarian approach to managing society. If we ever expect to make progress

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