Tag Archives: liberalism

Storytelling and invidualism

I’ve long described myself as a classical liberal on this blog, and I’ve tried on occasion to define what that means — for example, with this doodle (above). Its point was to locate the unit of analysis of liberals in the individual, not in any groups that individuals might belong to. That’s always made intuitive sense to me, and it still does.

So consider that Premise 1.

I’ve also expressed my appreciation of storytelling here over the years, with what has (to my surprise) turned out to be the longest-running thread on this blog. My intuition tells me that humans make sense of the world and of themselves through stories, that we form identity from narratives.

So consider that Premise 2.

I was therefore delighted to be disturbed by a suggestion that Premise 1 and Premise 2 might actually contradict each other. (Perhaps that’s the definition of ‘intellectual’: somebody who delights in seeing his contradictions uncovered, espying an opportunity to learn.)

The suggestion struck me, roughly, between minutes 5 and 10 of the lecture below, by Michael Sandel, a Harvard professor of philosophy. (I recommend the entire course, which covers some of my favourites, from Rawls to Aristotle and beyond, in a very entertaining way.)

In this segment, Sandel introduces the British philosopher Alasdair MacIntyre.

  • MacIntyre also starts from the premise that identity (‘the self’) is a product of narrative (ie, my Premise 2).
  • But he then concludes that individualism (ie, my Premise 1) is impossible, because narrative necessarily leads to a communitarian identity.

Specifically, Randel quotes MacIntyre saying:

Man is … essentially a story-telling animal. That means I can only answer the question ‘what am I to do?’ if I can answer the prior question ‘of what story or stories do I find myself a part?’

I am never able to seek for the good or exercise the virtues only qua individual. … We all approach our own circumstances as bearers of a particular social identity. I am someone’s son or daughter, a citizen of this or that city. I belong to this clan, that tribe, this nation.

Hence what is good for me has to be the good for someone who inhabits these roles. I inherit from the past of my family, my city, my tribe, my nation a variety of debts, inheritances, expectations and obligations. These constitute the given of my life, my moral starting point. This is, in part, what gives my life its moral particularity.

So: anti-individualist (and thus implicityly anti-liberal) and pro-communitarian. Right? Liberalism says: I am free and thus I am responsible for myself, but I don’t answer for parent, country, tribe, or history. MacIntyre says that is self-deception:

The contrast with the narrative view of the self is clear. For the story of my life is always embedded in the story of those communities from which I derive my identity. I am born with a past and to try to cut myself off from that past is to deform my present relationships.

It’s made me think a lot. Watch the entire lecture. (But first, read this update regarding this post’s title.)

Spontaneity and order

 

Hayek

 

Ten years ago, I began a piece in The Economist about Hong Kong with a paragraph that was, in this particular context, intended to be surprising:

FRIEDRICH VON HAYEK and Walter Eucken parted company over the issue of power formation in the private sector. Hayek, a leader of the Austrian school of liberalism, believed that keeping government small was enough to preserve competition. Eucken, who founded the school’s German branch, felt that anyone with excessive power, whether a government or a company, could threaten economic freedom. It is a pity that neither was alive this week to analyse the case of Hong Kong….

 

Eucken (click for credits)

 

Our local readers in Hong Kong quite enjoyed this framing of what they considered their “little” hometown business controversies, since they don’t usually see their city connected to the big debates among Western intellectuals.

I, however, was fascinated by precisely those local controversies, for two reasons:

  1. I consider Hong Kong the freest place in the world (and thus worth studying), and
  2. I have a personal connection to that debate between Hayek and Eucken, which I’ll tell you about at the end of this post.

Liberalism vs Libertarianism

What reminded me of all this was a post the other day by one of my colleagues about the two isms, Liberalism and Libertarianism. He concludes that the difference is basically about the precise role of government and

which approach is likeliest to lead to the most freedom.

So, because I’ve been parsing Liberalism here on The Hannibal Blog for a couple of years now, I thought I’d add a “continental” twist for those of you who are connoisseurs of all things liberal.

Between Freiburg and Vienna

 

Mises (click for credits)

 

For a lot of “Anglo-Saxons”, in my experience, the first surprise is that that there is a continental twist at all. Surprise turns into shock when the twist turns out to be specifically Germanic. Could Germans really have much to say about freedom?

Well, yes, a whole lot. The liberal tradition is long and deep in the German-speaking countries. Obviously it suffered a near-death experience during the Nazi years, but then it came roaring back in the post-war years.

More to the point, a lot of what we now tend to think of as “Anglo-Saxon” ideas actually have an intellectual pedigree that goes back to these “Germanic” (mainly German and Austrian) thinkers.

Ludwig von Mises (above) was the first giant of the so-called “Austrian School”, and in turn influenced the even more gigantic Friedrich von Hayek. Hayek in turn influenced Milton Friedman, who in turn influenced Ronald Reagan and Margaret Thatcher, thus re-branding Austrian Liberalism in the minds of many people as an “Anglo-Saxon” thing.

 

Rüstow

 

Walter Eucken, on the other hand, founded the so-called “Freiburg School” of Liberalism (after the university town where they hung out), which included liberal thinkers such as Alexander Rüstow (above) and Wilhelm Röpke (below).

 

Roepke

 

How spontaneous is order?

The first and most important thing to understand about all these thinkers is that they were friends. They liked each other’s company and liked debating one another. They viewed themselves not on opposing sides of anything, but on the same side: the side of individual freedom (which is what all classical Liberals agree on).

The subtlety that kept them busy (and I deliberately oversimplify) had to do with order. The Latin for order is Ordo, so the Freiburg School eventually even called themselves Ordoliberals.

Order, as opposed to anarchy, is necessary for individuals to be free. The question, however, is whether or not order comes about spontaneously.

Option 1: Yes

If the answer is Yes, as the “Austrians” basically believed, then the conclusion has to be that we simply need to keep government out of the equation entirely.

The “market” (and this could apply to more than material things — ie, ideas, culture, etc) will then “order” itself spontaneously, though competition. The prerequisite is merely the rule of law.

Option 2: Jein

The Ordoliberals did not counter that the answer is No. Instead, I would call their answer Jein (a contraction of Ja and Nein in German). Yes, markets can spontaneously create order. But that order is not always stable. Worse, that order could be of a sort that robs individuals of liberty.

What they had in mind were cartels, tycoons, cabals, and anybody else who amassed an unhealthy amount of power.

So whereas the “Austrians” worried almost exclusively about excessive government power, the Ordoliberals worried about all excessive power, whether in the private or public sector.

This led the Ordoliberals to the conclusion that government must, yes, stay limited, but must also supplement the “spontaneous” ordering of markets with “corrective” ordering. Government had to crack down hard on cartels and monopolies, for example.

My personal interest

I mentioned a personal connection to the debate. Well, I wrote my Master’s thesis at the London School of Economics about it (or rather, about an obscure aspect of it). My dad had once written his PhD thesis about another obscure aspect of it. And that was probably because his uncle and godfather was somebody by the name of Ludwig Erhard (“Uncle Lulu“). Here they are in the sixties, Lulu on the left, dad on the right:

And if Hayek influenced Ronald Reagan and Margaret Thatcher, and thus “Anglo-Saxon” policy, the Ordoliberals shaped Ludwig Erhard and thus post-war West German policy, for Uncle Lulu was West Germany’s first economics minister and then its second chancellor.

Postscript: Liberal v Libertarian (again)

So back to those two isms.

In essence, I think that Libertarians trace their evolution back to the Austrians featured here, and Liberals to the Ordoliberals.

However, those Austrian and Ordo-Liberals themselves, if we were able to bring them here today, would be puzzled by the debate. They would abhor some of the intellectual excesses committed in both names, and remind us that they were originally almost indistinguishable.

High on freedom and honest debate

I find that a great test of whether your instincts are liberal (as classically and correctly defined to mean freedom-loving) is how you approach the question of legalising marijuana.

In the current issue of The Economist I try to summarize the debate in California about Proposition 19 in November, a ballot measure that would legalize cannabis for those 21 or older.

And in an accompanying podcast, I interview an opponent and a proponent of legalization, both carefully chosen, in an attempt to get beyond mere gut instincts to clarify the arguments for and against. I wonder how you guys would interpret that conversation.

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Individuals, tribes & classes

How do genuine liberals (as correctly defined) view the world? As a collection of individuals.

How do conservatives view it? As a collection (clash?) of cultural communities.

Socialists? Economic communities (or blocks).

Communists? Classes.

Fascists? Tribes, nations or races.

People have drawn many diagrams to depict the political spectrum. But they don’t make sense to me. So I drew my own (in the new Google Draw. Try it.) Here it is:

This way of looking at the spectrum might help you to explain “left” and “right” to a child, should you ever need to. (More about the historical and arbitrary origins of “left” and “right” in a subsequent post.)

If you view the spectrum not as a matrix or a line but as a loop or circle, things become clearer. Liberalism then reveals itself to be not the “place in the middle,” the “split-the-difference” no-man’s-land of compromise and moderation, but the extreme and radical opposite of collectivism, which includes everything from Nazism to Communism.

Yes, Liberals care most about freedom, whereas collectivists tend to care more about “equality” (insofar as it pertains to the group of interest to the respective collectivist — ie, the class or the tribe.)

But the debate is not merely about the desired outcomes — freedom vs equality — of policy. It goes deeper. It is a debate about the unit of analysis. What — or rather whom — do we care about? What matters?

As a liberal, I instinctively choose individuals. People matter.

Now, it’s easy to lampoon this instinct. The caricature usually involves a quote from Margaret Thatcher, when she allegedly said:

There is no such thing as society. There are only individuals.

Here is what she actually said. As you can tell, it doesn’t come close to Ayn Rand in shrillness.

Individuals do form families and other groups, and liberals do care about those. But those are groups that individuals volunteer to form. (By contrast, I never volunteered to be American, German or middle class. Most of the time, I’m not even sure what those group memberships are supposed to mean.)

Let’s talk about Arizona

Enough prologue. Let’s talk about the new Arizona law against illegal immigration.

In my article in the new issue of The Economist, I try to analyze how the law and the backlash against it might affect American politics. My editor wrote a “leader” (ie, opinion editorial) to go along with it. And both of those pieces follow a short piece I whipped up the other day, when the law was first signed.

Now, it may not surprise you to learn that, in addition to the hundreds of, shall we say, passionate comments on our website, I have also been getting reader letters.

I have already regaled you with you my cavalier amusement at the tone of the American reader letters I get. But I must say, the mail bag of late has taken another turn for the worse. I leave it to your imagination.

So let’s step back and try to understand why I, and The Economist, would instinctively be

  • for more open borders,
  • for more liberal migration laws,
  • for freer movement of people.

Is it because I love Latinos, as some of my reader letters suggest (albeit in a different vocabulary)?

Well, yes it is. I do love them. Though no more so than I love Eskimos, Wasps and Tibetans. I love them all, but only as individuals.

There was a time, not all that long ago, when only diplomats carried passports. Other people moved freely where they wanted to go. Just read Casanova’s memoirs. 😉

This sounds like an ideal world: Free individuals and families moving wherever they want to go, with a minimum of hassle (besides the natural stress of moving).

I admit that this was before some countries had welfare states which might attract poor migrants and thus be overwhelmed. This issue — whose taxes pay for whose benefits in a given land — must be addressed.

And I also admit that this was before terrorists (who already existed) had access to weapons of mass destruction. So this issue — how do we keep murderous migrants out — also must be addressed.

On the other hand, I do not admit that immigrants in general, whether legal or illegal, are more likely than natives to commit crimes, because research proves this not to be true.

Garden of Earthly Delights

So what would a liberal Utopia look like?

All individuals anywhere would be free to move to and live where they please, within basic and minimal parameters to address the two issues above.

Americans, for example, would be allowed to go to Latin America or Europe to pursue careers, loves and dreams. Latin Americans and Europeans would be just as free to come to America to do the same.

This would apply to the “high-skilled” migrants, such as Indian graduates from the Indian Institutes of Technology (IIT), probably the best university system in the entire world today. And it would apply equally to “low-skilled” migrants, because they, too, have contributions to make and dreams to pursue.

Is this realistic? Probably not.

But is it desirable?

That depends whether you view the world largely as tribes, classes or, as I do, individuals.

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Intelligence and liberalism

Probably Republican

The Hannibal Blog recently introduced you to Satoshi Kanazawa, a controversial evolutionary psychologist.

A willingness to be controversial, when paired with actual research and intelligence, is a trait The Hannibal Blog applauds. Even so, you guys appropriately rang the alarm bells about some of Kanazawa’s more out-there views in the comments under my post.

That said, those views were not the ones that I found interesting (or had even been aware of). So allow me to re-introduce you to some of Kanazawa’s thinking.

1) The Savanna Principle

Evolutionary psychology starts with the premise that our brain, like our liver or eye or gonads, has evolved. This immediately leads to interesting insights, such as The Savanna Principle, a term that Kanazawa coined.

It states that we (Homo sapiens sapiens), having spent most of our evolutionary time in the African savanna, have adapted to its circumstances. We have not had much time (in terms of generations) to adapt to modern life. Therefore

the human brain has difficulty comprehending and dealing with entities and situations that did not exist in the ancestral environment.

(The word difficulty is important: Dealing with modern circumstances is not impossible, merely difficult.)

Thus, humans will see a banana as yellow (= recognizably edible) under all conditions except in a parking lot at night, because sodium vapor light did not exist in the savanna.

Let’s take another easy example. I recently railed against driving while texting or talking on the phone (the former is worse than drunk driving, the latter is as bad). Why are both activities so dangerous (whether or not you use “hands-free” devices)? Well,because

carrying on a conversation with someone who is not present in front of you is evolutionarily novel. Our ancestors never carried on a conversation with anyone who is not present in front of them or whom they could not see during the conversation. We have had the telephone (which allows us to have such conversations) for more than a century now, but it is still evolutionarily novel. Our brain has not adapted to the telephone in the last century. So it is possible that telephone conversations per se, not necessarily cell-phone conversations, are cognitively taxing and distracting because they are evolutionarily novel.

Everyone (legislatures and publics alike) assumed that what was causing the accidents was the manual and mechanical handling of the device, not the conversations per se. After all, drivers have conversations with fellow passengers all the time, with seemingly no effect on safety. [But] drivers who use hands-free devices are just as likely to cause road accidents as those who use hand-held devices.

2) Relevance to intelligence

More recently, Kanazawa has been thinking about how intelligence might have evolved in the Savanna, given that it would have been mostly useless there.

By intelligence he means general intelligence, as opposed to any set of specific adaptations to address specific threats in the Savanna (such as the specific ability to recognize a cheater in a social setting). Put differently, how and why would Homo sapiens have evolved to deal with any novel threat?

Well, it must have evolved since we left the Savanna. Our departure meant that we started encountering one (evolutionarily) novel situation after another, and those of our ancestors who happened, by mutational chance, to be better equipped to think about these new situations would have had a reproductive edge.

But intelligence can be misunderstood. As Kanazawa says:

more intelligent individuals are better than less intelligent individuals at solving problems only if they are evolutionarily novel. More intelligent individuals are not better than less intelligent individuals at solving evolutionarily familiar problems, such as those in the domains of mating, parenting, interpersonal relationships, and wayfinding (finding your way home in a forest), unless the solution involves evolutionarily novel entities. For example, more intelligent individuals are no better than less intelligent individuals at finding and keeping mates, but they may be better at using computer dating devices. More intelligent individuals are no better at finding their way home in a forest, but they may be better at using a map or a satellite navigation device.

3) Relevance to politics

The controversy starts right about now.

One by-product of this recently evolved general intelligence, according to Kanazawa, is an ability to empathize with people to whom we are not genetically related.

In the Savanna we only cared about kith and kin, because we hardly knew anybody else. (We lived in groups of up to about 150 individuals, the so-called Dunbar number.) Modern cities or countries did not exist.

But they exist today, as evolutionary novelties. Does general intelligence help us to deal with the situation?

Yes, says Kanazawa, by making us “liberal”. He uses not the correct and traditional definition but the modern American definition of liberalism

as the genuine concern for the welfare of genetically unrelated others and the willingness to contribute larger proportions of private resources for the welfare of such others. In the modern political and economic context, this willingness usually translates into paying higher proportions of individual incomes in taxes toward the government and its social welfare programs. Liberals usually support such social welfare programs and higher taxes to finance them, and conservatives usually oppose them.

And indeed, he has found a certain correlation between intelligence and liberalism:

And by the way, Kanazawa considers himself conservative.

So, as he says in a follow-up post, this is not to imply that liberals are “smart” and conservatives “dumb” in the conventional sense.

In fact, it may well be that liberals lack, and conservatives have, “common sense” — if by common sense we mean precisely that more pristine and specific intelligence that allowed our ancestors to survive and reproduce in the Savanna.

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Hayek on healthcare: Don’t be serfs, Americans!

Hayek

Hayek

I’ve only mentioned Friedrich von Hayek tangentially on The Hannibal Blog so far, although he probably deserves his own post in my great-thinker series quite soon. Hayek was one of the great liberals, properly defined. He was close intellectually and personally to my great-uncle Ludwig Erhard. His book The Road to Serfdom should be required reading.

So I was glad to see Andrew Sullivan revisit The Road to Serfdom to see whether Hayek addressed the topic of health care that so captivates America these days. Hayek did, it turns out, and I had forgotten.

(Recall that I, also with classical liberal instincts, concluded, in my amateurish way, that health care is different enough from other industries to warrant one of two clean and equally acceptable solutions: universal private insurance or universal government–ie, “single-payer” insurance. Anything, in short, but America’s current, fragmented, employer-government-individual hodgepodge.)

Here is Hayek, from Chapter 9 of The Road to Serfdom, via Andrew:

Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision…. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong… Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.


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Your pinko, Commie snob

Well, things change when you take a new beat, as I recently did (and as we regularly do at The Economist). In this case, I switched from a rather geeky beat–Silicon Valley–to a more general beat–politics and society in the Western states. Mostly, I’m thrilled about this new, and much bigger, hunting ground. But it comes with, shall we say, rather different reader letters.

Our reader letters at The Economist can be witty but tend to be flamingly, aggressively, rantingly, lividly hostile. What varies is the level of sophistication. Some readers really know what they are talking about, and really know The Economist, and eviscerate us effectively and brutally.

Others are, well, just plain amusing.

Here is one of the dozen or so I am perusing this morning, all informing me of my wanton and despicable ignorance and depravity. This particular letter writer reminds me that one of my recent articles

once again shows the elite arrogance and display of socialist bias on the part of The Economist.

Elite arrogance. Hmmm. Socialist bias. Hmmm.

That’s a classical liberal/libertarian from a classical liberal family writing for the world’s oldest classical liberal magazine, displaying a consistently elitist and socialist bias. Gotta love our readers. Can’t wait to read the next batch.

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Sick and unfree in America

yellow_emperor

In ancient Taoist China, a well-off family would hire a doctor, pay him as long as everybody in the family was healthy, and stop paying him as soon as somebody got sick until that person was healthy again. This, as far as I know, was the last time that a society aligned the incentives in the healthcare industry properly.

By contrast, healthcare today is upside down: You don’t pay for the thing you want (health); you pay for service when the thing that you don’t want (sickness) comes around. Hypothetically, if you had two doctors, one Taoist and one modern, and if the Taoist were good enough at his job to keep you healthy, the modern doctor would not get paid at all!

I bring this up only as a little thought exercise to illustrate something important: Healthcare is not like other industries. If the product is muesli or ball bearings, it makes sense to talk about competitive markets and such. But if you’re dealing with an industry that is fundamentally upside down, you have to be careful about using trite concepts of economics.

Another way that healthcare is different: If there were large numbers of, for example, children in society that could not get muesli or ball bearings, we could live with it. After all, they can get corn flakes instead, and walk instead of using wheels. The “market failure” would not equate to a shameful indignity. By contrast, if children (and adults, for that matter) cannot get access to healthcare, it is a shameful indignity.

(Disclaimer: As with everything on The Hannibal Blog, the opinions in this post are mine and mine alone, and may or may not overlap with the views of my magazine, The Economist.)

Healthcare and freedom

I bring up healthcare only reluctantly in my ongoing ‘Freedom Lover’s Critique of America’. I’m not qualified to talk about it and it’s not my beat at The Economist. But I decided that it belongs into this series because America’s healthcare system is so different from those in all comparable countries, and because it has such a direct bearing on freedom.

That the system is dysfunctional is well known. I won’t rehearse the familiar list of failings (many uninsured; many underinsured, et cetera). Let me just point to a few features for the subsequent discussion:

  1. American healthcare is typically American in that is it bureaucratic and adversarial. The effect on patients is alienating and dehumanizing. At the precise moment when they are most vulnerable and dejected, they are expected to go to war against their insurance company on the 1-800 numbers and phone trees to contest pieces of paper they don’t understand. But they have to, because their insurance company will contest almost every single claim–for this is built into the system!
  2. American healthcare is also typically American in being uneccessarily complex, as America’s tax system is. I’m not talking about the medical side–that is complex everywhere, because our bodies are–but about the administrative side.

Does this limit the freedom of individual Americans? Yes, and let me just give one concrete example. A free society is one in which people feel free to move and to change jobs, among other things. But a great many Americans are afraid to change or quit jobs, because their healthcare coverage is tied to an employer. So healthcare can become yet another of the shackles that makes serfs out of many Americans.

More generally, the system’s dysfunction limits freedom because it robs so many Americans of dignity. And dignity is a prerequisite for freedom. Thomas Jefferson could write “life, liberty and the pursuit of happiness” only because he lived in a relatively innocent age, the Enlightenment. A more mature constitution of liberty, such as West Germany’s after the Holocaust, begins with

Die Würde des Menschen ist unantastbar–The dignity of each human being is untouchable.

So yes, healthcare belongs into any debate about whether a country can claim to be free or not. Now let’s figure out what sort of problem healthcare poses, in general and in America.

What kind of problem is healthcare?

When the ancient Chinese paid Taoist doctors to keep them healthy, healthcare was a cost of living, comparable to food and shelter. When we turned it around and paid doctors for managing our sickness, healthcare became an insurance problem.

And there are two traditions of modern insurance:

1) Lloyd’s of London

In 1688, rich toffs started hanging out in Edward Lloyd’s coffee house in London, near where the ships came in and maritime gossip spread. They began betting on which ships would make it to port with their cargo and which might sink. They called it ‘insurance’. It was really a higher form of gambling, with huge profits when the bets went well and huge losses when they went bad. This is the origin of the Anglo-Saxon view of insurance: as a profit-business.

2) Swiss mountain valleys

In Switzerland, going back to I-don’t-know-when, villagers got together to share risk. You might say they “collectivized” it, but don’t think that they were socialists. They were freely volunteering to pool their individual risks because they noticed something that we now call

the Law of Large Numbers

Say that a Swiss village had 1,000 houses. The villagers knew from historical record that, on average, one house would burn down every year. That house’s family would be devastated. Let’s put their loss at SF1,000 to make the math simple. The other families would suffer no loss at all, but they could not tolerate the indignity of letting one family suffer and lived in fear that they might themselves be next.

So they agreed, in free assembly, to pony up SF1 each for a SF1,000 fund. The SF1,000 then went to the one family whose house burnt down to make it whole.

What had they done? They had exchanged a

large but uncertain loss

for a

small but certain one.

They were able to do this thanks to the Law of Large Numbers, which says that an unpredictable risk becomes highly predictable when it is pooled with large numbers of similar, but unrelated, risks.

Caveats

The Law does not work if the individual risks are correlated. The Great Fire of London in 1666 (below) happened because all of London’s thatched houses stood so close together that they were in fact one big house from the point of view of a flame.

350px-great_fire_london

The Law also does not work if adverse selection spoils the risk pool. For instance, say that some of the Swiss villagers had opted out of the pool because they had stone houses. Only those families with highly flammable houses would have entered the pool, but that would mean that the 1-in-a-1,000 ratio no longer applied (it would be much higher).

The Law also does not work if moral hazard changes the way people behave once they get insurance. If some villagers get the idea that, since they are now “covered”, they might as well set their houses afire, the system breaks down.

Finally, the Law works best for risks that are high in frequency, low in devastation. Fire is a good example. It does not work well for risks that are low in frequency, high in devastation. An extinction-causing meteor is a good example. (Who would charge whom what premium for what risk?)

Back to healthcare

And where does healthcare fit in?

  • First, it is very high in frequency (everybody gets injured or sick sooner or later) and low in devastation (usually only that one life is at risk). For most illnesses–diabetes, heart disease, etc–actuaries know exactly what percentage of the population as a whole will get sick in a given year.
  • Moral hazard is not a problem, because–loonies and rock stars excepted–people do not intentionally ruin their health just because they are insured.
  • Adverse selection is a problem, because risk, and the perception of it, changes over a lifetime. The young feel immortal and would opt out to save the buck (Swiss Franc) for a beer, leaving only the geezers to pay up.

Conclusions

Healthcare seems to be altogether unsuitable for a Lloyd’s of London (Anglo-Saxon, profit-driven) insurance culture, and perfectly suited for a Swiss-mountain-valley (risk sharing) insurance culture.

The prerequisite is that everybody in the pool must participate to avoid adverse selection.This, however, would require a mandate for the majority to coerce a few unwilling individuals, and that is something that (real) liberals do not like. But many liberals (and the Swiss are freedom lovers!) make this sacrifice because they understand that it is necessary: Dignity mandates that we look after the sick even if they have opted out of participating, so some people would become free riders.

There are two simple ways to get everybody into one risk pool subject to the Law of Large Numbers:

  1. Tax everybody a little bit (the equivalent of the SF1 per village family) to cover the proportion of people being sick every year, or
  2. make people buy their own insurance, rather as we require car insurance for drivers.

The first leads to a British or Canadian-style single-payer system. (Important: Notice that the government need only manage the funding of the care, not the care itself.) Since everybody is covered, there need be no paperwork for patients. I still remember when I was visiting Britain as a teenager with a soccer team and woke up unable to move my neck one day. I dragged myself to the street, got a taxi to a hospital, and, although I was not British, got fantastic care without signing a single piece of paper.

The second leads to a system of competing insurance carriers. This is fine, although there is one problem: What if you pay premiums to one insurer while you’re young, but then you switch to another insurer when you’re old? That would be adverse selection again (for the second insurer). But in a competitive system, patients would move in both directions, and might cancel one another out. Even so, there is slightly more paperwork for patients, since the care provider needs to reclaim the money from any of several insurers.

Notice that, either way, the economic burden is the same: Every citizen pays, whether through taxes or premiums, the same amount to participate in the risk pool.

America

And now, the American way: A bit of everything, mixed together and stirred. If you’re a veteran, you participate in huge risk pool. If you’re old (Medicaid) or poor (Medicaid), you participate in other risk pools. If you buy your own insurance, you can carry your coverage around, but you are paying much higher premiums because the insurer assumes adverse selection. If you’re employed, your company arranges coverage, but only as long as you work for it. If you are none of the above, you have no coverage and go to the emergency room when you’re sick, thus leaving the provider to hike everybody else’s costs to compensate for you.

Paper, paper, paper. No law of large numbers for society as a whole. Fragmentation. Confrontation between patient and insurer. Nightmare.

And if Obama goes on to do just the “politically feasible” thing–which, in America, is to add more “options” and complexity–it will get worse.

The way to bring freedom and dignity to America is to get rid of employer-sponsored insurance and to have either  one single government-run insurance pool or mandatory individual insurance for one privately-run insurance pool. Nothing else works.

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Frenemies: Freedom and equality

756px-eugene_delacroix_-_la_liberte_guidant_le_peuple

Marianne, above, did not flash her boobs to all those corpses for nothing. She did it for the trinity (as in the tricolore she carries) of liberté, égalité, fraternité. Let’s leave fraternity, which is a rather mushy notion, to one side. That leaves liberty and equality. Do those two belong together?

I knew I would have to address this issue sooner or later in my ongoing ‘freedom lover’s critique of America‘. But the fascinating debate in the comments below this post brought it to the fore. Fortunately, that comment thread neatly summarizes the entire spectrum, across the world and history, of views on the subject. As I see it, the three options are:

  • You can’t have freedom without equality.
  • You can’t have freedom with equality.
  • It’s complicated.

The Classical Liberal view

Broadly, classical liberals (as properly defined) are passionately in favor of equal opportunity and just as passionately against enforced equal outcomes, exactly as “Hizzoner” paraphrased Friedrich von Hayek here.

Which is to say: If you (ie, the government) predetermine that everybody will be the same (think the same, dress the same, drive the same car, live in the same house…) then nobody in your society can be free, if ‘free’ means being able to be yourself, ie different than others. Why create, why achieve, why risk, if the fruits of your effort and ingenuity will be confiscated (“redistributed”) in the name of equality?

I personally glimpsed the extreme form of just such a dystopia when I peaked into East Germany months before it crumbled (although I didn’t know that it would crumble, of course). They were all driving, or on the waiting list for, the same damn Trabi. And while I was ogling their Trabis, many East Germans were already flooding into the West German embassy in Hungary, trying to escape and eventually forcing their leaders to let the Berlin Wall crumble.

That same example, East Germany, also showed what Hayek correctly predicted would happen in reality in an ‘egalitarian’ society. As Orwell might put it: Some were more equal than others. The difference was that the ‘more equal’ ones didn’t use wealth to assert their supremacy but more nefarious means–party connections, or what the Chinese call guanxi. The resulting horror was captured intimately on screen here.

And so, to those of us, like me, who were devotees of Ayn Rand, the answer was clear. Equality is the enemy of individualism, and thus of freedom.

How it got complicated for Liberals

Even at the time, however, there were some contradictions that gnawed at me. Even in the ‘free world’, we were often invoking equality. For instance, democracy, which we (perhaps wrongly) associated with freedom seemed to be based on the equality of one citizen = one vote, even as capitalism seemed to be based on the opposite, ie unequal outcomes.

Then there was the bit about equal opportunity, which we were all supposed to be for. Well, this was messy, because, inconveniently, we were biological organisms and as such insisted on looking after our offspring. Anybody who ‘makes it’ devotes his entire life, and all his resources, to ensuring that his offspring get a head start. And who can blame him?

So if ‘we’ (the government) really wanted to preserve equal opportunity, we would have to get heavy-handed and stop ‘him’ from looking after his kids. We would have to stop him not just from sending his kids to better schools and doctors, but from reading his kids all those bedtime stories, paying for all those piano lessons and SAT prep courses, building all those Lego houses with them–ie, from doing all those things that give kids ‘unequal’ opportunity. In short, we would have to take his freedom away! Obviously, a non-starter.

The triumph of biology

And then I saw a documentary. I tuned in somewhere during the middle and never saw the title, so I can’t be sure it is this one, but it might be. It was based at least in part on Sir Michael Marmot’s Whitehall Study from Britain. Here is how I remember it:

Stress: It is not the same as pressure, which we all feel from time to time. Instead, it comes from ranking low in a hierarchy and lacking power over your own time, your own self (=not being free). You who are at the bottom are at the whim of others. You suffer. And not ‘just’ psychologically, but biologically. You tend to get fat in your mid-section, and your heart, blood vessels and brain change visibly, with entire neurological circuits shriveling up. Meanwhile, the brains and hearts of top dogs expand and thrive.

The most poignant moment came when they cut from our species, Homo sapiens, to monkeys. The researchers observed packs of primates, and sure enough: a monkey at the bottom of the hierarchy got fat in his mid section, had hardened arteries and heart walls and a a shriveled brain.

Equally poignant: One group of monkeys, led by particularly aggressive alpha males, played in a trash dump and was decimated by an epidemic. Another group, more female and egalitarian, moved in and absorbed the survivors of the first group. The egalitarian culture prevailed. And voilà, the health of the surviving monkeys from the first group recovered and improved! They were slim, their hearts and arteries pumped, their brains fired on all neurons.

Let’s take this one more step toward generalization: You recall that I criticized Ayn Rand for getting individualism wrong (which took me many years to figure out). Well, I now know how she got it wrong. She did not allow or understand how inviduals, when forming groups, pick up signals from one another that change who and what they are.

Watch this amazing TED talk by Bonnie Bassler as a mind-blowing illustration of what I mean. It is not about humans per se, but about bacteria. That’s right. Stupid, single-cellular strings of DNA and surrounding gunk. The trick to understanding bacteria (→all biological critters?) is to grasp how they chemically detect the presence of other bacteria, and then suddenly change their own chemistry. Upshot: No bacterium is an island.

The case of America

Let’s now look at America. Without getting into the academic weeds, there is a proxy for social equality called the Gini Coefficient. If the coefficient is 0, everybody has exactly the same; if it is 1, one person has everything, and everybody else has nothing. So countries fall somewhere in the middle between 0 and 1. Now look at this world map:

800px-gini_coefficient_world_human_development_report_2007-2008

The first thing you will notice is that the darkest blues and purples–ie, the greatest inequality–tend to be in poor countries, even in nominally “Communist” ones such as China. That’s because poor countries tend to be corrupt and feudal, with a few lords and many serfs. It is hard to consider these countries “free”.

But the second thing is more interesting. If you look at just the “developed” countries (let’s say those belonging to the OECD), you notice that one country stands out.

All the rich countries are in shades of yellow or green, meaning that they are fairly egalitarian societies. Only America is blue. America, in short, is the least egalitarian of all the developed countries.

And so? I’m not sure. The old Hayekian in me would chalk this up as a possible sign of more freedom in America than elsewhere. The new bacteriologist and epidemiologist in me wants to ring the alarm bell. This is not healthy! Sure, the Americans on top of the pecking order might show up at Party Conventions every four years and proclaim that ours is the freest country in the world. But many other Americans are simultaneously dying from their serfdom, whether they are aware of it or not.

For the time being, let’s consider freedom and equality neither friends nor enemies, but frenemies.

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Eleanor Roosevelt’s Liberalism

A major character in one chapter of my book, as hinted in the synopsis, will be Eleanor Roosevelt, who knew a thing or two about Triumph and Disaster being Impostors. So a few biographies about her are in my bibliography. The best is this one.

She is such a fascinating and engaging personality, that I’ve got loads overmatter of stuff that has nothing to do with the part of her story that I’m telling in my book. Take, for instance, this quote (from page 20) about the word Liberalism, which rhymes verbatim with my post on the matter:

But for the future to be “more rewarding,” she concluded, the United States needed to resurrect with conviction and daring the good American word “liberal,” “which derives from the word free… “We must cherish and honor the word free or it will cease to apply to us.”

Or this comment on intellectual rigor, honesty and diligence (on page 5):

“Argue the other side with a friend until you have found the answer to every point which might be brought up against you.”

Always better to do so with a friend first, because your enemies will oblige very quickly. This also dovetails with Amy Tan’s advice to writers about seeking criticism, but from friends or sources they trust to be honest.

Highly recommended book.