Comment by abdullahkhalids
3 days ago
Many laws solve the problem of high initial cost dissuading globally good actions. Laws forcing everyone to buy insurance, for example. It's very easy to see that where such laws don't exist, almost no one buys insurance, making everyone worse off.
This is also an example of the same kind of law.
Insurance is an interesting example, I would have expected one that causes more direct harm to others like drunk driving.
How are we all worse off when fewer people have insurance?
Healthy young people are less likely to buy insurance than sick older people. But if only sick older people buy insurance the payouts per insured are going to be higher. That in turn causes high premiums. Insurance works if everyone buys in, pays while they are young and relatively healthy, and gets paid healthcare when they are older and sicker.
If you “game” it, it breaks the whole system.
Now some of you might be thinking “why should a young and healthy guy like myself subsidize the old sick people?” The answer is that you will also get old.
What you are describing isn't really private insurance though, its a privately run socialized healthcare system. There's nothing wrong with that, it simply isn't insurance.
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Think of something like home owner insurance. Your insurance rates depend on exactly how your home is built, what type of heating system it has, where it is, etc. The rates, carefully calculated by actuaries, act as a signal to you as to how dangerous your house is to yourself, but also to others. If you set your house on fire due to negligence and cause the next house to burn, you might be liable for damages there as well.
Forcing everyone to buy such insurance forces everyone to fully pay for the expected cost of the danger inherent in their house. Over time, this causes houses to be constructed in a safer manner. If people are not forced to buy insurance, they don't buy it, and so this evolution over time does not happen. Also see [1].
Some financial tools are amazingly clever - whether they are morally good or bad. Bits about Money is a great blog to build insight into some of these constructions [2].
Another example for your initial question is car seats for kids. If you don't force em, nobody buys em. Then their kids die.
[1] https://en.wikipedia.org/wiki/Moral_hazard
[2] https://www.bitsaboutmoney.com/
For the insurance example, you're describing insurance as a forcing function for better made, safer buildings. That's what building codes are for though, we shouldn't need to have both and building codes are a more efficient and direct way of ensuring safe buildings.
For car seats, I'm not sure how we could know that people wouldn't buy them. I don't expect anyone would propose dropping the requirement to see how the market responds, and probably rightfully so. If car seats are much safer though (and I'm obviously not disputing that), people that can afford one would buy it anyway.
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