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A post on (former Denver mayoral candidate and current Denver Hispanic Chamber of Commerce President) James Mejia’s Facebook page about a drunk driver totaling his parked car reminded me of my similar experience about nine and a half years ago, and the lesson I learned from it about the moral and ethical deficiency that comes from the commodification of responsibility.

This essay forms a counterbalance to my essay on Political Market Instruments, which was more favorable toward another form of commodification of responsibility: the commodification of collective or shared responsibilities that serves the purpose of addressing the collective action problems involved. The potential benefits of some degree of commodification of shared responsibilities is that it converts the burden of meeting them into a monetarily lucrative one, and allocates that burden according to who can best bear it, transforming the value of meeting it into a tradable commodity. The commodification of personal responsibility, conversely, serves to insulate the individual from the moral or ethical dimensions of their obligation, reducing it to a market transaction in which an undue burden can fall on an innocent victim of another’s error.

When my wife and I moved to Colorado, we stayed with friends in Lakewood while looking for an apartment, our car parked on a quiet residential street. In the wee hours of the morning we all heard a commotion, and discovered a drunk driver had totaled my old but reliable Plymouth. State Farm, the young drunk driver’s father’s insurance company, tried to low-ball me (not considering the value of work done in Mexico for which I had no receipts, for instance, and offering me a settlement of about $1000, which was insufficient to buy a running car to replace the one I had), it being inherent to their business plan to try to pay the least possible, despite the fact that, morally and ethically, when a drunk driver totals your parked car, they really have a pretty unambiguous responsibility to make sure they make it completely right.

To the father’s enormous credit, when I wrote him a nice note about my predicament, he kicked in an extra $1000! So, in this particular instance, the outcome was a model of an individual taking personal responsibility despite the commodification of that responsibility insulating him from it. But it’s clear that that is exceptional, that the norm is to let the insurance company handle it, and that voluntarily assuming the moral responsibility which the insurance company insures people against is a rare occurrence. (In fact, the father mentioned in his reply to me that virtually everyone he knew counseled him to let the insurance company handle it.)

The system could certainly be tweaked to diminish this defect, without either eliminating the indispensible service of insurance or making its cost exorbitant. One way to diminish it, for instance, would be, in circumstances of absolute responsibility by one party for a harm suffered by another, a requirement that insurance companies accept the highest independent estimate of the value of the property destroyed (with perhaps some government certification of the those qualified to make such assessments, to prevent collusion between victims and those doing the assessments), since the injured party, morally and ethically, should get “the benefit of the doubt.” In general, when one person has an unambiguous moral responsibility to make another whole after inflicting some injury on them, their insurance company covering such liability must be held to the same moral standard that society would hold the individual. That is not currently the case.

Of course, we do have a recourse in place to ensure this result: Legal action. Unfortunately, legal action comes at a a cost to all involved, in time, stress, risk, and just general imposition. It is expensive, a form of transaction costs which get in the way of arriving at optimal solutions by making the process of arriving at them more costly than the benefits of arriving at them. There is also, in this case, grossly unequal institutional power between the insurance company and the individual challenging it, with the resources the insurance company has at its disposal to defend against legal action far outstripping the resources the individual has at his or her disposal (not to mention that accessing legal counsel may impose a cost on that individual that that individual should not have to bear.) Therefore, whenever possible, we, as a society, should prefer, whenever possible, to implement more seamless, costless mechanisms to arrive at optimal outcomes.

The commodification of responsibility, whether of the collective responsibility commodified by Political Market Instruments, or of the personal responsibility commodified by liability insurance, is not necessarily a bad thing. We only need to be careful that we are not erasing, or insulating the individual or collective from, any portion of that responsibility in the process.

Buy my e-book A Conspiracy of Wizards

Buy my e-book A Conspiracy of Wizards

Amendment 63 on Colorado’s ballot this November would prohibit the state from forcing people to buy health insurance, a provision of the new federal health care law , further cluttering our state constitution with yet another amendment which violates the U.S. Constitution (in this case, the Supremacy Clause of the U.S. Constitution, to be precise, which states that federal law takes precedence over state law). Many think this is a good idea. And the argument for it seems straightforward enough: Free people should not be compelled to buy any good or service from any private company that they do not wish to buy.

But most people acknowledge (albeit grudgingly) that some taxation is necessary, and so the qualifier “private company” is necessary. Taxes, after all, are the government forcing people, collectively, to buy goods and services from the government. You don’t get to choose if you want to contribute to the provision of a military, police and fire departments, schools, and other public services that we have not yet been foolish enough to eliminate (though some are trying to get us there), and most people don’t object to that. Certainly, no rational people do.

There are some who advocate for more privatization of public services, contracting more out (as the military has done, for instance), more private-public partnerships, more market dynamics and competition (in the form of school vouchers and cap-and-trade regulation, for instance). Few, again, would argue that government cannot tax citizens for any service that it contracts out in part or in whole, so, again, the prohibition we are discussing must be against government forcing people to buy any good or service directly from any private company; government forcing people to pay private companies indirectly is fair game.

What, exactly, is the moral or pragmatic distinction between government using tax revenues to pay for contracted services, and government cutting itself out as the middleman, and mandating that citizens buy certain services directly? Is the issue a concern that we mandate only taxation for the provision of public, not private, goods?

But insurance very much is a public good. It is the spreading of risk so that all pay some part of a collective burden that we all share, rather than allowing the whims of chance to dump crushing burdens on a few at a time when they are least able to bear them. Ideally, we would dispense with “insurance” altogether, and instead spread the risk universally, and seek to reduce it together through a preventative and proactive health care regime, conceptualizing health care not as an individual service that is individually consumed, but rather as a basic need that we collectively provide to all of our citizens.

In the absence of that ideal, in a compromise with our dysfunctional prior system, the next best choice is to have a highly regulated private market, one which uses private insurers as agents of a public function. To ensure that the pool of contributers is sufficient to cover the demands that will be placed on the system, mandating that people pay into it is functionally no different from mandating that people pay their taxes for services that are publicly provided.

Some argue that this is just a boon to the “evil” insurance companies, that exist to maximize profits by collecting the highest premiums possible while denying as many claims as possible. There is some truth to this, and it points to a basic defect of private insurance: When you pay now for a service whose future provision depends on a judgment by those responsible to provide it, you create the perverse incentive for those enterprises to be biased in favor of judging against providing it. As long as we rely on private insurers with some discretion to accept or deny claims, we will be facing an uphill battle, individually as consumers of that service, and collectively through our government agents, to force them to uphold their end of the bargain in good faith.

As an aside, in the case of liability insurance, it creates the added defect of commercializing the meeting of moral or ethical burdens in such a way that they will be minimally met if at possible. If a parked car is totalled by a drunk driver, that driver has a moral obligation to make the owner of the parked car “whole” again, to ensure that no loss of any kind is borne by the victim. But insurance companies have no incentive to view that moral obligation as being as compelling as it is; they will not pay for anything that the victim cannot document is owed to him or her, despite the fact that no burden should fall on the victim at all. (This observation is derived from personal experience, in which, in the above scenario, State Farm Insurance sought to pay me less than the real value to me of the car the drunk driver had totalled). In other words, when you buy liability insurance, you are paying a company to fulfil your possible future moral or ethical obligations, and that company is then motivated to do so its best to shirk that responsibility on your behalf.

Relying on private insurance is problematic in a variety of ways. The insurance companies are incentivized to refuse those most in need of insurance (those most likely to have to collect on it), to bear too little of the crushing burden of health care expenses when most needed by clients who have already paid for their insurance, and to charge exorbitant prices for the under-provision of these services. With the enormous wealth thus amassed, these financial giants can then aggressively lobby Congress to do their bidding, legally bribing and blackmailing their way to almost unstoppable heights of political influence.

But, boon to private insurers or no; a sad and frustrating tribute to a corrupt system or no; our goal is not to punish insurance companies or cut off our nose to spite our face, but rather to move incrementally toward more functional social institutional arrangements, and this often means acknowledging and accommodating existing distributions of power and influence, in order to move in a direction which makes their exercise more utility-producing. The best road we have forward, both to diminish the future political clout of insurance companies and to constrain them more narrowly to provide the service for which they’ve been contracted, is to increase government regulation, and increase public participation.

Requiring everyone to buy into health insurance pools is a necessary step toward developing a fully functioning national health care system.

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