The Quality of Mercy: Social Health Insurance in the Charitable Liberal State
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The Quality of Mercy: Social Health Insurance in the Charitable Liberal State SHERMAN FOLLAND
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Department of Economics, Oakland University, Rochester, MI 48309, USA
This paper has two, mutually supportive purposes: (1) to show that the modern economic rationale for universal social health insurance is consistent with the classical liberal understanding of property rights; (2) to show that the writings of the leading liberal sages—Locke, Smith, Mill, and Hayek—are congenial to programs economically similar to universal social health insurance, and, in Hayek’s cases, were specifically approving. It is hoped that these facts and reasonings, which are unlikely to be known in toto to those who do not normally study across the intersection of philosophy and economics, will encourage a dialogue that reasserts in a non-ideological way the neglected role of property rights in the health economic assessment of social health insurance alternatives. Keywords: social insurance, economic philosophy, History of Economic Thought JEL classification: I10, I18, B31, P14
The system of competition and private property depends [on] namely that the owner benefits from all the useful services rendered by his property... Where [this] is impracticable ...competition will not produce the service. Hayek (1944:38). My aim has been to indicate not only that the principles of justice fit our considered judgments but also that they provide the strongest arguments for freedom. Rawls (1971:214). The quality of mercy is not strain’d, It droppeth as the gentle rain from heaven; ...It is twice blest; It blesseth him that gives and him that takes. Portia in The Merchant of Venice by Shakespeare. These three quotations set the stage for an economic/philosophical theory that demonstrates a middle ground between those pro and con universal social health insurance (SHI) in the United States: Hayek expressing his clear understanding that private markets will fail when there are external benefits or costs, and Rawls revealing the high priority he placed on liberty. But, Portia’s plea best foreshadows the point of my argument here. If an altruistic gift also benefits the giver, as in recent economic theories of altruism, then the case of health insurance meets the criteria of market failure not only as posed in mainstream economics but also as in the classical liberal view. Social health insurance is now returned to the national agenda. “Social health insurance (SHI)” here will refer to any plan that covers the population universally or nearly so,
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provides at least an agreed upon “decent minimum” of health care, and does so by offering or subsidizing the purchase of the required health care insurance. Of course, voters will differ on which type of plan they prefer and some will prefer “no plan”. From a property rights point of view, however, what each type of plan has in common is that it requires the taking of private property rights by government, that is, each is necessarily coercive to some degree. A demonstration that
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