A brief explanation of everything.
...At least everything to do with functional welfare capitalism. This very neat article by Malcolm Gladwell in the New Yorker.
Read the whole thing. But in a nutshell:
1) Birth control is wonderful stuff.
2) Dependency ratios have huge predictive power for growth and welfare.
3) Private pension plans are a disaster in theory and practice (and for reasons you might not have explicitly thought of).
4) Public pensions and health insurance are basically the solution.
5) Walter Reuther understood all this stuff long before you did.
Fantastic stuff. Made my day.
Read the whole thing. But in a nutshell:
1) Birth control is wonderful stuff.
2) Dependency ratios have huge predictive power for growth and welfare.
3) Private pension plans are a disaster in theory and practice (and for reasons you might not have explicitly thought of).
4) Public pensions and health insurance are basically the solution.
5) Walter Reuther understood all this stuff long before you did.
Fantastic stuff. Made my day.
4 Comments:
Yeah! that was really good.
Now I want to make some long-term investments in India.
Laura-
Sorry for the late response. A couple of things: first, another very good article by Malcolm Gladwell. Always like reading him. But he doesn't mention other aspects of pensions, i.e. Social Security, IRAs, 401(k)s, etc. He also doesn't mention the problem of allowing people to retire after a certain time period (e.g., 30 years), rather than at a certain age (65), which seems to me to be a large part of the problem.
Note about Walter Reuther. Point of family pride: in the 1920's, Walter Reuther's roommate for four years was my grandfather (they both worked at Ford). The irony of this is that my grandfather was always strongly opposed to unions (he eventually started his own business). They apparently had some interesting discussions: Walter wrote to my grandfather that they had engaged in "revolutionary combat." But Gramps also said that Walter was the most honest man he had ever known.
Wow, John. That is cool.
What Gladwell says is quite correct, but is missing, for brevity, some important details.
One of them is that employer-related welfare means that employees have to be double terrified of losing their jobs, and people without jobs doubly desperate to get one.
However the bigger issue is indeed that of having a larger risk pool, and in particular mandatory insurance, as those are the ways to avoid self-selection and cheaper catastrophic event coverage.
A particularly nasty point is that today health care insurers have stopped providing insurance and in effect are providing health mortages, because there is no risk pooling across accounts:
http://WWW.DanielGross.net/archives/2006/07/30-week/index.html#a000995
«Insurers' resolve to price every account at a profitable level»
In other words the industry is no longer selling health insurance, but health mortgages, which is a very different
thing, as this example illustrates rather vividly:
«His 30-employee company makes packaging prototypes for advertising. [ ... ] His medical costs were roughly half of the premiums he paid between 2002 and 2004, according to his insurance data.
But last year, after an employee was severely injured in a highway accident, WellPoint's Blue Cross Blue Shield of Georgia boosted premiums by 30%. It had asked for a 41% increase but came down after Mr. Perkinson agreed to make employees pay even more of their bills out of pocket. [ ... ] The WellPoint unit says it had to increase AdProp's premiums so much to cover the big claims it incurred after the employee's accident.»
The last paragraph makes it damn clear that the so-called insurer is not running a book or pooling risk (insurance), just selling collective deferred payment plans (mortgages).
What health ''insurers'' call ''premiums'' are actually facility fees before a payout, and they are actually loan repayments after a payout; what health ''insurers'' sell is not insurance, it is a very expensive credit line.
This scam is a very good argument for mandatory, national, government run real insurance schemes for health, as they also avoid the self-selection problem.
Among the consequences is that since repayment is by account, larger accounts are much better than smaller ones. Which means that providing health care for small companies can be too risky. While big companies are getting rid of health care except for management, the most uninsured workers are in small companies, in good measure because of the issue above.
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