I shouldn’t get sucked in — I mean, I’ve got a ton of work to get done before the next semester brings its apocalypse with it. Dealing with Megan McArdle is just a poor investment of scarce time and attention…and yet….Oh the temptation!
Perhaps there is a middle way.
I’ll try. I just won’t let myself go all John Foster Dulles on McArdle’s recent attempt to show that she knows more about journalism than an actual journalist, and more about constitutional law than a constitutional law professor. Suffice it to say that hilarity ensues.*
Here I’m just going to look at a single little paragraph that contains one of McArdle’s standard party tricks. She asks:
…surely we can agree that it’s an open moral and political question as to whether it’s acceptable to respond to moral hazard problems with coercive comprehensive regimes? Maybe before you answer that, you’ll want to contemplate the gnarly moral hazard problems attached to many social insurance schemes.
__
Look at the skeleton of her “reasoning” (sic — ed.):
(a) There are moral hazards associated with social insurance
(b) Some of those moral hazards are “gnarly” — i.e. too complex to confront. (I think that’s what she means.)
(c) Coercive comprehensive regimes are the tool used to respond to such moral hazards.
(d) That’s a bad thing.
__
There are a couple of problems here.
__
First, yes, there are indeed moral hazard issues associated with social insurance schemes.** (Moral hazard, by the way, as defined by one of McArdle’s favorite people, Paul Krugman, is “…any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly.”)
__
Unfortunately, the paper to whose abstract she links is not primarily concerned with what most people think of as the core moral hazard associated with providing pensions to old folk. It does address an important phenomenon. Published in 2005 by three University of Minnesota economists, Michelle Boldrin, Mariacristina De Nardi and Larry E. Jones, it argues that a bit more than half of the drop in fertility observed in Europe and America from the 1920s forward can be attributed to the emergence of old-age pension systems.
__
A couple of things here: first of all, this change in fertility is not exactly an unintended outcome. Because large families are associated with poverty (especially in recent studies of developing nations), fertility reduction can be seen not as a tangled trap for pension systems but as a sought-after policy result.
On The Nature of Truth: A Quick Bit of McArdle GiggingPost + Comments (86)