4 ms·

I'm not trying to make a moral point about whether taxes are right or wrong, simply that people behave differently when spending other people's money rather tha

I'm not trying to make a moral point about whether taxes are right or wrong, simply that people behave differently when spending other people's money rather than their own. Government spending taxpayers' money is exactly the same conflict in this sense as company management spending shareholders' money. These agency conflicts can an do often lead to bad outcomes and when this happens it's generally viewed as a form of market failure.

TeMPOraL 6y ago
I'm also not trying to make a moral point. I'm trying to show that these kinds of problems are one of the possible failure modes on the free market, and whether one of the actors happens to be a government is immaterial - you could (like you personally just did) draw an equivalent scenario involving only private businesses.
- tomatocracy 6y ago
  When people talk about "free" markets it usually means markets where these types of problems are effectively managed or mitigated, not "markets with no rules". There's of course lots of debate about what the right policies to manage and mitigate these are but it doesn't mean that markets aren't a good mechanism just because there might be trade-offs or imperfect solutions.
  - TeMPOraL 6y ago
    I always understood "free" markets to be ones run by supply and demand, without authoritarian interference. That does not exclude principal-agent problems, though. I'm also not saying markets aren't a good idea. Just I don't believe they're the core of the solution to the problem I outlined upthread.
bosie 6y ago
Considering you are talking about the health care system where insurance companies spend money on behalf of their customers. At no point did the customer of the doctor or dentist spend his or her hard earned money. It was always a large, authoriative corporation. Why would it matter if the corporation is the government or an insurance company? Also, are you implying that you can't have a free market if you have insurance companies?
- tomatocracy 6y ago
  It is indeed a problem with insurance as well where it's more commonly called moral hazard. With insurance traditionally there are a number of mechanisms which can help mitigate this eg copays, deductibles, etc. - and there is (sometimes) a market for pricing of policy premiums and terms. But it's far from perfect, especially in the US (at least as I understand the American system).

TeMPOraL 6y ago

I'm also not trying to make a moral point. I'm trying to show that these kinds of problems are one of the possible failure modes on the free market, and whether one of the actors happens to be a government is immaterial - you could (like you personally just did) draw an equivalent scenario involving only private businesses.

tomatocracy 6y ago
When people talk about "free" markets it usually means markets where these types of problems are effectively managed or mitigated, not "markets with no rules". There's of course lots of debate about what the right policies to manage and mitigate these are but it doesn't mean that markets aren't a good mechanism just because there might be trade-offs or imperfect solutions.
- TeMPOraL 6y ago
  I always understood "free" markets to be ones run by supply and demand, without authoritarian interference. That does not exclude principal-agent problems, though. I'm also not saying markets aren't a good idea. Just I don't believe they're the core of the solution to the problem I outlined upthread.

bosie 6y ago

Considering you are talking about the health care system where insurance companies spend money on behalf of their customers. At no point did the customer of the doctor or dentist spend his or her hard earned money. It was always a large, authoriative corporation. Why would it matter if the corporation is the government or an insurance company? Also, are you implying that you can't have a free market if you have insurance companies?

tomatocracy 6y ago
It is indeed a problem with insurance as well where it's more commonly called moral hazard. With insurance traditionally there are a number of mechanisms which can help mitigate this eg copays, deductibles, etc. - and there is (sometimes) a market for pricing of policy premiums and terms. But it's far from perfect, especially in the US (at least as I understand the American system).