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Sunday, February 26, 2012

Does It Matter?

It seems like we are obsessed, more than ever, with the idea that redistribution to provide a safety net for the less fortunate in society always generates costs greater than benefits.  When was the last time you heard a story or read an article about someone down on their luck who reluctantly applied to the "system" for help, received that help temporarily, got back on their feet, and left the system?  I cannot recall one.  However, I've heard stories from friends, relatives, and students of the "friend-of-a-friend" who is scamming the system, purposefully doing everything they can to remain on government assistance.  As a result, many are absolutely convinced that these government programs are a waste of money and should be eliminated. 

Why does everything seem to come down to this all-or-nothing option?  Are we incapable of reasoned analysis?  Of compromises that generate net benefits for society?  Or does the mere attempt to use reasoned analysis signal, to a seemingly growing number, of an effort by the intellectual elite to take one step closer to the socialistic revolution of our economic system?

In the article, "Moral Hazard: A Tempest-Tossed Idea," by Shaila Dewan in the NYT on 2/26, Dewan explains how the concept of moral hazard is now used to argue against any form of government assistance.  Most "safety net" programs that redistribute create incentives to engage in behaviors that result in added costs to society, moral hazard.  These costs should be minimized with well designed policy, but they can never be eliminated unless you eliminate the safety net.  Eliminating the safety net will cause even larger social and economic costs than providing a program where some individuals take advantage of others (as the article points out, the costs of moral hazard are likely to be overstated). 

So, does it matter? Does it matter if a social safety net (government redistribution) will cause moral hazard?  Or does it matter that we use reasoned analysis to offer help to the less fortunate and thus compromise on policy that generates greater net benefits for all of society?

2 comments:

  1. You are right that we need to get away from the all or nothing way of thinking about the safety net. Instead we should continue to provide help to those in need, but also include reasonable requirements that those that are physically able engage in some form of skills training design to make them more able to gain employment. Public assistance should not be a lifestyle.

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  2. Does it matter? The headline tells everything and yes government have not rights to waste our money like this. This is done all because we people don't no about he financial services which are help us for understanding our rights. Some universities program are come forward for giving the idea of financial services uses.

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