Saturday, August 06, 2005

Thanks Henry, But....

Henry helps me out, but perhaps I'll give it a go. I think part of what is going on in Wilkinson's argument is that he is attacking a strawman. Hacker writes (username=yellow21; password=yellow21):
In the new world of work and family, the emphasis should be on portable insurance to help families deal with temporary interruptions to income and big blows to household wealth. And these insurance protections should be mostly separate from work for a particular employer, sponsored either by government or private communal associations. By the same token, we should not let massive social risks be borne by Band-Aid institutions that do not distribute those risks broadly or efficiently. Bankruptcy should not be a backdoor social insurance system; private charity care should not be our main medical safety net; early retirement and disability programs shouldn't be a way of simply shedding older workers--and not because these systems are prone to abuse, but because they were not designed to bear the burden they now carry, much less to carry it effectively or equitably.
Hacker's not concerned about income volatility in terms of fluctuation ($80,000 to $60,000), rather it's termporary interruptions to income and big blows to household wealth. Because I agree with Wilkinson: if the only thing new that Hacker was pointing to was a group of people who's income randomly varies between $80,000 and $60,000, I don't think I'd be too worried.

But Hacker isn't pointing to that at all. He's pointing to people who incur massive medical expenses without health insurance (or with inadequate health insurance); people whose income drops from $50,000 to zero when they are laid off and can't find a new job; people whose company defaults on the defined benefit pension scheme they'd been counting on...And the solution to all these things isn't wage insurance, but a strengthened social safety net -- albeit one souped-up and sexed-up for the new century.

Now Wilkinson thinks the abstract question is that old dynamism v. stability debate:
We are richer because of the possibility of swings in income. The efficiency of the economic order, and the overall rate of growth, depends on the ability of the system to dynamically allocate resources to their most valuable use. This entails a fair amount of turbulence inside the general upward trend. Our economic security requires that we be exposed to some income volatility.
But that isn't the relevant debate here. The abstract debate is not about dynamism v. stability, but about the distribution of risk in the system. We are happy with the level of dynamism in the system, but we'd prefer that the risks associated with that be distributed differently. We aren't asking to re-regulate industry and inflict costs on industry (which would push towards stability), but are instead asking for governmental institutions which would facilitate the risk taking of workers and corporations. It's redistributing risk to encourage dynamism.

It is souped-up over the New Deal and the 60s because rather than relying on having a stable corporate sector to reduce risk in individual lives, we want a dynamic and volatile corporate sector, but wish to mimic the security that workers once enjoyed. We ask government to provide those various safety nets, because government is best at aggregating risk. This safety net is not income insurance.

Somehow I've lapsed into an odd voice, but the point is that a) Wilkinson attacks a strawman and that b) Hacker isn't engaged in the debate over dynamism v. stability so beloved of political philosophy. What Hacker is doing is saying now that we have a dynamic corporate sector, what are some nice things that corporations used to do for workers that government could conceivably do, and do more efficiently? And thus social insurance...

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