Sunday, December 18, 2005

The Two Sides of Monsieur Porter

Eduardo Porter has two articles in today's Times. One is quite intelligent, pointing out that the tax breaks employers receive for providing health insurance would be almost sufficient to fund health care for the poor. As policy this would run into the old adverse selection problem in that employers would no longer buy health insurance for employees and so employees would have to get insurance on their own. This is potentially rather difficult, though the article hints that people would be forced to pool in order to buy health insurance which may or may not make any sense. But the basic analytic point is sound and interesting.

The other is a rather foolish attempt to be counterintuitive on the "trade and not aid" argument. Porter points out that countries which import food would be hurt by lifting food subsidies in the West because it would raise the prices of imported food. If you are a net importer, this obviously has detrimental welfare effects. But the "trade and not aid" is not about short-term redistribution, but about changing the long-run incentives in poor countries. If food prices rise, then you get more farming and hopefully more capital accumulation in a distributed fashion. Now "trade not aid" has problems: not least, the estimated rise in food prices may well not be sufficient to do much. But at least take the argument seriously, and don't argue against a mis-reading of it.


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