Government control better than the corporate alternative?

[brian0918]

I am ill equipt to deal with debates I have encountered where individuals assume from the beginning that the problems they experience with private companies, particularly certain insurance companies, are problems true of any private organization. Here is one such example:

I have private insurance. Think about your private insurance company and how helpful they were the last time you called. Now, do you really believe that Private fire departments are a good idea? How about a for-profit Police department? For a "funny" take on that idea, read Snow Crash. I don't know about you, but I willingly work 10 hours of my week for public police, fire, and roads. Not least because private organizations of that type would cost me 20 hours a week and make me sign a waiver and wait on hold with my insurance company for pre-authorization before they started hosing my burning house down. I call that a realistic view of how the real world works, not a "flawed" understanding of anything. Don't get me wrong, gov't sucks. It's wastefully mis-managed, corrupt, and all that... it just really is better than the alternatives.

I am not asking for something to copy-and-paste back to such an individual, but for a better understanding of the grounds for this line of reasoning, and where, if at all, it goes wrong. I have grown up with the idea that private organization is bad and government, thought wastful and easily corrupted, is better, and insurance companies have been the default example. Why is that? Why are insurance companies so seemingly bad, and would they be somehow better if government had no control over money? If so, how?

[agrippa1]

I am ill equipt to deal with debates I have encountered where individuals assume from the beginning that the problems they experience with private companies, particularly certain insurance companies, are problems true of any private organization. Here is one such example:

I am not asking for something to copy-and-paste back to such an individual, but for a better understanding of the grounds for this line of reasoning, and where, if at all, it goes wrong. I have grown up with the idea that private organization is bad and government, thought wastful and easily corrupted, is better, and insurance companies have been the default example. Why is that? Why are insurance companies so seemingly bad, and would they be somehow better if government had no control over money? If so, how?

The key here is that, according to Objectivism, some functions need to be done by, and in fact, are the justification for, government. Law enforcement (including courts) is one. So the example of how private law enforcement fails is supportive of Objectivism.

The other examples, fire and roads, are open to debate, in my view, though roads more so. A privately contracted fire department might well result in increased effectiveness as the focus shifts from human effort (the hallmark of gov't work) to technology. I haven't heard a good argument on how roads would practically be built and maintained privately. Talking all roads, not just toll highways and bridges. At some point the shared nature of roads dictates a "government" solution, even if it's a local neighborhood government.

As for insurance companies, the situation is not as clear cut as the wonks would have us believe. Here's an article in this week's WSJ about a contributing cause of high insurance costs. When reading it, think about what insurance properly is, and what things it should properly cover.

on edit:

Then think about whether the failure of privatized socialism is an indictment of its private, or its socialist nature.

Edited February 10, 2008 by agrippa1

[softwareNerd]

I have grown up with the idea that private organization is bad and government, thought wastful and easily corrupted, is better,...

Okay, let's stop here and ask: bad in what sense? I assume we're talking about customer service and value they provide. Fortunately, in the U.S. the government does not run too many businesses. However, in other parts of the world one can compare government cafeterias side by side with private ones; one can compared the government bus-service to the private one; one can compare all sorts of government-owned organizations with private ones, and the government ones that provide good customer service are the tiny exception.

... and insurance companies have been the default example. Why is that? Why are insurance companies so seemingly bad, and would they be somehow better if government had no control over money? If so, how?

By "control over money" I assume that you mean "control over the economy". I also assume that when you say "insurance companies" you mean "health insurance companies". Correct?

The way in which private health insurance is organized in the U.S. is a product of law, not the free-market. It's extremely unlikely that such a system would survive in the free-market. Somewhere on the forum there's a post explaining a little more about the U.S. system and how it is a creature of our current laws, rather than of the free-market. Not sure how one would find it, since there are so many posts about health-care. Perhaps the FIRM web-site could be a starting point to understanding the nature of the U.S. system.

In essence, the system is not insurance against unforeseen risks. Instead, the way the system has been set up, it could be called "managed spending accounts", with the insurance company poking its nose into every little expense. Imagine an analogy where each of us paid a private company $xxx each month for "food insurance", and then the supermarkets sent the bills to the "food insurers" for collection. Soon enough the insurance company would be responding that we really did not need to eat that expensive brand of chocolate when a cheaper generic was available, and they would be fighting with out favorite gourmet food stores, saying that they were charging prices that were beyond was was "reasonable and customary". Both sides would hire administrative staff to fight these fights, and the consumer would be tangled up in the red-tape as well. Then, the government would also allow people to put aside some of their money in a tax-free account from which they could spend on food; but, they would have to collect social-security numbers of all food-providers, and keep all receipts, and fill up forms, and track all this at the cost of many hours and bother! Unfortunately, that is the way health spending is organized, primarily because of U.S. tax-law and secondarily because of the notion that it is good if firms provide health-care cover to their employees, instead of giving them the equivalent in cash.

Edited February 10, 2008 by softwareNerd

[Galileo Blogs]

I am ill equipt to deal with debates I have encountered where individuals assume from the beginning that the problems they experience with private companies, particularly certain insurance companies, are problems true of any private organization.

I see several problems with the debate argument you are encountering. In no particular order, here are some problems I see which I offer as questions for you (or your debate opponent) to think about.

Your debate opponent is making a faulty generalization. He sees, according to him, a problem with an insurance company, and then extrapolates to a broad generalization that all private organizations are flawed. How does such a broad conclusion follow from a single or several examples?

Then he makes the improper conclusion that government provision of this service would be better. On what basis can he say that?

The whole discussion also presupposes sloppy definitions. What is a private organization? Is it any business, regardless of the circumstances it operates in? For example, insurance companies are arguably one of the three most regulated industries in the United States (the other two are electric utilities and medical care). As such, government already is dictating most of the terms of service of insurance companies, such as rates, who can enter the industry, and even policy language. If that is the case, is an insurance company really the best example to use of a faulty private organization?

To what degree is the insurance company's poor performance due to government regulation? Using the performance of such a heavily regulated industry to condemn capitalism is hardly convincing. Using it to condemn government regulation might be more appropriate!

Another question worthy of asking is: What is the proper standard of judging whether an organization is performing well? Is it how well the product is given away for free to anyone who wants it (e.g., public education and socialized medicine)? Or, is it how well a business honors its contracts? Is it how much innovation occurs? Your debate opponent presupposes that an appropriate standard for judging performance exists, but he does not spell out that standard. If his standard is along the lines of the first one, it is entirely inappropriate.

Finally, speaking more broadly, what is the nature of capitalism that results in good products and services produced at low prices? What is it about government provision of services (or regulation of "private" entities providing services) that hinders the creation of good products and services at low prices? The theory of capitalism shows that competition in a system of private private property where rights are protected by government does result in better goods and services at lower prices. In other words, it results in a progressively rising standard of living.

The history of capitalism in England, America and, more recently, Asia, also validates this theory. Just how is the example of a single allegedly poorly performing insurance company supposed to refute the theory and history of capitalism?