Links about health care reform

The subject of the day. I don't have a lot to say about it, so I'll simply offer links.

1. What I said 2 and a half years ago still reads well to my own biased eyes.

2. Here is something along analogous lines, that Ronald Bailey wrote back in 2003.

3. But let's be more up-to-date for a moment. Here is something from the folks at Cato, who are watching all this with some more particularity than I am.

4. Julian Sanchez reminds us that insurance is about managing risks. If health insurers aren't allowed to manage risks (by for example protecting themselves against liability for pre-existing conditions) then whatever exactly it is that they are doing, it is no longer insurance as that term has always been understood.

5. It does seem to be an odd but empirically observable fact that in some fields low-risk people purchase more insurance than do high-risk people.

6. Virginia Postrel tells us about her life, her breast cancer diagnosis of 2007, and what she makes of it in terms of health insurance as an industry.

7. On the intra-party split the Democrats now face? This may be important. The bill is hardly home-free given the huge differences betwen the two sausages that have come out of the two chambers of our sausage making apparatus. Here is a columnist in The New York Times on the intra-party split.

8. And here is ABC News.

9. Forty-five years ago, Kenneth Arrow wrote a "seminal paper" about the economics of health care. Krugman cites it as gospel, others aren't so worshipful.

Portfolio and municipal bonds

I wasn't a big fan of the Condé Nast business publication, Portfolio, when it debuted last spring. Indeed, you can read one of my early reactions here if you like.

But it has grown on me. Or perhaps they've found their own footing since then. No more Tom Wolfe style onomatopeia for hands rapping on a door in the middle of the night.

No, instead we have someone like Jesse Eisinger, making a very intelligent case in the March 2008 issue that the whole "municipal bond" insurance market is one big scam. No, I wouldn't buy a bridge from Mr. Buffett.

Though I love his cousin's tune, Margaritaville. I've sung it at karaoke places many times.

And where the heck is that shaker of salt....

Auto Insurance Premiums

Peter Brink, writing in TheStreet.com yesterday, said that auto insurance premiums are falling. Why would that happen? Aren't auto insurance companies greedy bastards? as much so as any other capitalists?

Brink attributes the decline to the fact that vehicles are safer now than they were 10 years ago. http://www.thestreet.com/funds/ratings/10359691.html?puc=googlefi But, we might ask him: so what? If a business can keep selling its product for the same amount of money even though its costs are dropping, why wouldn't/shouldn't it? It's called profit maximization, isn't it?

Yes. For the sake of clarity, we ought to think this through a bit further. Suppose two brothers, Frick and Frack, have founded two insurance companies. Each has specialized in the field he thinks likely to be most lucrative. Frick sells auto insurance. Frack sells flood insurance. Suppose, now that both lines of business prove to be equally profitable. There is no incentive for either to change his business model, because each is doing as well as the other. What might change this nice equilibrium?

A sharp drop in auto claims, due to increasingly safe models of car over ten years, might change it. Frick continues to charge premiums at the price the market will bear. Since he pays out less money, his profit of course increases. This means he's doing better than Frack now. Some of the Fracks in the world will become dissatisfied with this situation, and will move into auto insurance themselves. The increasing competition (in the absence of prohibitive barriers to entry) will lead to lower rates after all.

That's how its been written up in books at least since Alfred Marshall's day. And that is what seems to be underway.