On Feb 3, 4:23*pm, (Cynic) wrote:
On Thu, 2 Feb 2012 06:57:37 -0800 (PST), Ste
wrote:

Seeing myself as being both a consumer and a producer, it is obvious
that in general I want some sort of balance between the two. And even
as the builder, I don't really want individual consumers to be stung
with covering the full cost of my family emergency. But clearly I want
some general power to take time off to deal with irregular
emergencies, without total collapse of my lifestyle and reduction to
penury.

Can you not see that for a great many employers, paying an extra
salary every month to someone who does not actually do any work can be
just as devastating, and could easily result in bankruptcy for the
employer? *That would especially be the case if such a thing became
law, because for every genuine case there would bound to be several
chancers who did not *really* have to stay at home as a carer.

Indeed, so once again the answer is to distribute that cost more
widely than either individual consumers or individual (small)
employers. The buffer has to be built somewhere into the system. In
the post-war period, that was somewhat achieved by having a system of
contributory and earnings-linked state benefits.



If money were to be taken from someone (I suspect you would like it to
come from myself and other taxpayers) to pay for you to look after a
disabled relative, how about a situation in which your partner leaves
you or dies and you are left literally holding the baby? *You will
have to find a way to care for your infant in that situation.

Indeed, and in many cases that is achieved by recourse to state
benefits.



I see two perfectly reasonable solutions. *The first is as I mentioned
- friends and relatives who do not work step in and help.

But that simply presupposes that there are systematically such non-
working friends and relatives available. It doesn't matter which way
you look at it - somewhere in the system, there has to be a sufficient
reserve of time/labour, to cope with irregular but highly-demanding
emergencies. In the past women as a class fulfilled that function to a
large extent, where even if their domestic duties were far more
demanding than today, those duties were significantly more flexible
than formal employment.



*The second
is for you to take out insurance to cover the possibility that you
will have to give up work due to your own or someone else's
disability.

Indeed, but if the insurance cover is discretionary (as opposed to
compulsory), then, amongst other things, that carries problems with
individuals opting-out, particularly due to strained economic
circumstances and competitive social pressures - the very sorts of
circumstances where such insurance might be most necessary and
desirable from a social point of view, but where individuals acting
individually are most likely to take risks in opting-out.

It also carries the problem of adverse selection, where individuals
are likely to pay into such policies only when they are most likely to
need the cover, and therefore the premium will be most unaffordable,
as opposed to if the same premium had been spread over their entire
working lives.

In the presence of perfect foresight on everybody's part, people would
only choose to buy an insurance policy immediately before the adverse
event, and the premium demanded by the insurer would carry the same
cost as the adverse event itself. That would subvert the whole point
of the insurance in the first place, which was to spread large and
irregular costs, across society and across time (including, to some
extent, the time period *after* the adverse event).

The reason for doing this is so that individuals do not become 'total
losses' in insurance parlance, bearing in mind their social and
economic value to society at large. The traditional economics
assumption that individuals who take bad decisions will be 'driven
from the market', often fails to appreciate the systemic importance of
not allowing individuals to drive themselves from the market, nor
allowing them to make extremely bad decisions and then attempting to
hold them to the fatal consequences and trying to force them from the
market when they decide that they do not want to leave after all.

I can't help viewing the recent worldwide economic troubles as being a
somewhat more general example of what I'm talking about. With Greece,
for example, permitting them to accrue unmanageable levels of debt,
and then attempting to extract that money on terms that will lead to
the failure of their state, is inevitably going to lead to default
anyway, but not without imposing a heavy burden of international
tension (with the tension proportional to the ferocity of the attempt
to extract repayment of the debt instead of allowing immediate
default). It is easy to declare in retrospect, that prudence would
have demanded that these loans were never made to the Greeks in the
first place, even if they demanded them and were willing to accept
them.

That sort of dynamic is exactly what contributed to World War 2, where
runaway competition amongst imperial powers, and the imposition of
harsh consequences on the losers, only led to a renegotiation of terms
later and regulation of international competition, but not before
hundreds of millions of people were killed or psychologically maimed,
and trillions of pounds of economic capital had been lost.

I would also point out that, fundamentally, the idea that consequences
should follow the choices, is often only an ideological commitment. It
does not follow in any natural way, that the repayment of a debt
should follow the consumption of the borrowings. You can quite easily
take the money, and then refuse to repay. Honesty and credit-
worthiness is a pretense that can be discarded, if the circumstances
demand it. And if for whatever reason you have made a bad bargain, and
the consequences (if accepted) are now fatal (metaphorically, if not
literally), then there is going to be a strong temptation to
renegotiate or default.

For, if the creditor were your friend, then he would not have accepted
the bargain, and certainly he would not hold you to its harsh terms
now having seen how events had unfolded. And if he is not your friend
but your red-in-tooth-and-claw competitor, then you owe him nothing
anyway, and there is no reason to abide by the rules of the
competition anymore. The smart creditor does not enter into such
arrangements, because the punishment of a defaulting debtor is
extremely expensive in terms of both the forfeit of the loan and the
additional conflict generated by the punishment.

In any society that relies on a degree of trust, cooperation, and
willing adherence to common ideology, you cannot afford to be an
irresponsible creditor in general, because in the end you'll probably
lose not only your own capital, but even more certainly everyone will
lose the benefits derived from trust, cooperation, and willing
adherence to common ideology.