Hayek on Social Insurance

From The Road to Serfdom, Chapter 9:

Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance--where, in short, we deal with genuinely insurable risks--the case for the state's helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatibility in principle between the state's providing greater security in this way and the preservation of individual freedom. To the same category belongs also the increase of security through the state's rendering assistance to the victims of such "acts of God" as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.

If libertarians cringe at such a thoughtful passage from F. A. Hayek, it is only because they have completely lost any desire for the welfare of society and desire only social Darwinism. However, the opposite problem has apparently occurred among some people attempting to defend the Democrats' health insurance law, as the Freeman reports. (See my comment at the bottom of the page.) It is never helpful to an argument to take words out of context. It only further distorts an already cloudy picture.

Health care is a very tricky subject. Our free market system has been a large reason for our rapid success in coming up with newer and better ways to treat patients. This success is both a blessing and a burden, since it raises critical moral questions about how these blessings are made available to the public. While most products seem perfectly suited to leave up to the market to distribute, health care seems to be of a different nature, as it is quite literally a matter of life and death.

But before we get too certain of how to proceed, let's consider the moral implications even of the measures which have already been passed by Congress. The new health care bill will require, under penalty of being fined, that every individual buy a certain level of health insurance. My understanding is that this is not allowed to be "catastrophe only" insurance. The government intends to force you to make it a regular habit to visit your doctor. While this is a perfectly reasonable habit for any individual to choose, the presupposition behind this coercive measure appears to be that we individual Americans are all machines owned and operated by the government, which must receive regular maintenance to keep productivity at a maximum. This not only allows the state more power to influence our lives. It seems to actually give the state ownership of our life and health.

It must not be imagined, nor uttered by anyone, that basic health care ought to be available only to those born into privilege. But that word "basic" is incredibly slippery when it comes to health care. Diseases that can now be easily cured using "basic" treatments were only 100 years ago incurable. And if our medical field is able to continue advancing in its efficiency, it is not unthinkable that diseases now incurable will one day be treatable by relatively inexpensive means. If we desire this general increase in health care services, we need to think carefully about what makes the system actually work.

It is significant to me that we entrust our most basic necessity of all--food--to the forces of the market. There is nothing more fundamental to our existence, and yet the food industry is nearly just as free as any other in this country (though, like most other industries, it is certainly subject to numerous regulations which may in particular cases seem more or less reasonable). Health insurance is, for many, no less desirable than food. Yet if food is available to the vast majority of Americans by means of the free market, how will we argue that health insurance must, of some mystical necessity, be distributed in a radically different way?

Now I will not deny for a moment that many people in America are at this moment in need of food. Nor will I deny that many people in America are in need of emergency health care. Like Hayek, I think there is a need for a basic safety net implemented by the government for the sake of those who are destitute. We can also hope that the American people, out of a basic sense of charity, will step in to fill the need where it is found.

But this is no reason for the government to expand its discretionary power over our lives in an unprincipled and unsustainable way. The sheer economic reality is that many companies will not be able to comply with the new law's demands, and as a result we are already seeing how the government is stepping in and exercising its power of discretion to grant exceptions to those deemed worthy (such noble exceptions include McDonald's and Jack in the Box). It is evident that the Democrats had no intention of passing a law. They had every intention of creating a system of bureaucratic control with the purpose of engineering our economy to achieve some vaguely defined notion of a more "equitable distribution" of resources. While it is true that this law doesn't constitute socialized health care, it follows the logic of socialism with frightening consistency.

We need to be concerned about the problem of health insurance. However, what is needed is a set of principles allowing us to live and work together on this problem. I believe collective action can be taken to solve such complex problems as we face; but collective action does in no way equate with bureaucratic control. Just the opposite, really: true cooperation means people voluntarily working together by means of a shared set of just laws. As much as we'd like to fix the outcome of this cooperation in advance, we can't, and we probably shouldn't want to. In truth, nothing has been better for society than the unanticipated results of people working together freely, without direct manipulation by the state.

I wish I knew what Hayek would say to the particulars of the problems we now face, but I can only hope that those who love liberty will continue to think carefully about the present situation. We are in desperate need of real reform.