In their book We’ve Got You Covered, which I reviewed here, Liran Einav and Amy Finkelstein have a short section in which they discuss a 1975 article by James Buchanan titled “The Samaritan’s Dilemma.” They summarize it briefly. It has been almost 50 years since I’ve read Buchanan’s piece but I think they get it basically right. Buchanan argued that when people are bailed out from their risky decisions that go wrong, they are likely to take fewer precautions. Thus the dilemma: do we help them, which will signal them and others not to take precautions, or do we not help them, recognizing that some people who didn’t take precautions will be in bad shape? (I guess I’ve answered that for myself. I have friends who have not made nearly as good provision for their old age as I have and I sometimes help them.)
Then they write:
The issue with the Good Samaritan, in other words, is one of unintended consequences, a perennially popular theme of economists’ lunchtime chatter and PhD dissertations alike.
This summing up of Buchanan’s point surprised me. I would have thought that the authors would identify this theme of “chatter” and dissertations for what it is: moral hazard. Finkelstein has written extensively on moral hazard, making their failure to use the term even more puzzling.
Then they write:
How then to protect ourselves against our own well-intentioned but ultimately misguided charitable instincts? True to his libertarian roots, Buchanan offered no public policy solution. “Modern man has ‘gone soft,’” Buchanan lamented, as he exhorted the reader–in the spirit of Lady Macbeth urging her husband to murder the king–to try to restrain our natural impulses, to “screw [our] courage to the sticking place.”
I know a little about libertarianism, having been one for over 50 years. I’ve never seen someone who understands it say that being true to my libertarian roots means I can offer “no public policy solution.” I probably don’t go a day without offering some kind of public policy solution that is rooted in my libertarian views, whether it be to cut government spending, end rent control, end tariffs, end certificate of need laws, liberalize immigration. or many others. And specifically, since the discussion is about people not buying health insurance, I have often argued for allowing bare-bones health insurance that many people could afford rather than throwing people off those policies the way the Biden administration is attempting to do.
Whatever their intent, Einav and Finkelstein come off as people who want their readers not to take libertarians seriously. More important, they do it by distorting.
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