09 March 2010

Don't pick my pocket and tell me you're just playing grabass


That's Mark Calabria on new credit card regulations. Fundamental issue: these new rules only make sense if the problem was credit being too expensive before the crash. Wasn't the opposite true?

Wider issue: I accept that me and my more leftish friends have differing views of wealth redistribution. I'm not entirely opposed to it. But if we're going to do it, I absolutely demand we do it in an open and honest way, and not by forcing good credit risk customers to cross-subsidize bad credit risk customers.*

This is also an issue with health care. I don't mind if society decides to have high-income people transfer money to low-income people so the latter can pay for medical services.  However, I definitely don't want to do it in a messy, hackish way with price controls on insurance premiums that force all healthy people (both rich and poor) to subsidize all sick people (both rich and poor).

A great deal of this problem is just politicians forcing credit card companies or insurance companies to do the dirty work of subsidization and income transfer for them, but I think another big chunk of it is that both of these industries rely on assessing actuarial risk, and most people, voters/customers and regulators/legislators, have pretty poor understanding of anything probabilistic.


(* I could go on and on and on with examples of inefficient and dishonest wealth redistribution, but I'll throw out just one more example.  If The Royal We decides that sugar farmers are worthy of a bigger chunk of society's resources, then take money from everybody else and write a check to sugar farmers.  Don't impose silly import limits and tariffs and cut back room land deals to get them a bigger slice of the pie.)

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