Menzel’s reconciliation Notes for September 26

Main points

Both Dworkin and Menzel advocate altering the distribution of goods that free markets would produce, especially in the case of goods like health care.

Dworkin would, presumably, regard ill health as a case of brute bad luck. Someone who has less than others as a result of brute bad luck could legitimately envy what others have and that would mean the distribution of goods fails his envy test. His solution would be a hypothetical insurance market that would convert the brute bad luck into option luck. He argues that risk aversion would lead to a pattern of insurance premiums and payouts that would resemble an income tax. That is, using what he claims are plausible assumptions about the risks that people are willing to bear and the declining marginal utility of money, he concludes that they would choose to pay for social insurance schemes through something like a graduated income tax.

Menzel largely takes it for granted that the provision of health care will involve substantial government intervention. Still, some of his reasons are clear enough: a public health insurance program is a public good, private insurance companies try to insure those least likely to be sick (a.k.a “adverse selection” or “cherry-picking”), and a lot of investment in health care goes into large-scale projects that are best overseen by a public agency.

At the same time, both authors seek to reconcile liberty and equality by making the public provision of health care reflect people’s preferences. We talked about the differences between their positions as well as some of the difficulties that they both face.

The handout gives a quick summary of Menzel’s criticisms and the principles he uses to support his preferred alternative.

Note: Menzel refers to a book called Sovereign Virtue. That is a collection of essays Dworkin wrote on the question “what is equality?” The essay we read is included in that book.

Why not a simple market?

One thing that we learned is that the overall distribution of health care is not at issue. What is at issue is whether there should be a coercively enforced public health insurance program. As either Menzel or Dworkin sees it, such a program would only imperfectly match individual desires for health care. Those who want more can buy more.

But that raises a question. If we’re going to worry so much about matching expenses to preferences, why not equalize wealth and let people buy the insurance that fits their preferences? Why all the fiddly hypothetical guessing about preferences? Or, alternately, if the fiddly hypothetical guessing gets things right, how important do they really think it is that the public program conforms to individual preferences? In other words, are the references to preferences just a distraction that covers the authors’ drive to set up a public health insurance system that matches their own convictions?

It might be helpful to distinguish two kinds of reasons for having a public rather than private insurance system.

  1. Pragmatic reasons. For reasons having to do with history or the costs of getting a privately organized system to produce the goods that people want, a coercively enforced publich health system is inevitable or necessary.
  2. Principled reasons. Only a public system can provide some health care that should be provided. For example, private insurance won’t cover the costs of health problems that people have prior to entering the insurance market. More generally, private insurance will not spread the costs of health care across both healthy and sick in ways that the overall health system should.

In laying out that distinction, I’m just trying to identify the kind of case that would have to be made. I’m not saying that the case has successfully been made. (Though I myself believe that there are both kinds of reasons for a public health insurance system).

Hypothetical choices

Hoo boy, we had a lot to say about the point of hypothetical insurance schemes and hypothetical preferences. Here’s a selection of what I was able to get down, usually followed by a hint at how someone might try to answer the question. Someone like … me!

Generally speaking, we were skeptical of Menzel’s claim to rely less on hypothetical choices than Dworkin does. See Menzel p. 292 for the most concrete illustration of the alleged difference.

Jenn said she thought that people’s preferences were too diverse for any public policy to match them exactly. She’s surely correct. But supposing we’re convinced that public agencies have to be involved, I think the question would be as follows. Are people’s preferences similar enough that we could use them to guide public policy, such that our policies conform more closely to individual preferences than not?

Alex reminded us that there is a huge difference between “what Joan would have done” and “what I think should be done.” When we start talking about hypothetical preferences, it’s easy to slide from the former to the latter. This is especially pronounced when we’re discussing a large population, rather than just an individual. Of course, sometimes, you just have to resort to hypothetical preferences. If Joan is unconscious or otherwise unavailable and you think it’s important that a decision reflect her preferences, you have to make your best estimate. Something similar is true of large populations, though, of course, it’s much harder to come up with a meaningful estimate and you may even wonder whether there is such a thing.

Michael noted that a lot depends on when you take the relevant preferences. He suggested that the question has to be asked when care is needed. If so, the project of tailoring public health insurance to individual preferences will have difficulties in limiting the care it pays for. Menzel’s idea, by contrast, is to make our decisions about how to limit public expenses on health care by considering what people would be willing to insure themselves against in advance of needing the services.

Kari noted that our preferences change quite a lot over the course of our lives. Since that is so, she asked, how could there be such a thing as a level of insurance over a meaningful portion of a lifetime that reflects our preferences? You could get an answer for a point in time, but why say that shows that limiting public expenditures later reflects your preferences? Menzel’s answers to that question are hinted at in his principle of personal integrity; he’ll address Kari’s point and Michael’s as well more directly in a reading we’ll do later.

Finally, Professor Brown pointed out that there’s a difference between choices and preferences. Normally, liberty concerns choices. I’m free to do X to the extent that I am able to choose to do X. If you give me something that I want, that’s nice, but it’s not exactly the same thing as my having freely chosen to acquire it myself. We can see this if you demand compensation. But Menzel claims that policies that reflect our preferences, regardless of our actual choices, accommodate concerns about liberty. That sounds odd.

Speaking for myself (Green here), I would think Menzel’s best bet would be to show that public involvement in health insurance is inevitable. For either pragmatic or principled reasons we have to have a public health insurance system paid for by coercively enforced premiums. So the closest we can come to protecting liberty is to make the insurance scheme reflect preferences. Of course, whether he can actually show that or not is a different question.

Freedom, Markets, and Well-Being