Why social security and basic socialism makes sense

[Gadianton]

To the extent social programs take advantage of risk pooling, they can make a great deal of sense, at least in theory. Analytics used to make this point about social security; it's an insurance model. Whether corruption or mismanagement can ruin it is an open question, but to say, as Ajax does, that socialized benefits are a great evil to workers and highway robbery and against capitalism is absurd. If insurance makes sense, in principle (and insurance can also be corrupted), then socialism to the same degree makes even better sense, since the entire nation equates to the largest diversification pool.

Here's the problem with Ajax-levels of self-reliance for a capitalist economy: If there's a small chance of a costly event such as untimely death, cancer or a car accident, in the world of self-reliance, everybody must save a massive amount of money to cover the huge cost of a tail event. If everybody must save a huge amount of money, but statistically only a handful of savers will fall victim to these tail events, then that's a huge misallocation of savings. Spending, not saving, is what drives the economy. "thriftiness" is not a virtue in capitalism. If risk is pooled, people can spend significantly more than if risk isn't pooled. People need massive 401ks, for instance, as a hedge against living too long. But in an ideal social security model, you wouldn't need to save much for retirement beyond what you pay in premiums (taxes) for living-too-long. This means you can enjoy more of your money throughout your life, which again, is consumption, and consumption is what drives the economy.

The only theoretical downside here is that it forces people into the system rather than giving them a choice. If a man wants to go it alone and have more money to say, party now, expecting to be dead and not need the benefits, then that choice isn't respected. But generally speaking, people underestimate tail events thinking they will be okay, and then when it happens, are they consistent and accept the fact that they opted out? Of course not, most people want to avoid the premiums but then an exception made if they have a problem. Like my left-wing friend's right-wing neighbor: he had a good job, saved and invested well, and retired around 40. No health insurance because he's cheap. ~60, oops, didn't expect cancer. Gets on Obamacare and it saves his life, repents of being a libertarian for a couple years but then lapses and is back to complaining (about people like himself who take advantage).

Singapore, Switzerland, Ireland, and Taiwan all have some form of universal healthcare. They are the current "most free" economies according to the Heritage foundation, who invented Project 2025 and wants Trump as dictator for life and imprison most of the country for not being Christian. It always gets me that the best countries according to them have little to do with their own ideology and especially take full advantage of the possibilities of a mixed economy with a solid capitalist foundation.

[Gunnar]

Singapore, Switzerland, Ireland, and Taiwan all have some form of universal healthcare. They are the current "most free" economies according to the Heritage foundation, who invented Project 2025 and wants Trump as dictator for life and imprison most of the country for not being Christian. It always gets me that the best countries according to them have little to do with their own ideology and especially take full advantage of the possibilities of a mixed economy with a solid capitalist foundation.

Excellently stated. Also worth noting is that the countries that have embraced democratic socialism and universal healthcare and social security programs consistently rate as the happiest countries on earth and have the longest life expectancies and, as you said, also currently rate as the "most free" economies, even by the fools who invented Project 2025. I guess they can't stand the idea of people being free to choose for themselves what religions, ideologies or lifestyles they wish to live if they don't happen to match the narrow constraints that the Heritage Society wishes to force upon everybody. Why do they so adamantly hate the very idea of human freedom and democracy? I guess it is because they crave unlimited power, wealth and dominion over others, no matter how many "lesser humans" (in their own view) have to suffer and be marginalized for them to achieve their own selfish, avaricious ends.

[Doctor Steuss]

I think one of the things we often overlook is the racial component in how the US is structured compared to every other wealthy western nation. There was a lot of heavily socialist type programs in white communities prior to the Civil Rights era. Socialism was all fine and dandy... until there was a chance that non-white people might benefit. When Truman expanded our country's hospital system, it was the racist Southern Democrats that manipulated the legislation to ensure that the states could decide how the funds were used, and were able to segregate the facilities. When the debate was being held to fully socialize our healthcare system, it was a racist "blacks are inferior, and will eventually go extinct" proponent (whose name escapes me, for which I apologize) that successfully went on a lobbying campaign with his book to the Legislature. Denying healthcare to huge swaths of white people was preferential because it would result in the extinction of black people.

And wouldn't you know it, the same people who are currently against joining the rest of the advanced westernized world with a single-payer system just happen to be the ideological children of those same conservative Southern Democrats. They just now wear an "R" on their registration card. Imagine that.

Gleefully eating a turd sandwich because there's a chance a minority might have to smell their breath when they're done.

[huckelberry]

To the extent social programs take advantage of risk pooling, they can make a great deal of sense, at least in theory. Analytics used to make this point about social security; it's an insurance model. Whether corruption or mismanagement can ruin it is an open question, but to say, as Ajax does, that socialized benefits are a great evil to workers and highway robbery and against capitalism is absurd. If insurance makes sense, in principle (and insurance can also be corrupted), then socialism to the same degree makes even better sense, since the entire nation equates to the largest diversification pool.

Here's the problem with Ajax-levels of self-reliance for a capitalist economy: If there's a small chance of a costly event such as untimely death, cancer or a car accident, in the world of self-reliance, everybody must save a massive amount of money to cover the huge cost of a tail event. If everybody must save a huge amount of money, but statistically only a handful of savers will fall victim to these tail events, then that's a huge misallocation of savings. Spending, not saving, is what drives the economy. "thriftiness" is not a virtue in capitalism. If risk is pooled, people can spend significantly more than if risk isn't pooled. People need massive 401ks, for instance, as a hedge against living too long. But in an ideal social security model, you wouldn't need to save much for retirement beyond what you pay in premiums (taxes) for living-too-long. This means you can enjoy more of your money throughout your life, which again, is consumption, and consumption is what drives the economy.

The only theoretical downside here is that it forces people into the system rather than giving them a choice. If a man wants to go it alone and have more money to say, party now, expecting to be dead and not need the benefits, then that choice isn't respected. But generally speaking, people underestimate tail events thinking they will be okay, and then when it happens, are they consistent and accept the fact that they opted out? Of course not, most people want to avoid the premiums but then an exception made if they have a problem. Like my left-wing friend's right-wing neighbor: he had a good job, saved and invested well, and retired around 40. No health insurance because he's cheap. ~60, oops, didn't expect cancer. Gets on Obamacare and it saves his life, repents of being a libertarian for a couple years but then lapses and is back to complaining (about people like himself who take advantage).

Singapore, Switzerland, Ireland, and Taiwan all have some form of universal healthcare. They are the current "most free" economies according to the Heritage foundation, who invented Project 2025 and wants Trump as dictator for life and imprison most of the country for not being Christian. It always gets me that the best countries according to them have little to do with their own ideology and especially take full advantage of the possibilities of a mixed economy with a solid capitalist foundation.

Gadianton,I think this is a sharp enough post that it is worth copying over just to say so. I find myself thinking about the ambiguity or perhaps fluidity people use to word socialism for. I do not know how many people think our highways all should be privately planed and owned but I do remember years ago a conservative Utah resident complaining about the US gov building all those uselessly big highways out in the desert. Much of my own understanding of conservatism comes from Mormon versions and is a bit old. It was important that socialism creeped, progressively stole your freedom. I do not know if it still creeps in the imagination.

[Physics Guy]

Socialism as insurance is a good way to think about it. If it doesn't make everything obvious, it's because insurance is a tricky concept. It's hard to balance the clear and steady cost of premiums against the risk of unlikely disaster. While the risks seem remote, the premium costs feel like robbery; if the disaster occurs and insurance saves you, it feels like a miraculous windfall. Or maybe it's only that it feels like an unfair windfall for someone else, when their insurance saves them.

Buying insurance is a free market transaction that is pretty far removed from the concrete exchange of handing over coins in return for a sandwich. Free market economics is like that, though. If you let people buy and sell whatever and however they want, some people are going to agree on sophisticated deals, like buying and selling the right to buy or sell something else at some price in the future. Insurance isn't a weed in the capitalist garden. It's a native-grown product, capitalism at its best.

It's important to appreciate how wonderful free-market capitalism is for so many things. Giving everyone the right to get rich if they can was like discovering fire. Even with the fat cats like Bezos and Musk, who do seem to be kind of slimy, literally every dollar that they have obtained has been given to them voluntarily in exchange for something that the buyer valued at more than a dollar. Otherwise they wouldn't have bought it, whatever it was. In every single free-market transaction both sides profit, in the sense of getting something they value more than whatever they give, because otherwise the sale doesn't happen.

Nothing seems to hold communities down like effectively denying the right to get rich. For most of history there was no way to get rich, because if you ever got anything better than others then it would just be taken immediately, either by your rulers or by bandits—and for most of history rulers were nothing but bandits who had been there for a while. It was easier to kill a person than to create anything of value, so anybody who tried to build anything would just lose it to violence or the threat of violence. A lot of societies even today seem to be struggling to emerge from that era. There is no reliable way to get ahead significantly; anything you win, you'll just lose. So nobody takes any risks or does any more work than they have to do to survive. There's no upside to any risk, because you can't win anything. There's no point.

Capitalism still isn't a god we must serve. It's our servant, not our master. When it fails to do a good job at something, we can fire it from that job, and engage other servants. Some important kinds of service seem to need some kind of social enforcement to make everyone do their part all of the time instead of shirking in good times and then trying to mooch in the bad times.

It's the Prisoner's Dilemma. If everyone pays their premiums, we all pay but we also all have insurance and disasters aren't too bad for anyone—and overall this is better for everyone than having unmitigated disasters, because the effects of unmitigated disaster always have a lot of ripples. For any one person, though, it's often more advantageous to duck out of paying, and just count on other people to deal with big problems whenever they come. Pure individual freedom simply can't cope with Prisoners' Dilemmas. Letting everyone act in their own interest makes things worse for everyone. It's just math: the kind of math that's confusing and paradoxical in the abstract but immediately obvious to anyone when it's their own interest at stake. So we need some kind of limits on freedom, for cases like this.

We just have to make sure we don't suppress free-market opportunity by making it pointless to try to get rich. There's plenty of room for this. We can absolutely have a mixture of socialism and capitalism. It's vital to let people get rich, but it's not at all clear that there have to be opportunities to get rich in every possible field of endeavour. And it seems very likely that the right to grow rich yields diminishing returns. Society seems to benefit vastly from giving everyone the right to become a millionaire if they can, but it's not clear at all how much additional benefit we're really getting from letting people become multi-billionaires.

One option at our disposal is to use more kinds of currency, like in pay-to-win freemium games where you can collect both coins and gems, and gems get you things that no number of coins can buy. An alternate currency that many societies have successfully used in the past, to reward certain special kinds of productive effort, is honour. You can't buy a Medal of Honor, a Légion d'Honneur, a Victoria Cross.

On appelle cela des hochets; eh bien! c’est avec des hochets que l’on mène les hommes.

You call these [distinctions] baubles; well, it is with such baubles that men are led.

[Gadianton]

I do not know how many people think our highways all should be privately planed and owned but I do remember years ago a conservative Utah resident complaining about the US gov building all those uselessly big highways out in the desert.

There are various aspects to government and lines of division have been drawn over many issues. I restricted the OP to those aspects of government related to social welfare -- it would be hard to deny the validity of the bare concept of people over or under saving due to either ignorance or bad incentives. In the society of only industrious and thrifty workers who are religiously self-reliant, over-saving will be a big problem that leads to stifled growth.

Who pays for the roads? is another one of those PD issues PG brought up. If individuals and firms don't have incentives to build them then it's a good case for government. Whether or not the free-rider problem applies to road building would be one aspect of a debate between anarcho-capitalists and socialists. But road building is controversial for other reasons. Is the economy supply-side or demand driven? Up until Keynes, it was considered supply driven. To see how this is a Conservative vs. liberal issue, if supply is king, then give tax cuts to businesses and let them supply more. If demand is king, give tax cuts to individuals so they can spend more. The paragon case of driving an economy via demand is getting out there and building roads and if that doesn't work, go to war.

The other conservative vs. liberal issue packed into the freeway question is over how the road-building is financed. We probably aren't financing it via taxes but debt. How far should we go into debt building roads? For a true Keynesian, until it pulls the economy out from its recession, independent of whether the freeways ever get used much.

[Gadianton]

It's the Prisoner's Dilemma. If everyone pays their premiums, we all pay but we also all have insurance and disasters aren't too bad for anyone—and overall this is better for everyone than having unmitigated disasters, because the effects of unmitigated disaster always have a lot of ripples.

If there are no market breakdowns (and PD lurks behind most of them) then there wouldn't need to be any government at all. I believe the anarcho-capitalist view is such, though I've only glanced at their positions. An anarchy would work if all factors of life found a collective maximal happiness by virtue of market forces. That isn't the position of Heritage Foundation or typical conservatives. According to Heritage, the core of government seems to be to guarantee property rights and providing a strong military is ancillary to that. Conservatives believe in "huge" government, when it comes to that. When it comes to securing the financial interests of society's winners, and presumably reconciling squabbles between winners, the government must be more powerful than any player and capitalism produces some powerful players. Government must be huge. Heritage also believes in economic freedom (sort of), but not in other personal freedoms, such as the freedom to not go to church on Sundays. They have no problem with a police state enforcing culture -- although they don't appear to grasp the relationship between economic success and cosmopolitanism or that self-determined people need a reason to get up in the morning not prescribed by the state.

Heritage, and I take them as a proxy for conservatives, has a private definition of big government that only covers social benefits, which we have seen can be viewed as an implementation of insurance concepts and not necessarily radical wealth redistribution -- in theory, of course. The goal of red USA seems to be China. China is CINO, their retirement and health systems are not equality of results based, but very close to the insurance implementation model with rewards reaped in line with market participation, there is little to fear. Instead of a long-reigning authoritarian leader enforcing the norms of a party that is CINO they will enforce the very similar norms of conservative Christianity. The dream of small business lies in China, not the US. I ran into an Arabic guy on my walk a couple of years ago who ran small businesses in China for twenty years. He says it's great environment for entrepreneurs. They really cater (how this has changed recently with Xi is unknown) to outsiders coming in and trying new things. He said they went for years without paying taxes. Once you start making real money, it raises an eyebrow, but it's more like, "c'mon guys, you've got to start paying something."

The only real tension I see with the China way is public works, all the trains and bridges and clean energy would be a problem for US conservatives. So China minus that and sub Christian Nationalism for so-called "communism".