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Preventing Mental Illness Violence - A Market Solution

Full disclosure of possible bias: I live with someone who has a form of PTSD and with someone else that has bursts of reactionary anger. I also have other extended family members with similar moderate mental issues.

The Problem Defined

The Soviet Union used psychiatry as a tool to suppress dissent. The U.S. criticized them in the 60's for this and Soviet apologists claimed that American mental institutions and involuntary commitment were practicing the same thing, locking up dissenters.

As a result, some politicians and academics in the U.S. pushed a movement to deinstitutionalize.

In many cases the deinstitutionalisation of the mentally ill in the Western world from the 1960s onward has translated into policies of "community release". Individuals who previously would have been in mental institutions are no longer continuously supervised by health care workers." Study

Now we have a permanent group of street people (many of whom are not violent, but some are) and a system where it's very difficult to get someone committed involuntarily, like Adam Lanza should have been, Jared Loughner should have been, and James Holmes should have been.

There is a real concern that someone may be committed against their will by the government or well-meaning (or malicious) family members. There is also a real concern with uneven conditions within government run mental institutions.

A Solution Offered

Let's align economic incentives to help the mentally ill, especially the potentially violent mentally ill, while at the same time protecting their rights and the rights of those they may attack.

First, make it easier for an initial commitment for an evaluation period.
Second, make it easier for that evaluation to result in commitment to a mental institution.
Third, contract running the mental institutions to competitive private companies with incentives to make them as pleasant as possible with items such as allowing the inmates and their families to move between institutions on a basis easy enough that it's a real threat to their livelihood if everyone decides to go elsewhere for services. These aren't prisoners and there is no need to make their living conditions match a prison isolation ward.
Fourth, contract with a group of Mental Health Professionals, independent of the companies running the institutions, to supervise treatment and analyze when it's appropriate to release someone. Align the incentives of at least one person supervising a patient's case with getting them released and let them act as a formal/informal advocate for that position. Don't leave the burden on the family or the patient to try and get someone out if they really don't need to be there anymore. Make this provision strong enough that we won't worry too much about easier initial commitments, because people will be right back out if they can truly manage on the outside.

I don't have all the answers, but I think something like the four points above is the best we can do under our current regulatory system and political climate.

I'd challenge economists smarter than I am, Tyler Cowan, Bryan Caplan, and David Henderson, to name a few who could argue this to death, to consider the question and refine my solution or propose their own with proper incentives.

Perhaps a system of three Doctors, with one an advocate of the patient getting out, one from the institution advocating keeping him in and the third paid just to decide when the first two can't convince each other. I posit a similar private legal system in the novel Sharper Security.

#OverheardAtDNC2012 It happened again...

Here's a sneak preview of the 2012 Democratic National Convention comments...

Ok, really just more twitter jokes in the latest hashtag game. A few of these are re-tweets, but you can get the whole history by checking out @Sharper31.

  • #OverheardAtDNC2012 To use what I learned in all my many recent golf games, what we need here in the presidency is called a mulligan.
  • #OverheardAtDNC2012 Q. How do we break Biden's arm just before the VP debate so they cancel it? A. I'll get some teamsters to handle it.
  • #OverheardAtDNC2012 What's with all the giant vaginas? They're going to recreate @BarackObama's virgin birth and give him a new certificate.
  • #OverheardAtDNC2012 What are all the people from the tax collector's union doing here? And how come they get all the good seats?
  • #OverheardAtDNC2012 Vote early and often! And bring all your relatives, especially the dead ones! What voter id?
  • #OverheardAtDNC2012 Don't worry! If it ain't broke, Obama will fix it until it is! Then we can call Jimmy Carter back in as an improvement!
  • #OverheardAtDNC2012 Q. Why is @BarackObama claiming we're not in a Depression? A. _He_ isn't depressed.
  • #OverheardAtDNC2012 The most important thing is to re-elect @BarackObama. All the rest of you Dem candidates, you're on your own!
  • #OverheardAtDNC2012 We've convinced McDonald's to compete with Chick-Fil-A by including an Obama promise of a toy with every happy meal!
  • #OverheardAtDNC2012 No, we never said the PEOPLE wouldn't have to pay more for health care, just that CONGRESS wouldn't pay more.
  • #OverheardAtDNC2012 Reading bills before signing them is considered bad luck. Besides, how would we ever get anything done?
  • #OverheardAtDNC2012 Ok, so one last time, when we reduce the increase in spending, we call it a budget cut. Got it now?
  • #OverheardAtDNC2012 No, it's an investment, not deficit spending. That way it doesn't count! I mean, we still have printing presses, right?
  • #OverheardAtDNC2012 Where's the line to make donations in exchange for bailouts?
  • #OverheardAtDNC2012 Did you hear about the seance we're having? Yeah, we're going to be channeling Jimmy Carter all week!
  • #OverheardAtDNC2012 Did you hear about @BarackObama's balanced budget plan. It's exactly one half smoke and one half mirrors.
  • #OverheardAtDNC2012 Q. How come @BarackObama is so popular in China? A. Well, he created jobs over there...
  • #OverheardAtDNC2012 I can't wait for this presidential candidate to be elected and have a chance to DO something!
  • #OverheardAtDNC2012 Q. How can you tell when @BarackObama is lying? A. His teleprompter has words on it.
  • #OverheardAtDNC2012 Q. Why don't we replace Washington on the one dollar bill with @BarackObama? A. He's already on the food stamp.
  • #OverheardAtDNC2012 How come he gets a trillion dollars for gas money? Can't I get a trillion dollars printed for me, too?
  • #OverheardAtDNC2012 Q, Why are jobs at all time lows and gas at all time highs? A. Obama's back from the golf course.
  • #OverheardAtDNC2012 Our new plan for increasing the number of barrels of oil America produces? Make the oil companies use smaller barrels!
  • #OverheardAtDNC2012 ... for more shovel ready jobs, we'll give everyone sand shovels and have them create sculptures to me over and over!
  • #OverheardAtDNC2012 What's the menu for @BarackObama's banquet? Chicken Poodle Soup, Terrieryaki Chicken, and Dog Pound Cake.
  • #OverheardAtDNC2012 @BarackObama has lost five million jobs in America during his presidency, but Joe Biden's on the case to find them!
  • #OverheardAtDNC2012 Q. What will Obama do if Romney challenges him to a debate? A. Claim Executive Privilege.
  • #OverheardAtDNC2012 Did you know that @BarackObama has sold more guns to the drug cartels than all the other Nobel winners combined?
  • #OverheardAtDNC2012 We're printing new bumperstickers: Bush did is responsible! Vote for @BarackObama!
  • #OverheardAtDNC2012 Biden can't answer simple questions and Obama has three different answers for each question. We're doomed.
  • #OverheardAtDNC2012 Q. Is that DJ Cassidy or the President up there? A. Does it matter? Foo Fighters will be playing soon!
  • #OverheardAtDNC2012 I know! We'll put big video screens up all over so we can distract people from the lack of new ideas!
  • #OverheardAtDNC2012 Too bad we can't get Clint Eastwood to come be on stage with @BarackObama like the RNC did...
  • #OverheardAtDNC2012 Q. How come we have to bus people in to fill the seats? A. Most of the Dems in Congress didn't want to come.
  • #OverheardAtDNC2012 Did you hear Tony Bennett is singing? Yeah, he was young when these progressive ideas were already old.
  • #OverheardAtDNC2012 Just don't say anything racist. - Like what? - Like anything bad about @BarackObama.
  • #OverheardAtDNC2012 Did you hear, ObamaCare pays for #DogWhistle Hearing Aids?
  • #OverheardAtDNC2012 Joe, you HAVE to stick to the teleprompter this time like Barack does. We'll cut your mic if you don't...
  • #OverheardAtDNC2012 Who's Eli Manning? Is he speaking at the convention?
  • #OverheardAtDNC2012 "Hey baby... wanta be part of my new composite girlfriend?" "Bill!" "Hillary, I thought you weren't coming!"
  • #OverheardAtDNC2012 Poll numbers bad? They're all lies, anyway. We should know, we usually write them...
  • #OverheardAtDNC2012 No, the key is to get them young before they can think for themselves and notice real life happening...
  • #OverheardAtDNC2012 Peter Van Buren? Didn't he get transferred to the Department of Homeland Security?
  • #OverheardAtDNC2012 See, by power to the people, we mean people pay taxes to fund solar power companies and then end up with the mess...
  • #OverheardAtDNC2012 Solyndra... Solyndra... nope, never heard of it. Can I tell you about some of our electric car loan programs?
  • #OverheardAtDNC2012 No, don't let that Border Patrol agent's family into the convention. What was his name again?
  • #OverheardAtDNC2012 The Secret Service wants to know when the prostitutes are coming? Oh, ask Bill?
  • #OverheardAtDNC2012 What, what? I need a Social Security number to get in? How many digits do those have again?
  • #OverheardAtDNC2012 School Choice bad, Girl choice good. Got to remember that. It's all just so confusing being in intellectual giant!
  • #OverheardAtDNC2012 The black voters? They'll have to ride at the back of the convention. We already own them!
  • #OverheardAtDNC2012 ... and then I said, "Elections have consequences, Bee-yatches!" ... Oh, time for my speech on bipartisanship?
  • #OverheardAtDNC2012 Any way we can get stimulus funding to pay for all our cost overruns?
  • #OverheardAtDNC2012 So how does that whole insurance thing work again? You make people pay more for it so they can get paid back?
  • #OverheardAtDNC2012 Q. Who's empty chair is that up on the stand? A. We have to re-elect the chair first before we know who's in it.
  • #OverheardAtDNC2012 Q. How come Charlotte's unemployment rate is 10%+? A. It must be Romney's fault, somehow!
  • #OverheardAtDNC2012 How come @MittRomney gets all the cool actors and we're stuck with the social rejects?
  • #OverheardAtDNC2012 Our lives would just be empty without @BarackObama! (Hint: They already are..."
  • #OverheardAtDNC2012 Q.How come Bill Clinton gets to share a suite with the Occupy crowd? A.They're sharing unwanted sexual encounter tips.
  • #OverheardAtDNC2012 Energy Independence is when we don't build refineries and pipelines here, so we are "in"-dependence on others.
  • #OverheardAtDNC2012 All the youth supporters from four years ago were too _occupied_ to come this year...
  • #OverheardAtDNC2012 How come we couldn't get any of the youth supporters from four years ago to come to the convention?
  • #OverheardAtDNC2012 How come the Washington Post and the NY Times get to sit on the stage with the candidates?
  • #OverheardAtDNC2012 I know! We'll pretend Romney plans to raise taxes we'd actually like to raise and then attack him on it!
  • #OverheardAtDNC2012 Don't tell Biden that it's 2012. He'll have a heart attack.
  • #OverheardAtDNC2012 Just explain that we're going to force everyone to buy more insurance than they want to make it cheaper for them!
  • #OverheardAtDNC2012 Q. "Do the middle class have to pay that new ObamaCare tax?" A. "I don't know anyone middle class..."
  • #OverheardAtDNC2012 "Nobody mention Medicare this year!"
  • I #OverheardAtDNC2012 "Can't you find somewhere besides Staples and Walmart to buy office supplies at?"
  • I #OverheardAtDNC2012 that they don't like the "optics" of @BarackObama's chair, so they're going to make him stand the whole time.
  • I #OverheardAtDNC2012 that they want everyone to get @BarackObama back for what he's done to them.
  • I #OverheardAtDNC2012 that they're giving out @BarackObama speech tickets in bars.
  • I #OverheardAtDNC2012 that they can't figure out where to place the flag so it won't look weird when Obama doesn't salute it.
  • I #OverheardAtDNC2012 that they're bringing in George and some other out of country close relatives to match Romney's family.
  • I #OverheardAtDNC2012 that they're trying to figure out how to divide 57 states evenly into 5 seating areas.
  • I #OverheardAtDNC2012 that Russia, China and the PLO just need to wait until after the elections for their payoffs...
  • I #OverheardAtDNC2012 that Debbie Wasserman Schultz is going to explain why the Obama Biography video isn't from the campaign.
  • I #OverheardAtDNC2012 that @JoeBiden would be given hand puppets to wave instead of a speech to read.
  • I #OverheardAtDNC2012 that _this time_, they're going to focus on jobs... just trust them....
  • Apprenticeship in Business vs Sports

    Posted in

    I was reading a debate on education and signaling and commented:

    At least one reason why more businesses don't do apprenticeship style programs is that it's illegal, as are unpaid internships.

    Another legal issue is that you can't effectively contract for someone's labor AFTER you've taught them. You can train an employee and they can then leave for your competitor. Without the costs spent on training the employees, your competitor can pay them more than you can, everything else being equal.

    The closest you'll see to apprenticeship is in (foreign) soccer and baseball clubs, where teams get a legal ownership interest in the players they develop. Since that tied-up-contract process is legal in those sports, most players are apprenticed to a team. In sports where because of the rules and/or legalities teams can't bind players like that, colleges play a much larger part as "farm" teams.

    There's definitely a paper there for someone who wants to do some sports economics...

    Public Masters vs. Public Servants

    If someone is your servant, they do what you want them to do. If you pay them, it's because you agree on what their work is going to be worth to you. That's called a trade.

    If someone is your master, they tell you what to do. If you pay them, it's because they require you to pay them. Sometimes that's called tribute.

    Now compare the elites in Washington to those two definitions. Don't especially the progressive Democrats, pushing a health care bill that is overwhelmingly opposed by the people, fit the definition of Master better than that of Servant?

    Has Democracy in America led to the servant becoming the master? Or has it always been somewhat that way and the idea of "Public Servants" has always been a sham?

    They argue that "it's for our own good" and that the elites know better than the people do what's good for them. That may describe a more "benevolent' slave master in the pre-civil war south, but it's hardly how anyone would describe a good servant.

    "The master and servant relationship only arises when the tasks are performed by the servant under the direction and control of the master and are subject to the master's knowledge and consent." -

    Even that argument falls down pretty flat in the face of billions for bailouts and pork benefitting their friends and fellow elites. It's not their money that's getting spent. Who's in charge here, anyway? Who's supposed to benefit again?

    How to NOT control rising health care costs

    There is a discussion in a NY Times blog with proposals for controlling health care costs.

    Most of the ideas make things worse, not better.

    Quick summaries:

    Jacob S. Hacker, political science academic: Use government price controls.

    This quickly turns into shortages. Some political scientists still ignore basic economics.

    Len M. Nichols, think tank health guy: Give more power to the Medicare commission to run everything.

    Really? Because the Medicare folks already do such a bang-up job of making sure Medicare isn't going to lose trillions over time?

    Gail Wilensky, medicare bureacrat who moved to an NGO: Tax more expensive health insurance more and give the secretary of Health and Human Services lots more power over everything.

    Yep, Congress is too busy to make the important, hard decisions that the policy elite want to happen, so it's best to outsource it all to the "experts" in the executive. Better deniability for lousy decisions all around.

    Joseph Antos, think tank academic: Fix the employer tax break, competition in state markets, give pricing information to patients, make Medicare compete with Medicare Advantage.

    And here's our first set of proposals that would actually lower costs while improving things. The solutions are of the "tweak the existing system" mentality, but at least they are steps in the right direction.

    Daniel Callahan, think tank guy: Medicare rationing and price controls on health insurance.

    At least he comes right out in favor of legally limiting how much health care people get! I'm not sure that's going to be too popular. It's definitely not necessary for bureacrats to tell people how much they need. And of course, price controls always result in shortages anyway.

    Leslie Greenwald, think tank academic: Setup rationing by the elite based on "evidence".

    Some how I don't think she gets who should be making the decisions about how much health care people should consume...

    Arnold Kling, economist: Use vouchers to move from third-party payers to patients as consumers.

    Our second idea that would actually accomplish something positive. Not sure it's totally workable, but it's for sure a big improvement on the current system!

    My answer to the same question is totally unrealistic in the current political environment, but just for the record:

    • Increase supply of medical care by removing legal obstacles. That means removing licensing restrictions (especially for Health care professionals trained in other countries) and removing AMA (Doctor's union) restrictions on the number of new health care workers trained every year. It also means severely limiting the FDA's ability to stop drugs from being produced. At most, they should evaluate and report on, rather then control the legality of drugs. That way Doctors and their patients could choose what risks to take based on their best information available.
    • Add more competition to the system by overriding state insurance regulators with a federal mandate that allows interstate commerce in insurance policies. Either end tax breaks for employer-provided plans or make sure that they are matched exactly by breaks for non-employer-provided plans. Prevent any regulators anywhere from regulating what is offered at what price in health insurance plans. Innovation in insurance service doesn't start in state health insurance regulation committees!
    • Allow prices to reflect demand as much as possible by providing methods for price transparency in service as well as allowing insurance as insurance instead of pay-for-service plans. Most of that would be taken care of by removing regulatory obstacles as above.

    Health care is a solvable problem, but it's unlikely to be solved when most of the proposals to do so just provide more of the same ideas that created the problems in the first place.

    When people in this country consume more books than people in another country, we don't lament that U.S. "book costs" are much higher than average and that "something must be done!" Some of this issue results from government distortions of the market for health care at State and Federal levels, but a lot of this issue is also a misunderstang of what's going on.

    How are you paying for all the no-cost stuff again?

    Barack Obama: "Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan."
    Arnold Kling: "And if we don't pass this plan, does he intend to keep the waste and inefficiency, out of spite?"

    This little exchange illustrates a couple of problems with Obama's logic. First, notice the false dichotomy implied by Obama and exposed by Kling's comment. It's implied that the savings and the plan must go together, when nothing actually requires them to. Second, notice the implication his plan costs money, even though he elsewhere claims it doesn't.

    It's not a sacrifice or a trade-off if it's something you wouldn't want to do anyway. "I'm going to give up paying someone to poke me in the eye so that I can afford to eat out for lunch" just doesn't have the same compelling sense of sacrifice as "I'm not off buying new shoes so that I can afford to eat out for lunch".

    Obama's comment also nicely illustrates how progressives can get away with things that the media will never call them on, when their opponents would be instantly demonized. If a Republican president or congressman had suggested that we should reduce "the waste and inefficiency in Medicare and Medicaid", most of the press would be reporting this under a headline like, "Obama advocates budget cuts to programs that provide health care to millions of poor and elderly!"

    See this Washington Post Story as an example. You'd have quotes in news articles like the actual news quote "... proposed cuts to Medicare would hurt older and disabled Americans and take a wrecking ball to many essential hospitals across the country". That was for a proposal to slow the rate of growth from 7% to 5% by eliminating waste, not even an actual cut.

    What you won't hear Obama nor the Democrats talk about is what their plan will cost you in insurance premium increases. Most of the "reforms" in their "exchange" plan have already been implemented in several states. They've driven premiums up in those states. The government cost analysis of the bill won't reflect those costs, since you pay that directly, not indirectly to support the federal budget.

    Real Education vs Paper Education or Internships and the Minimum Wage

    Many universities have some students who just want a piece of paper (called a "Degree") in order to justify something to their parents and/or improve their odds of obtaining a job in their desired line of work.

    There are other who students attend to obtain an education in order to better themselves, make themselves actually more valuable to potential employers, etc...

    The mix between these types of students at any particular location of higher learning can vary wildly. Off the top of my head (i.e., no actual research done), I'd rate University of California, Santa Barbara as the biggest paper-seeking school in the nation and George Wythe College the one with the most students interested in an actual education. Having lived near and known students at both, UCSB is the "party" school, while GW isn't quite accredited yet (so no real piece of paper), but GW has a massive learning load that would astonish students at UCSB.

    Both sets of students pay (via one method or another) in order to attend these colleges. The colleges don't pay them to attend class, do papers in their "free" time, etc...

    Colleges and Universities have a long tradition and history in the world. There has also existed another tradition of learning, one typically considered more suited for less academic pursuits, but used in academia as well. It's the internship. Way back when, apprentices (or their parents) would pay the master of a craft to take them on as an intern. If they worked out they got a promotion to journeyman and started seeing some money, if not they went and found something else to do. Either way they learned something.

    Mark Cuban has recently pointed out that the federal government's current stance on unpaid internships is "Screw You!" As in, an unpaid intern isn't making minimum wage, so therefore they are to be legally prevented from contracting to do a little marginal work in order to gain valuable experience and learn something valuable.

    That stance is fine for the group that just wants a little cash in their pocket (albeit at the cost of higher unemployment among the youngest, the poorest and the least educated in our society), but what about people who are just in it for the learning?

    There are many industries where school doesn't prepare you to be an immediately contributing employee in your chosen field. Either the employer takes a hit while waiting for you to learn enough to be useful, or you just don't get a job. In a recession economy where employers aren't desperate to find new employees, guess which one they will tend to choose?

    So to the people who want an entry-level job or an unpaid internship in order to learn something that will actually enable them to get paid quite well in the future, via the minimum-wage laws Congress proclaims, "Screw You!"

    Pull the plug on "Your Life, Your choices"

    Jim Towey, founder of Aging with Dignity, brings up an interesting point in the Wall Street Journal. Health care reform advocates like to point to the VA as an example of an existing system similar to the proposed public option, but the VA has their own version of the "Death Panels" idea, a planning document called "Your Life, Your Choices".

    Apparently the VA has found it necessary to do a little subtle cost controlling by influencing veterans towards a "life is not worth living" and "don't be a burden" mentality.

    Read it for yourself on the VA's web site.

    A large portion of the document consists of describing various horrible health situations in detail, then asking the veteran if in that situation, would life be difficult, just barely worth living, or not worth living. After that cheery thought, they list possible treatments and are asked to check a box if they'd rather die naturally or receive each treatment. The only treatment that is pre-checked for all the questions is "Comfort care', meaning painkillers and cleanings.

    That isn't the only way to present this information and get people thinking about their options and wishes. Compare "Five Wishes". It's shorter, more focused, and much more positive.

    So why has the VA chosen to use one over the other? After all, under the Bush administration the VA stopped using "Your Life, Your Choices" because of some of these very issues. The Obama administration started using it again.

    It would be interesting to hear the discussion that led to that decision. Did it include a discussion of steering veterans away from expensive life-preserving treatments in favor of a "natural death" and how much money the VA could save as a result?

    We don't need government health care providers trying to convince veterans that life may not be worth living.

    We certainly don't need new government health care providers.

    What we need is more freedom for individuals to contract for their own care and options. The progressives need to stop using regulations to stop people who want to do something different than the "experts" have decided is best for them. That's one of the problems with political solutions to economic problems. One size must fit all.

    Don't Compromise on Government Health Care

    Make no mistake™, the current push for "health care reform" is a push for the government to take over and create socialized medicine and a single-payer system. In Obama's own words:

    "I don't think we're going to be able to eliminate employer coverage immediately."

    "There's going to be potentially some transition process."

    "I happen to be a proponent of a single-payer universal health care program. I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its gross national product on health care, cannot provide basic health insurance to everybody. And that's what Jim is talking about when he says everybody in, nobody out. A single-payer health care plan, a universal health care plan. That's what I’d like to see. But as all of you know, we may not get there immediately. Because first we've got to take back the White House, we've got to take back the Senate, and we've got to take back the House."

    Well, they took all that back and it's apparent that changing the health care system is a major priority for the Dems. The basic problem they realized is that the public doesn't support a single-payer system. That makes congressmen who have to face elections next year pretty nervous. In fact, even with a "public option" proposal, they wanted desperately to get it pushed through quickly so that enough time would elapse before the next elections in the hopes that people would forget. Instead, people are debating it and dwelling on it.

    It's to the point where some Dems are now going to be willing to compromise and even drop the "public option" if they can get the federal control part of the plan passed.

    They're calling it a federal health care exchange. What it exchanges is the current choices people in most states have for forcing everyone into federal insurance standards that are very similar to a few states. You know, the states traditionally controlled by the progressives, where health insurance rates can be double what they are in more conservative states.

    It's bad enough that the states can be very restrictive in limiting health insurance offerings and choices, but now they'll use federal mandates to require certain insurance coverage nationally to drive up the price of health insurance. Then they'll use that as the next excuse to try again for a public option that drives out private insurers and leads to a single-payer system.

    That's the new fallback position for when they can't get everything they want through the Senate. Don't let them have that either. It will invariably make the insurance market more expensive and worse for regular people, giving them the excuse they want to try this all again in four more years. Just like they'd like to use that plus government "insurance" to either drive the insurance companies out of business or else turn them into government controlled insurers.

    So don't let your congressman or Senator agree to vote for a "compromise". It will lead to anything but!

    Market Substitutes For Unemployment Insurance

    David Henderson at Econolog talks about the myth of market failure in regards to unemployment insurance. He makes some excellent points and there are more in the comments.

    Something not addressed is that unemployment insurance has a superior substitute good.

    To understand what a substitute good is, you might consider that attendance at plays goes up when movie prices go up, or sales of margarine go up when butter is less expensive, or cheaper cell phones lead to a drop in people purchasing plain old telephone service.

    A substitute good for unemployment insurance is "safe" investments. It would be difficult to pay someone else enough to support you AND monitor that you lost your job and can't get another one through no desire of your own (the inherent moral hazard) and have them be able to pay you more in benefits than if you took your unemployment insurance premiums and simply invested them safely.

    Essentially, you are self-insuring. You are the most efficient at that, because no moral hazard exists when you have perfect information on your own motivations and desires.

    The next best option is a mutual assistance society that is run by people who know the members and can decided on benefits. That means there isn't a faceless bureaucrat deciding if someone deserves benefits, but rather someone in a much better position to determine exactly what is really needed and exactly how much work the someone is able to do in return for their benefits.

    There are still some mutual assistance societies, but many of them vanished when the government "took over" their market and drove them out by using mandatory taxes and deficit spending to under price them. The ones that remain tend to have another primary function.

    For example, the LDS church (among many other things) functions as a private welfare society. In their example, they reduce the inherent moral hazard in the situation by having those seeking welfare interviewed by the volunteer leader of their local congregation to determine exactly what help they need, but more importantly what they REALLY need (not money to eat out, or to live in a mansion), and what they themselves can contribute. It's not unusual for an LDS member on welfare to clean up the church grounds or work at a welfare farm if they are able to while seeking new employment, while someone sick may not be asked to do anything at all.

    That sort of differentiation and local personalization is what a federal government program is unable to match.

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