Most people know that Americans benefit from high taxes, powerful unions, limited consumer choice, and strong government control. But most people lack the training to fully understand why we derive benefits from these policies, and why government control over public anything results in unsurpassable quality. To remedy your "knowledge deficit" you can ask us any question you choose, and it will be explained by the legendary Professor Paul Krugman in a language that you can understand. From the evils of profiteering, corporatism, and economic exploitation to the rewards of regulation, social justice, and community/stakeholder involvement, Professor Krugman will use his agile mind to clarify the otherwise intimidating field of economics.

Economics Primer 15: Insurance

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Insurance enables people to obtain things for free; apart from receiving government services, there is no better mechanism for obtaining things that you are entitled to.

But let's step back and ask ourselves what insurance is, and how it works. There are two types of insurance: A) Paid insurance that requires premiums -- like auto insurance and home-owners insurance, and B) Compassionate insurance, which is provided by employers and governments -- which is free; e.g., health insurance.

Paid insurance requires the insured to make regular payments to insurance companies. The rates are set to maximize profits for the insurance companies -- with auto insurance being the most scandalous. However, these companies will also pay for your claims if you suffer a loss. Put another way, your insurance premia have two components: 1) Windfall profits for insurance companies and 2) Some of your payments possibly being returned to you in the form of settled claims. And that is why insurance is so essential: Because you get some of your money back.

Insurance protects against all sorts of things, from the catastrophic loss of real estate (assuming you've been paying your taxes) to catastrophic repairs of toasters, paid for by insurance known as "extended warranties". At one time, people had to pay for appliance repairs, or worse, buy replacement space heaters, alarm clocks, and can openers. But now, we can rest assured that our "extended warranty" insurance will pay for repairs, for free, provided you have your receipt and a only a few weeks to wait for service. Yes, a courageous government would require everyone to buy extended warranties for all our purchases.

Even better, a courageous and benevolent government would require that the citizenry buy insurance to cover all their purchases to start with. The only thing better than a toothbrush with an extended warranty is a toothbrush that can be purchased with insurance to begin with.

Which brings us to health insurance. There are still many Americans...too many Americans...who lack insurance to purchase the most basic health care like medical checkups, dermatology exams, and teeth cleanings. Therefore, they do without. And these are the same people who cannot afford (and are therefore unable to purchase) other uninsured items like food, housing, clothing, televisions, microwave ovens, automobiles, mattresses, cigarettes, satellite dishes, tattoos, and dental jewelry. Perhaps, we, as a nation, can tolerate the most vulnerable among us do without these things -- but how can we, as a nation, deprive them – indeed, deprive you and I -- the benefit of health insurance so that we can all have free acupuncture therapy?

In general, mandatory universal insurance for every product and service is one of the most efficient ways of making everything free for everyone. Only the most cold-blooded government would deny it to their people.