Insurance has two main concepts moral hazard, an effect that is present after signing up to insurance and adverse Selection one that is present before you sign up; the latter is the one that interests me today. What Adverse selection means is that people who feel they are more likely to fall ill will more likely go insure themselves and those who face less risks will not (related to the “it won’t happen to me” human failure). The case for government running insurance schemes is the ability to spread risks on a massive scale (the whole country) which can overcome adverse selection (which might draw in risky immigrants, so eventually this should be done on a global scale), simple enough.
The next point… is well…those of us who have seen the movie Gattaca are probably very aware of the social risks that could arise as scanning genetics becomes increasingly more available. Clinton signed a bill in 2000 to ban such discrimination, essentially capping the information which insurers can use to accept or reject someone. It’s easy to ignore the big picture and merely accept that the threat is gone, ignoring the fact that this gave birth to a very real danger for market failure.
Not allowing for such information disclosure would be fine as long as both parties had an equal amount of information. But the fact is there is a very strong information asymmetry case to be made, where people are much more aware of the genetic or otherwise risks they face. As years go by an increasing proportion of us will know the genetic risks we face through medical tests(which we won’t share with insurance). This information asymmetry problem becomes more prominent every year and adverse selection is on its tracks. As the pool of people who sign up for insurance becomes increasingly more skewed, either the insurance industry will raise their premiums(if this happens gradually enough) and deter people with good genes completely or an inevitable collapse for the health insurance industry, unless of course black market for genetic information is created.
So we will eventually have two choices, nationalizing, (better yet… globalizing) all of health insurance or allowing for discrimination. Just like always, the government solution will benefit the weak (genetically) by allowing them to pay a standardized (average) premium just like everybody else and the private solution will benefit the genetically gifted by charging low risk individuals lower premiums… a true return to the “survival of the fittest”.
Most of us have grown to accept the idea of choice discrimination (like smoking or drinking) but will the human masses really be able to accept innate discrimination?
Daniel Kanhneman(Nobel Prize Winner) link of a test(he wants you to fail it otherwise he would not get the prize). http://www.vanityfair.com/business/features/2011/12/kahneman-quiz-201112
What if Economists ran nations?
Krugman Vs Summers debate
And the IGM economic experts panel… a straightforward debate killer… renowned economists killing misconceptions… touches a variety of areas, new questions every week.
What percent are you?? Enter your household income here or your individual income here
Keynes Vs Hayek Debate
(Serious Debate video link)
Here’s a summary
The not so serious ones are below
Without changing the culture and morality of the system, the aim is to make it more efficient both in terms of budget deficit and in terms of dropout rate in tertiary education, one of the highest in the world. Protecting public education whilst attempting to find optimization routes is crucial, it allows social mobility without discriminating according to household income or willingness to go into debt.
An accounting entity can use its auditing services to gain a better understanding of the system and apply lean techniques to cut wasteful activities. Feasibly tracking down how to offer non-core services more selectively (the ratio of student to service and technical staff is 1:40, in the US, its 1:3) or reducing the frequency of optional and less popular courses or just eliminating non self-supporting non-core activities. Gamification (one of PWC’s expertise), could be key by transforming mundane tasks into enjoyable ones. Lessons learned are benefits of high frequency positive feedback; the best approach is using ICT as an important ingredient to ameliorating efficiency and student capacity allowing individual tracking of progression enough to create self-motivation and eventually allowing a switch from batch processing to a more continuous way of handling students.
To set up a proper waste reducing system a proper measurement capacity of value adding activities is required. Perhaps use the percent of graduates gone to further education or found a job. Such a primary index set in a dynamic manner, adjusted according to economic conditions sustaining or increasing spending in departments or schools achieving or exceeding this quota and reducing it in those that missed it by a proportionate amount. The forte of such a structure is its reliance on market mechanisms as information sources and has the government act on those, creating a much more demand based classification of education avoiding miss-matching skills to employer’s needs. The supplementary benefit will be a much clearer sense of purpose for educators subsequently gearing their teachings to fit this need and offer work specialized education, incentivizing interaction between industry and research, enabling cross training opportunities not only for students but also for teachers. A catalyst could be introduced in the form of bonuses for exceeding quotas, along with penalties for dropping out or failing.
France’s spending in education per university/high-school student is among the lowest in the EU. Moreover, 30% of that funding goes towards “Grandes Ecoles” (who train less than 5% of students), and create a completely parallel structure which contributes disproportionately to the formation of the “elites” and results in a two tier education curricula distorting the system and painting an even grimmer picture. The steps highlighted above offer a way to reduce this emphasis on “Grandes Ecoles” and eventually should be able to replace them.