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When you shift risk from individuals to the government (or anyone else, as what happens every day in financial markets) one of three things can happen:
1. The risk still exists, but it’s smaller because of the power of diversification.
2. The risk stays the same size and is transferred from one party to another.
3. The risk increases, because you’ve created a new systematic risk, moral hazard, or some distortion in which prices and incentives don’t make sense anymore.
known-unknownsWelcome to Known Unknowns, a newsletter that’s here to remind you that although you can shift risk onto someone else, it never really disappears.
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This author seems to imply that handing the money and incentives over to private enterprise is the way to go but all I see that doing is enriching those companies and their CEO's at our expense.
Other than national defense and public safety there are actually very few services (such as health, broadly speaking) or infrastructure projects that are performed directly by the government in any case. The great majority of these services and projects are contracted to the private sector by the government, with greatly varying degrees of efficiency. The government typically acts mainly in some combination of the roles of contractor, auditor, or safety administrator, again with varying degrees of effectiveness.
It seems to me that articles of this type are throwing out a red herring with respect to suggesting that private enterprise can do a better job, as they are already doing the job. So these types of arguments are somewhat specious- the actual underlying argument really seems to be that many of these services and projects need not be done at all. Taxes, you know.