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Market Failures II: Informational Asymmetry

DEVRAJ : So today, we're going to talk about social insurance. So why do we have this thing called "social insurance?" Let's first talk about what social insurance is, and then ask why we have it. So basically, social insurance is government-provided insurance programs. This is the largest single category of government expenditure in the US today, is government-provided insurance programs. Now, why do we have these? You might say, well, we know why we have these. We learned about uncertainty. We already talked about how people dislike uncertainty, and about how as a result, insurance is big business in America. Private insurance for health, for auto, for life, for property and casualty adds up to about $1.5 trillion every year. So we already have big business of private insurance. So why does the government need to get involved? I mean, after all, people want insurance if they're risk averse. We talked about insurance markets can work. And as always in economics, ...