Making money, not taking advantage
by Sam Selikoff January 22, 2010
The latest stroke of brilliance from Mr. Obama: “We know that we need insurance reform, that the health insurance companies are taking advantage of people.”
Insurance companies add value to markets by pooling risk. This reduces uncertainty in people’s lives. This is the service that insurance companies provide. They cannot “take advantage of people” for the same reason McDonald’s cannot: people have a choice to either give their money to these firms, or keep it.
I’m not saying I don’t understand what Mr. Obama is referring to when he makes inane statements like this; he’s referring to a market that isn’t performing efficiently. The problem with saying that insurance companies are actively out to take advantage of people is that it completely misses the cause of this inefficiency. Firms aren’t out to take advantage of people. They are out to make a profit – which is simply another word for providing the most value to the most number of people for the lowest cost. Indeed, only when government gets involved and props up various parts of an industry through complicated regulatory structure is one entity even capable of taking advantage of another.
It is angering to hear our president obfuscate the system of exchange which has done more for the common man than all of history’s good intentions. It will become harder to educate citizens on basic economic truths if politicians continue to ignore them.