Politics and Economics: Two Looking Glasses - The Wise World Traveler: Becoming a Part of All that You Meet - page 43

ance. Even so, all such policy questions are set within a larger frame of reference: What do
the rich owe the poor? What is meant by equality? Is it equality of opportunity or equality
of outcome? In general, equality of opportunity is taken to mean that each person shall have
an equal opportunity to acquire wealth and all that it can buy. The outcome will depend on
such things as hard work, intelligence, native ability, and good luck. Equality of outcome is
taken to mean that each person is entitled to some reasonable measure of those things that
define a good life—some minimum income, medical services, housing, and education.
A related question turns on ideas about equity, generally taken to mean fairness. If, as
President John F. Kennedy once said, “Life isn't fair,” then what should government do to
make life more fair? In the American context there are two general approaches to solving
issues of equity: market equity and social equity. [38] Both terms connect ideas about equal-
ity.
Market equity generally means that government allows the market to provide fair
shares. Each of us can have the quality of life that we can afford. For example, market
equity usually determines what kind of housing we have and where we live, in the inner
city, an elegant suburb, or somewhere in between. Social equity generally means that gov-
ernment has an obligation to give each of us some agreed-on share of life's goods and ser-
vices. For example, in housing, social equity can be achieved through government-issued
rent vouchers sufficient for settling the poor in the suburbs. If the devil is in the details,
political argument turns on what is meant by fair share? Presume, for argument's sake, that
we will not permit the poor to starve to death: what, then, shall be their minimum income?
And what other assistance do we provide? Housing? Medical treatment? Unemployment
benefits? A pension at the end of one's working life? And how much of each of these be-
nefits? [39]
Other democracies frame their issues differently. Words like market equity and equal-
ity of opportunity are usually not part of their political debates. Issues are framed in words
that acknowledge their socialist heritage, such as socializing risk and socializing cost,
meaning to make the entire society responsible for assuming the cost of risks and benefits.
An example from the insurance industry is helpful. In most countries, drivers pay differ-
ent premiums for their insurance. The premium is based on such things as the driver's age,
number of previous traffic violations, number of previous accidents, distance traveled daily,
and age and make of the car. This is an actuarial form of insurance. In contrast, if all drivers
paid the same premium, that would socialize the cost by dividing it equally among all those
who participate. Those whose needs are greatest pay the same as those whose needs are
minimal. This socializes needs and risk. It is also a form of transfer payment whereby the
rich subsidize the poor. To use the example of medical insurance, those with chronic illness
and those who are elderly pay the same premium as the healthy and young. That socializes
the cost. And it, too, is a transfer payment.