Moral Hazard or Why Ron Paul Says it’s Ok to Feed Kids

Even without the concept of moral hazard (defined in the next paragraph), there are cost-effective reasons to have some social programs.  For example, if we cut all social safety net programs, we would have to spend a lot more on things like street cleaning dead bodies off the street (and more medical stuff because dead bodies aren’t healthy) and more to the point, on jails.  Jail is expensive.  Jail can be more expensive than some of these programs that get kids food, or preschooling etc.  Some social welfare programs are actually cost effective because they reduce crime and thus the number of people needing incarceration.  Even the most cold-hearted conservative should be in favor of them for that reason.  Because we have to keep society safe and we have to spend money to do that.

One big reason that many conservatives do not like social programs is the problem of moral hazard.  Moral hazard encompasses the idea that if you offer a benefit, people are going to change their behavior in order to take it.  It mathematically happens if we assume that people are rational.  Some people with higher values of leisure will take leisure if a program is poorly targeted, even if they would have worked without the benefit.  It’s the main argument against these kinds of programs.  If we could perfectly target people who are actually disabled, actually unable to find work etc., it would be easier to sell these kinds of benefits.  Since we can’t figure out who really needs them and who doesn’t, we’re going to be making mistakes both ways– not helping people who need it and helping people who don’t.  It just falls out of the equations.  (In science terms there’s type 1 and type 2 error… or false positives and false negatives.)  It’s a fact.  So many folks know someone on disability who is cheating it somehow… but some of us also know people who really ought to be on disability but did not qualify for the program.  That will always be true unless the program is universal (in which case nobody is denied) or does not accept anyone.

Kids don’t have moral hazard because they’re not the ones making the decisions.  That’s why even Ron Paul says we should feed hungry kids (he said this either on the Daily Show or the Colbert Report, I don’t remember which one).  There’s no downside to the kids– they don’t change their decisions about work because they’re not working.  Sure, some parents who might have fed their kids on their own will be less likely to (moral hazard at the parent level), but it’s not a kid’s fault if a parent would rather buy cigarettes than food, and when a kid isn’t fed, the kid is more likely to have developmental delays and eventually become a cost to society rather than a productive member.

So… feed the kids.  They’re our future, and it isn’t their fault if their parents suck.

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13 Responses to “Moral Hazard or Why Ron Paul Says it’s Ok to Feed Kids”

  1. Molly (Mike and Molly's House) Says:

    What kind of country are we when our politicians are debating IF we should take care of our children, elderly, mentally disabled and infirmed.

  2. femmefrugality Says:

    Agreed. I tend to think some of the programs should be universal. But taking a lot of them away would be a crime. It makes me sick when I see people who legitimately need the help get denied because they do no qualify. If they had the help, a lot of these people could improve their situation and thus our society. But, really. Kids? That should be a no-brainer.

  3. chacha1 Says:

    The kind of country where people get their “news” only from local broadcasts/papers and commentary (people clearly, very often, confuse commentary with fact). And the kind of country where the majority of people can’t be bothered to vote. And the kind of country where those who DO vote often base their voting behavior on opinion and personality, and not on any knowledge of the issues (as in, no knowledge what the issues even are, much less any understanding of their complexities). And, of course, the kind of country where people want the easy answer (like ‘cut social programs to balance the budget’) but at the same time only want programs cut that they don’t benefit from.

    There is a huge logical disconnect when people think we can balance the budget by cutting Head Start, or other tiny programs, without touching SS, Medicare, and Defense.

  4. Kingston Says:

    What chacha1 said.

  5. anandi Says:

    This seems like another one of those things where people like to get overly up into other peoples’ business. I mean, what if someone chooses welfare instead of working? It’s not like they’re getting rich, or even having that great of a life if they qualify and are “choosing” that path. Obviously if it’s FRAUD we should have systems in place to check for that, but this moral hazard stuff? Seems to me such a small argument compared to thousands (millions?) of people going hungry or without healthcare or whatnot. And the people concerning themselves with this “problem” have likely NEVER been in those circumstances in their lives. My guess is that *most* people accepting these services are trying their best to get out of them and support themselves.
    But maybe I’m just a bleeding heart liberal optimist who assumes the best in people…

  6. Comrade PhysioProf Says:

    One big reason that many conservatives do not like social programs is the problem of moral hazard.

    Yeah, maybe in the bullshitte “centrist” liar conception of what “conservatives” actually are. In the real world, conservatives don’t like social programs because they benefit n*****, spics, fags, kikes, commies, and other undesirable parasites sucking the blood out of productive Real Americans.

  7. Jack Says:

    OK, so we agree that feeding children is a Good Thing. So we give to charities that feed children, right?

    Here’s the crux of the problem:

    If people think that feeding children is a worthy goal, then they will donate to charities that feed children.
    If that is not happening, then either it is not really a worthy goal, or people cannot be trusted to decide where their money should go. If they cannot be trusted to decide where their money should go, how can they be trusted to decide who will decide?

    • nicoleandmaggie Says:

      Ah, Jack, you do not understand the Public Goods problem. That lecture actually comes before Moral Hazard. The private market (even charity) under-provides public goods because of the free-rider problem. We all want someone else to donate to charity so we don’t have to. That’s why there’s market failure and there’s a role for government.

      Even if everyone agrees that feeding kids is a worthy goal, we will still underprovide food for kids in the free market because we would rather have everyone else pay so we can keep our own money and have other people pay to feed the kids. Result: underprovision.

      I have some lovely homework problems I could give you that illustrate this concept using mathematical examples if you would like. (They do require some knowledge of calculus though.)

      Here’s more info . And remember that Rush doesn’t have a degree in economics.

      • Jack Says:

        I understand the problem quite well. In essence, because people want a free ride, they are incapable of making good decisions about where their money should go. That still does not get you around the problem that these same people are the ones deciding who gets to decide.

        If they are incapable of deciding (to your satisfaction) where they should put their money, how can you think them capable of deciding who will decide?

      • nicoleandmaggie Says:

        No honey, you really don’t get it. It isn’t about the kids wanting a free ride. And sweetheart, kids don’t have moral hazard– they’re incapable of wanting a free ride because they’re not the ones making the decisions.

        Read the free-rider problem more carefully in that wikipedia article. Also open your mind up a little bit. I know that the public goods problem is a really complicated to understand– the class it is taught in is upper level undergraduate and has relatively substantial pre-reqs. But if you don’t even try to think about it, you will be incapable of understanding.

        The problem is that people WANT money to go to the kids, but when they know that OTHER PEOPLE also WANT money to go to the kids, they will underprovide as a group. Nobody wants to be the only sucker that’s donating but people want everybody to donate. It is called the free-rider problem. And it requires government intervention to be fixed so that the market no longer fails. (And there are several ways that government can intervene based on the characteristics.) But I can see that explaining it to you isn’t going to do any good because you aren’t willing to get out of your fixed viewpoint. You’re not even getting the idea that kids don’t have moral hazard.

        Maybe you’d understand if you thought about it another way. National Defense is also a public good. By your argument, only Charities should be providing national defense. We should all decide how much we want to donate to public defense and then the US will spend the appropriate amount on public defense. If people decide they don’t want to donate to public defense, then obviously we shouldn’t have it. There, problem solved. We don’t need any government, we don’t need national defense, we don’t need police officers. Charitable contributions will take care of everything because everybody will be willing to donate.

      • Jack Says:

        National Defense cannot be done by charities. Feeding a child can. That is why our Constitution provides for National Defense, but not for feeding children. (The States, however, do have that power.)

        I was not speaking of children’s being free-riders, or moral hazard. I am speaking of the electorate — those who YOU SAY want others to do what they are not willing to do themselves. You are saying that the people cannot be trusted to choose where their money goes. So why do you trust them to decide who will decide?

        This is the question I want you to answer: If you do not trust them to wisely decide what to do with their own money, why do you trust them to decide who will decide what to do with yours?

  8. Ten for Tuesday, February 14, 2012 | FavStocks Says:

    [...] Why Ron Paul Says It’s Ok to Feed Kids Just because we need something political this week, here’s an interesting look at social [...]


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