The fundamental problem in most of these is "lack of a safety net".
While there are safety nets in society they often exclude the years when someone is most likely to take economic risks - for example, in the US a minimum free medical coverage is provided to those people under 18 or over 65.
Personally, I'm thinking that if people knew they couldn't incur permanent damage to themselves or their futures, they would take more risks. As falling out of health insurance when you have a chronic condition (which is likely genetic and not the person's fault) in America is one of those situations, people stay in crap jobs that go nowhere, and aren't out there creating new businesses.
Personally, I'm thinking that if people knew they couldn't incur permanent damage to themselves or their futures, they would take more risks.
Surely if people knew they couldn't incur permanent damage, it wouldn't be much of a risk? I don't think people's risk aversion has changed, I just think things are (or at least seem) more risky at the moment.
I think what was meant was more along the lines of "if people knew they couldn't incur severe permanent damage..."
The problem seems to be that if you fall off the "middle-class bandwagon" in the US, it's very difficult to get back on. Since medical emergencies or the like can easily do this to you, people who might be willing to take a reasonable risk become more focused on minimizing the risk of a really bad outcome than on maximizing expected outcome.
We have far more safety nets in place than ever - yet people are moving less. We've gotten so used to the notion of safety nets that we're terrified to move away from one lest another not be there - unaware that our predecessors took greater risks, and thus reaped greater rerwards, precisely because there was no safety net.
Doesn't help that the paranoia about safety nets results in demands everyone pay for and get premium nets, and then come to believe they cannot get by without such ideal services.
Suck it up and step out. You're going nowhere if you don't.
As someone from South America, I'm amazed that in the U.S. you're out of health coverage if you're not employed.
Other safety nets are counterproductive, though. My country has very high firing costs, which means less jobs, and job security is very highly tied to years in the job, so in my case, leaving my dead-end but decently paid job for a better job is a very significant gamble (I basically give up all my unemployment rights for a time if I change jobs voluntarily)
As someone from South America, I'm amazed that in the U.S. you're out of health coverage if you're not employed.
You're not. The tax structure encourages this kind of behavior, but the day I quit my job 5 years ago I started cutting a check for my own health insurance. If people actually looked into the cost of catastrophic coverage with a high deductible (the point of "insurance" in the first place), they'd see that it's not as expensive as they think. It's getting more expensive thanks to government interference, but all insurance is affected similarly.
Pay cash for regular visits. Save money instead of buying toys, and magically you don't fall into the trap of "I have to choose between food and health coverage."
Cutting a check is pretty difficult when you stop receiving a salary. The logic of the US system is incredible: Pay a few hundred dollars a month while employed for coverage from your employer, or if they lay you off, you have the opportunity of picking up COBRA coverage by paying both the employee and employer portion for over a thousand dollars a month. In what other first world country do the newly unemployed pay 3x the price for healthcare that the gainfully employed do? Once your COBRA benefits expire in 18 months, you can expect to pay even more as now you have to shop on the open market and a lot of insurance carriers just flat out refuse to sell insurance to a single family.
I was talking about private insurance, not COBRA (which is crazy expensive). This was the single largest factor keeping me from quitting the corporate world for my own business, but only due to my own ignorance. Once I looked for a high deductible catastrophic plan for my family, I discovered how easy and affordable it was. HR departments do a good job of brainwashing us into thinking that they are the gatekeepers to the doctor's office, when that's not even close to the truth.
Anecdote time.
Last month I called up a dentist's office who I had never visited before. The conversation went as such.
Me: Hi, I'm a new patient. I'd like to make an appointment.
She: What insurance company are you with? If it's backed by, or affiliated with, the state we aren't accepting any new patients at this time.
Me: I'll be paying cash.
She: How does tomorrow at noon sound?
They happily gave me breakdowns of all costs, made decisions based on price (oh, we could give you this other xray but you don't really need it), and pretty much bent over backwards to make me happy. This isn't abnormal. The same thing happens at the doctor. I pay through an HSA for tax purposes, keep the insurance for major issues, save money in the process, and generally get better service.
It's "easy and affordable" until you get seriously ill and they drop you for failing to disclose your childhood acne, or just refuse to approve the treatment you need.
Private insurance is cheaper than group coverage for a reason. The insurance company has no intention of paying benefits for e.g. cancer patients, and they'll drag out the process in the hope that you'll just die first. Assuming you live long enough, you'll probably have to sue them to get anything out of them.
I agree that safety nets are needed, but be careful with safety nets. There's a big problem in the UK with the various forms of disability benefits.
Some people find themselves trapped on benefits, and it's hard for them to move back into work.
An oversimplified (too long!) rundown:
Some disabled people incur extra living costs (for either transport or for care) just because they are disabled. This is covered by something called Disability Living Allowance. In theory you can get DLA whether or not you're working. (But sometimes the work you do will be used to reduce or remove the DLA you get.)
DLA isn't particularly controversial. But recently there's been disquiet about the way it works. It's strictly about "how disabled you are, how much support you need". When you realise that you can accept that an adult that has just lost a leg will need more help and support than an adult who has been without a leg for a few years - they've got a prosthetic and learnt how to move and got workarounds sorted out. This situation suddenly came to light when a bunch of soldiers with amputations suddenly had their DLA reduced from high to medium. From their point of view they still only had one leg.
The more controversial disability benefit is "Incapacity Benefit". (which is being replaced). (And various older benefits.)
People can have a disability and still work. Recent disability equality laws make this easier. Recent improvements in support for finding work for disabled people and supporting them while they're in work makes this much easier. Recent research showing that people (especially with mental heath problems) are better off in work helps too. But those improvements are trying to work with an old system of benefits and sub-optimal medical advice. "Bad Back" used to be 'untreatable', people would be given advice to lie flat on their back with a board under a firm mattress and to not get exercise. In areas of high unemployment (and little prospect of employment returning, eg mining towns) many people lived their lives on disability benefits. We now know that advice for bad back was terrible. We now know that mild to moderate depression responds really well to CBT (just 12 weeks!) and medication. People who used to spend years not working can now have a short amount of time away from work, and then get back in.
The controversy comes because benefits are so Political. People are not trapped in a system and need help to get back to work; they are lazy feckless scroungers stealing from the tax payer.
The other controversy comes from testing for the new benefit regime. This can be brutal for people with MH problems; who often don't have great medical support. Clinicians don't know how to work the bureaucracy, so even if a bunch of doctors think that Fred shouldn't be working for a few months it's not help to Fred.
The old benefits are being replaced by "Employment Support Allowance". In theory it's more compatible with modern attitudes to work and incapacity. In practice the UK needs a progression of gentle changes across everything (tax laws; support structures for disabled people entering work; employment laws; benefits offices; job seeking offices; clinical and vocational support for disabled people (especially those with MH problems) rather than huge disconnected changes in small areas.
While there are safety nets in society they often exclude the years when someone is most likely to take economic risks - for example, in the US a minimum free medical coverage is provided to those people under 18 or over 65.
Personally, I'm thinking that if people knew they couldn't incur permanent damage to themselves or their futures, they would take more risks. As falling out of health insurance when you have a chronic condition (which is likely genetic and not the person's fault) in America is one of those situations, people stay in crap jobs that go nowhere, and aren't out there creating new businesses.