Monday, August 31, 2009


Simon Johnson and James Kwaak have a great article at Democracy Journal. Choice quotes:

...The presumption should be that innovation in financial products is costly—it increases transaction costs, the cost of effective oversight, and the risk of unanticipated consequences—and should have to justify itself against those costs.


Though it is not often thought about in these terms, reforming health insurance—to make it universally accessible and stable in its premiums—would be another financial innovation that would accrue both social and economic benefits. Because individual households’ economic fortunes are volatile, insurance is one of their core financial needs. It is generally possible to buy adequate auto, home, and life insurance, but for most people true long-term health insurance is simply not available. While a majority of Americans get health insurance through their jobs, many would be unable to remain insured should they become unemployed. What they have is subsidized health care during their term of employment; they don’t have true insurance. While there are several ways to do it, making individual health care policies available to everyone (and not subject to an accident of fate like a layoff or divorce) would allow consumers to better plan their economic lives. There could be no better embodiment of positive financial innovation.

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