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Monday, May 9, 2011

Diversifying promises

While we tend not to want to dwell upon it, the reality is that human existence is rather tenuous. Take away our things, including our food pantries, our shelters, and our water supplies, we will last less than a week. However, for the most part in the "civilized" world, most (but not all) of us remain relatively oblivious to this reality. We live in a world of plenty where obesity is more of a problem than hunger.

I have been in the working world for more than 40 years and I live comfortably. Not only do I have consistent access to meals and a climate controlled environment, but I have also made plans to retire some day to a world where I no longer am required to generate additional earning through work. I have delayed immediate gratification from current earnings based upon the assumption that I can delay them and collect later. How exactly does that work?

It is all about promises. Once we moved from each of us toiling to provide each and everything we need individually to an increasingly complex system marked by division of labor, sharing, and exchange, it became all about making and keeping promises. Early in the process, the exchanges were all personal, but as complexity reached dizzying levels, exchanges moved into the legal and contractual realm.

We are now surrounded by abstract promises. The US dollar... a promise. Social Security and Medicare... promises. Your pension .. a promise. Anything that you currently toil for but defer immediate gratification is somehow based upon the assumption that you will be able stake claim on something later. Someone or something must be committed to honoring this promise.

The reality is our existence in the modern world requires promises, that we need to deliver on them and that we are also dependent upon them. We need to ask, who can we rely on the keep their promises? A good rule of thumb is not to place all your eggs in one basket. Diversify your promise portfolio. All agents and entities capable of fulfilling promises are also capable of failing to do so.

The question is how involved can and should the state be involved in making this system of promises work? I think there is little contention that the state must be involved in the maintaining the legal framework under which exchange can happen. Furthermore, some sort of exchange medium is also required and states have played a central role in currency creation, although not always handling this responsibility responsibly.

Beyond creation of currency and the legal framework, what other promises should we trust the state with? How many promises should we place in the state basket?  What risks are inherent with political promises? These questions are essential to ask when the system of promises which back our health care economy is increasingly captured by the state. 

My own biases are obvious if you have read any number of my blogs. I think it is a bad idea to rely on the state to honor too many promises. The Federal government has already made so many promises that we simply cannot afford to keep all the promises they have made. If they do so, they will violate the basic and critical promises that all other promises depend upon; the legal structure and financial structures which underpin all other promises, public and private. Then we are in real trouble.

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