Wednesday, July 26, 2006

If you like limited government, then typically you like decentralized government, e.g., federalism. A big exception is trade barriers. For example, Arnold Kling would love for Congress to sweep away the patchwork of states' regulations of health insurance. So would I, but in the long run we might still have lots of regulation, only now at the federal level. (Remember the "Patients' Bill of Rights"?)

I believe that at the federal level the probability of extreme outcomes is higher. Since there is no threat of people and businesses voting with their feet by moving to a new state, very rigid regulation or even nationalization at the federal level is much harder to fight. On the other hand, a relatively unfettered market in health insurance would be easier to achieve as one political victory in Congress than 50 victories in state legislatures. If I had to guess, I'd say it's worth the risk to try to get Congress to free the interstate market in health insurance. But I must stress this is just a guess.


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