For instance, it makes no sense to have a “no man left behind” policy in war, except that it’s really useful for motivational purposes. It leads to more dead people than it saves in the long term.
Do you also object on similar grounds to insurance for expensive medical conditions? “Man is left behind” is a dangerous medical condition with fewer microbes than usual, and the cost of the insurance premium is implicitly part of the servicemen’s pay even though there isn’t a line item for it.
Your reasoning could be used to argue that servicemen shouldn’t get paid at all. Aside from motivational purposes, paying the soldiers costs money and accomplishes nothing, and there’s an exchange rate between money and lives, so giving them pay has a real cost in lives.
That’s a more complicated case, especially assuming that the insurance is opt-in. In an ideal world that would mean that the inefficiency also acts as a tax on irrationality.
Your example of serviceman pay isn’t actually that far-fetched. For instance, Finland pays conscripts barely anything, between 6 and 14 euros per day depeding on rank [1]. Since the alternative is prison time [2], there’s indeed not much reason to pay. This has surprisingly low impact on morale.
In an ideal world that would mean that the inefficiency also acts as a tax on irrationality.
Why is the insurance inefficient? The whole point of insurance is to spread risk; some people get out more than they pay in (or could possibly pay in), because nobody knows in advance who’s going to need the expensive procedure. If insurance couldn’t do this, it wouldn’t be “efficient”; it would be useless.
Oops, seems like I was wrong here. The dynamic doesn’t extend to insurance, at least in general. Good point.
Then, my objection would be that the equvalence itself doesn’t hold. Insurance is, supposedly, priced based on the actual risk. It also doesn’t contain a negative feedback loop; people don’t get sick more often because they pay for the insurance [1]. This is not the case for a “no man left behind” policy. The rescue operations cost, on expectation, more lives than they save. Since no money is involved, the policy cannot price in the risk. Of course this policy isn’t absolute and in some cases isn’t followed, when the ratio looks too bad. Not that a medical insurance company would burn hundred millions for a single patient either.
Do you also object on similar grounds to insurance for expensive medical conditions? “Man is left behind” is a dangerous medical condition with fewer microbes than usual, and the cost of the insurance premium is implicitly part of the servicemen’s pay even though there isn’t a line item for it.
Your reasoning could be used to argue that servicemen shouldn’t get paid at all. Aside from motivational purposes, paying the soldiers costs money and accomplishes nothing, and there’s an exchange rate between money and lives, so giving them pay has a real cost in lives.
That’s a more complicated case, especially assuming that the insurance is opt-in. In an ideal world that would mean that the inefficiency also acts as a tax on irrationality.
Your example of serviceman pay isn’t actually that far-fetched. For instance, Finland pays conscripts barely anything, between 6 and 14 euros per day depeding on rank [1] . Since the alternative is prison time [2] , there’s indeed not much reason to pay. This has surprisingly low impact on morale.
Slightly more complicated: https://intti.fi/paivaraha-ja-varusraha
In practice, something like house arrest with an ankle monitor
Why is the insurance inefficient? The whole point of insurance is to spread risk; some people get out more than they pay in (or could possibly pay in), because nobody knows in advance who’s going to need the expensive procedure. If insurance couldn’t do this, it wouldn’t be “efficient”; it would be useless.
Oops, seems like I was wrong here. The dynamic doesn’t extend to insurance, at least in general. Good point.
Then, my objection would be that the equvalence itself doesn’t hold. Insurance is, supposedly, priced based on the actual risk. It also doesn’t contain a negative feedback loop; people don’t get sick more often because they pay for the insurance [1] . This is not the case for a “no man left behind” policy. The rescue operations cost, on expectation, more lives than they save. Since no money is involved, the policy cannot price in the risk. Of course this policy isn’t absolute and in some cases isn’t followed, when the ratio looks too bad. Not that a medical insurance company would burn hundred millions for a single patient either.
Not counting counterfactually using the money for preventative measures.