'Fairness' Fanatics

Many people are incensed that other countries pay less for American medications than Americans pay because that is “unfair.” Of course it is unfair — and all of us like fairness. But there are many other things we also like, and often in life one desirable thing must be weighed against another.

Most of us would prefer to live longer and be healthier, for example, and various medical products and procedures enable us to do that. We could make drug prices “fair” if the government imposed price controls on both domestic and international sales.

But you can bet the rent money that this would lead to a reduced supply of new drugs — and therefore more suffering and death.

Not all problems have solutions. Often there are only trade-offs. How much suffering and how many premature deaths are you prepared to accept as the price of seeing that Canadians don’t get something for less than Americans pay?

Pharmaceutical drugs are not the only things for which fairness can cost more than it is worth. Politicians are forever trying to make insurance “fair” — and driving up its costs in the process.

It is illegal in France for insurance companies to charge different prices to men and women for insurance or for annuities. Like many “fairness” policies, this ignores cost differences.

Men have more automobile accidents than women and women live longer than men. This means that it costs more to insure a man’s life or automobile. This also means that it will cost an insurance company more to provide an annuity paying a given amount of money per year to a woman because she is going to collect that money for more years.

In a free market, men will have to pay more for life insurance or car insurance and women will have to pay more for a given annuity. What happens when an insurance company is forced by law to charge men and women the same?

The total cost goes up because the financial risks go up. The whole basis of insurance is assessment of risks. One of the increased risks that come with unisex insurance is that it can now make a big difference whether more women or more men buy a given company’s insurance policies or annuities.

When each group is charged according to the costs of its own risks, then whether more women or more men sign up with a given insurance company doesn’t matter. But it matters when women are subsidizing men in insurance and vice-versa with annuities.

If a given company finds lots of women buying its annuities and few buying its insurance policies, it is worse off than if it was the other way around. And of course the insurance company has no control over who will choose to buy what.

In short, the overall risk is higher, so the total amount of money required to cover those higher risks must be greater than the total amount collected when women and men were charged separately.

“Fairness” has a price. There is no free lunch.

The same is true when insurance companies are forbidden to “discriminate” by age, race, neighborhood or other factors that create differing costs that cannot be charged to those who cause these costs because that would upset those who are preoccupied with fairness.

How many people will be happier to pay more if their neighbors and friends are also forced to pay more? Maybe some fairness fanatics.

Most of us are not fanatics, however — and for a good reason. Fanaticism is not free. It has cost some people their lives.

It is certainly not fair to expect children of poor and poorly educated parents to meet the same academic standards, or perhaps even behavioral standards, in school as children from more fortunate families. But the cost of accepting lower standards for poor children can be a lifetime of lost opportunities for those children to rise out of poverty. That too is a pretty high price to pay for fairness.

The real sign of a fairness fanatic is not how high a price he is willing to pay but his utter obliviousness to any need to pay any price. He is particularly likely to be oblivious when the price is paid by others.