Protection as a Virtual Good

There’s a tension between the desire of some politicians to protect the population from harm, the desire of some in the population to be free from regulation, and the desire by some to have the freedom to harm. The idea of protection as a good is interesting because it has a lot in common with a risk pool.

I reckon that protection is virtual good because protection is an idea. There’s this idea that the state provides protection from threats. Most threats, not all, are imagined, aren’t they? The state organizes protection from external forces: against intruders, looters, raiders, hordes, and parasites that pose threats to agriculture and aquaculture. The state organizes protection from internal threats: against murderers, organized crime, rebels, drunk drivers, anybody who challenges the states’ monopoly on violence, and others. What is threatened is a way of life that is made possible through the exclusion of threats. It’s only possible to achieve any level of complexity or specialization if there is protection from threat, mostly real, but also imaginary ones. Protection offers the state enough stability to be able to organize anything at all. That includes organizing the capability to create protection itself.

There’s solid evidence that individuals are deficient at estimation. The common statement is that lotteries, casinos, and book-makers wouldn’t be profitable if people were good at it, but I prefer the insurance industry, the finance industry, inducing hedge funds and the venture capital sector as those that thrive by estimating risk better than others. Many individuals have a peculiar confidence bias, in that they overestimate their own competence and underestimate others, in particular with respect to risk that they perceive they fully control. Ask anybody – they’ll tell you that they’re great drivers – it’s just others that you have to look out for!

It follows that individuals who are the most likely to need protection are those who are most deficient in their estimation of self-competence. Why do we need so many regulations? Isn’t it obvious that you shouldn’t store radioactive material in the crew cabin on ships? Isn’t it obvious that you shouldn’t store petro-chemicals in emergency fire escape stairwells? Isn’t it obvious that you shouldn’t let people set up ponzi schemes? It’s probably obvious to you. It isn’t as though everything is obvious to everybody. But it certainly wasn’t obvious the chronic over-estimators of self-competence. So, naturally, the response from politicians is to protect people from malevolent over-estimators.

Then, there are those who want the freedom to cause harm. I have difficulty accepting a system of values that justifies the following position, but I can emulate the extreme position. Here goes: Because after all, don’t people deserve it? If you’re dumb enough to sleep next to radioactive waste in a ship cabin, then don’t you have it coming to you? If you’re dumb enough to store propane in a fire escape, then you deserve to burn? If you’re dumb enough to fall for a ponzi-scheme, you should be separated from your assets? Screw you, I’m getting mine! And besides, what’s the cost of all of this protection really costing us? We can’t go on bubble-wrapping society for all of the idiots. If they never learn, they never learn, and some people simply won’t ever learn. Instead of spending money on regulations, laws, and enforcement, give me the money instead. Such positions exist. I don’t agree with the position, but I understand it well enough.

It’s between these extremes: the desire of politicians to protect, the desire to be free from protection, and the desire to be free to harm, that civil society can discuss a mix of policies that is good enough to support a way of life that is desirable. Too much protection and individuals rebel against oppression. Too little protection and vigilantism emerges and barbarians appear at the gates or children are pressed into militias. If an entrepreneur can’t threaten and then harm the margins of those who have captured regulators and bribed politicians, then the economy stagnates. I have difficulty accepting a system of values that justifies for ponzi-scheming or depriving others of their health and life, but I understand on some level such a system would appear valid and compile in some minds as moral.

That tension is constant and can be healthy when the optimization objective is aggregate social welfare. In aggregate, we’re all better off when boats of raiders aren’t sailing up at random and hauling our people away into slavery in far away lands. In aggregate, we’re all better off when roads are paved and reasonable speed limits are enforced. In aggregate, we’re all better off when people feel that contracts will be enforced, identities protected, and assets are secured from theft. We’re better off when we’re free to compete and better off when we have the autonomy to create outcomes that aren’t always aligned with those who are renting power.

Unless we discover a better way to create protection as a virtual good that doesn’t involve negotiating amongst those concerns, there will always be tension. It has the mouth-feel of a forever problem – something every generation will have to talk to itself, and to other generations, about over and over again. If we’re lucky, I suppose, we might evolve more peaceful ways to talk about the tension. But until then, we got what we got.