Why is the government involved in agricultural insurance?
Hi Graham,
At the end of the wiki, you mention the following conceptual concept: "Why is the government involved in agricultural insurance? (Why don't we just leave it entirely to the free market?)". I might have missed it (I probably did), but I haven't seen it explained anywhere in the wiki or in the battlecards. What would be the answer to that?
Regards,
Comments
Oh, I suppose I didn't address it. When I wrote those notes at the bottom, I was partly trying to think about the material from a higher conceptual level. To come up with a reasonable answer, I would first think in general about benefits of government involvement. This is from the Germaini reading CAS.GovtIns. The memory trick for that is FCC(ES).
The reason that stands out for me is social purpose. Maintaining our food supply is obviously of critical importance. Nobody would want to be a farmer without some sort of protection and this is not always possible via the free market. The free market is motivated by profit so insurance for farmers might potentially be be unaffordable or unavailable. The government however can use taxes to support and stabilize the private market.
If you want to be more specific, according to Quiz 5, BattleCard 11, the roles & responsibilities of the federal government include:
The second bullet point relates to the social purpose. The government supplements programs that aren't doing well. The first bullet point might relate more to the ** convenience and efficiency reasons for government involvement. (If the government develops the guidelines, then individual private insurers don't need to spend resources doing it themselves. And if all private insurers use the same guidelines, there will be uniformity across the country and that will also reduce regulator costs versus a system where every private insurer follows different guidlines.)
See also BattleCard 12 on the roles & responsibilities of the provincial governments:
It's potentially efficient and convenient for the government to do these functions also.
SUMMARY
With conceptual questions like this, it's good to discuss both general and specific points. The general points here would be the 5 government reasons for involvement in insurance or whichever of the 5 are relevant. Then you can mention facts that are specific to the situation under consideration.