Steve Reads

I give this book credit for advancing ideas that maybe a lot of people wouldn’t have thought of before, and for tying together a lot of strands that people might have seen as elements of the different problems. In a word, Hacker brings together much of post-1960 American life under the heading of “risk”: increasingly, our economic fates are being thrown back on the cruelties of the market. Getting sick can cost us tens or hundreds of thousands of dollars; losing our jobs can mean economic devastation. The market thrives on Schumpeter’s “creative destruction”, and it is by common understanding the very hallmark of a dynamic capitalist economy. What it means, though, is that none of us can expect our jobs to be around in 10 years: they may be creatively destroyed just as easily as the next guy’s.

Of course most middle- and upper-income readers will immediately try to defend their own sense of self, by supposing that their own level of education insulates them from the shocks of the new global economy: surely creative destruction is creatively destroying manual laborers’ lives, not ours. Hacker says no, and submits a mountain of data to prove his point: over time, we’re all becoming more subject to economic crises. The standard economic statistics don’t point this out; they focus on economic growth or inequality, but not risk. If Hacker’s book is valuable for nothing else, it is valuable for focusing attention on risk where previously few people did.

To deal with this risk, we need to return to an insurance society. Like a lot of people, Hacker advocates health insurance similar to Medicare. He advocates not only unemployment insurance, but unemployment insurance that helps people transition from a creatively-destroyed career to a new one. Hacker doesn’t have time to build out the argument — actual policy prescriptions are confined to the final 10% or 15% of the book — but he says that the economic profession is broadly agreed on the necessity for this kind of insurance.

The broader social impact of American insecurity often goes unremarked. One of my coworkers made an excellent point about it recently: in Europe, he says, you’ll find far more little shops run by sole proprietors than you will here. He believes this is because there’s a social welfare net that lets you take some risks that you just couldn’t take in this country. Most important among the strands of the safety net, of course, is health insurance: insurance for a small business is frightfully expensive, so presumably a lot of small businessmen go without. It would be interesting to test the connection between bad-sense risk (the chance of economic collapse) and good-sense (entrepreneurial) risk.

The move from pensions to 401(k)s is another big thread in The Great Risk Shift. A large body of research suggests that people are terrible at judging their own long-term prospects. We systematically undersave (for that matter, I systematically undersave), we systematically underestimate the likelihood of a major life catastrophe, and we invest too much money in the company we work for. Pensions used to protect against this, by shifting the burden of risk-estimation onto the employer. Workers didn’t have to figure out where the money went, they had no choice about whether to invest, and their nest egg was more stable as a result. Even making 401(k)s opt-out rather than opt-in makes a huge difference in how much we use them. Forced savings are good for us. Here’s where everyone is obliged to mention Ulysses tying himself to the mast to ward off the allure of the Sirens. He foresaw his own weakness and protected against it. So should we. Government can help.

I think The Great Risk Shift will be mostly valuable in two directions:

1. Helping to guide conversations with non-believers during the health-insurance debate: we’re not just talking about poor people getting sick here. We’re talking about a much broader economic problem that can only be solved by joining forces with our countrymen.

2. The deeper research in the ample footnotes. I’ve found a lot of good stuff in there.

It’s not a very good piece of rhetoric, though. When Hacker talks to Real People, he sounds like an academic rather than a beat reporter. Indeed, if you read the footnotes, it turns out that most of the Real People conversations are from other people’s books. I don’t think Hacker has much power as a polemicist: he’s not going to talk with real people, or appeal to them very much either.

What I’d like is something like Jon Cohn’s Sick: scholarly and yet passionate. (For a taste of Cohn’s style, see his essay “Creative Destruction”). Hacker’s not quite there, but I’m willing to give his earlier Off Center a shot.