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J. Donald Moon on Unemployment - Dictionary of Arguments

Gaus I 212
Unemployment/welfare state/institutions/Moon: (...) private firms and voluntary organizations are poorly equipped to protect individuals from income loss due to unemployment. Non-governmental risk-pooling schemes work best when the chances that one person will suffer a given condition - say disability or death - are more or less independent of anyone else's chances, and when
the overall risks facing the group are known. Under these conditions, each individual can pay into the fund, which can accumulate enough to provide beneflts to the unfortunate.
But if the risks in question are not independent, if one person's suffering increases the likelihood that others will suffer as well, then a private scheme may collapse, as more and more people shift from being contributors to being claimants, and the group's reserves are depleted. Unemployment is (in part) cyclical, which means that in a downturn some people lose their jobs, and as a result reduce their consumption, thereby leading other firms to lay off workers, in an expanding cycle.
Thus, a private firm or voluntary association offering unemployment insurance would run the risk of going out of business as fewer and fewer people held jobs (and so paid into the fund) and more and more people lost their jobs, and so became claimants.
Because state-sponsored schemes, unlike private associations, are able to run deficits, and to the extent that these deficits actually contribute to expanding demand and so reducing unemployment and stabilizing the economy, they can deal with problems that non-state schemes cannot. >Welfare state/Political philosophy, >Minimal welfare state/Friedman, >Public goods, >Economic cycles, >Institutions/Barr.

Moon, J. Donald 2004. „The Political Theory of the Welfare State“. In: Gaus, Gerald F. & Kukathas, Chandran 2004. Handbook of Political Theory. SAGE Publications

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Moon, J. Donald
Gaus I
Gerald F. Gaus
Chandran Kukathas
Handbook of Political Theory London 2004

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