Alex Tabarrok highlights an interesting study highly relevant to the debate on health care in the US:
In an interesting paper, Aghion, Algan, Cahuc and Shleifer show that regulation is greater in societies where people do not trust one another. The graph below, for example, shows that societies with a greater level of distrust have stronger minimum wage laws. Note that the result is not that distrust in markets is associated with stronger minimum wages but that distrust in general is associated with greater regulation of all kinds. Distrust in government, for example, is positively correlated with regulation of business. Or to put it the other way, trust in government (as well as other institutions) is associated with less regulation.
That has some interesting parallels in the financial meltdown, but it is healthcare that is on my mind at the moment. Much of the debate against comprehensive coverage (and, thus, regulation) seems to stem from distrust of government. The thinking goes–as I understand it–that government cannot do anything efficiently, and I don’t want to pay for waste or crack moms when I have a job and pay my bills and… That’s not only distrust in government but also distrust in fellow citizens.
Government has given plenty of cause for distrust, and I suppose the current regime in Iran represents an extreme case. The study is something to ponder as the health care debate goes forward, and one question for which I have not even a guess is: how might this apply to public-private partnerships?