Recently Gwen Moore, a congresswoman from the great state of Wisconsin said, “We need to continue to seek creative market-based solutions to problems.” Sadly, there was not a sliver of market in what she was referring to.
It was a bill she sponsored in which, if passed, FEMA would conduct a study analyzing the feasibility and benefits of a community-based flood insurance program. What is this beautiful idea of market-based community flood insurance? Well, you see, it’s where the local government purchases a flood insurance policy for their jurisdiction funded by property taxes or a utility-esque fee structure.
This is what “market-based” has become—a term that means almost nothing. Here, it means taking a federal program and shifting it to more local government structures. But clearly there’s not a market in sight. Perhaps devolution would have been a better choice of words.
That being said, the type of program that Congresswoman Moore’s sponsored bill would investigate is actually an improvement over the status quo—a federal program. But even some people have referred to that as market-based.
The federal flood insurance program was recently found to be fiscally unsound. It was amended so that higher premiums are phased in over several years to bring the price of “insurance” more in line with the risks of living on a coast. I suppose what they’re trying to get at is bringing the prices people pay into a federally funded program closer to what some hypothesize they would be under a market structure. To call that market-based is quite a stretch.
What’s odd is that in both these cases, people are using “market-based” to try and impart a positive spin on their political efforts, even though any actual market activity in the flood insurance world is hard to find. The term “market-based” functions, sadly, as an empty marketing phrase. It’s been so abused by people in elected office that any program that doesn’t give stuff away for free is now “market-based.”
People also often use the phrase when they’re trying to disparage something they don’t like. The most obvious example of this is when people disparage the current/old broken health care system in the U.S. as market-based when nothing could be farther from the truth.
John Cochrane in his essay After the ACA, has a good example of a rule in the current “market” for healthcare:
“In Illinois as in 35 other states, every new hospital, or even major purchase, requires a “certificate of need.” This certificate is issued by our “hospital equalization board,” appointed by the governor and, like much of Illinois politics, regularly in the newspapers for various scandals. The board has an explicit mandate to defend the profitability of existing hospitals. It holds hearings at which they can complain that a new entrant would hurt their bottom line.”
Clearly a system such as this is a far cry from something market-based. And yet, people have claimed just that. Here’s President Obama: “The market alone cannot solve the problem—in part because the market has proven incapable of creating large enough insurance pools to keep costs to individuals affordable.”
What he’s claiming may be true, and an accurate critique of the old health care system, but it certainly isn’t a critique of a market.
To be fair, sometimes people spend more time on political nomenclature than creating actual solutions–think of liberal, Liberal, conservative, neo-conservative, progressive, etc. etc. These debates get old and pointless very quickly. But the case of the term “market-based” is actually rather important.
When people misuse it, they’re not using a made up word to describe an ethereal political idea or the general leanings of a coalition. “Market-based” actually means something. By using it incorrectly, and as the examples above show, ascribing to it the opposite of its meaning, it gives a bad name to solutions that actually might be market-based.
And so, at this point, correcting its usage isn’t out of the question. Write a letter to the editor when a journalists slips, or to a congressperson when they use it incorrectly. Or perhaps it’s best that whenever someone proposes an actual market-based solution, they should use the phrase “market-based (no really)” in all of their writings, speeches, and informal drunken discussions.