Private Language Fraud

When was the last time you read your health insurance or homeowner's insurance policy? Do you really know what you are getting? How about your automobile lease or mortgage agreement? Information asymmetry is one of the more nettlesome problems facing libertarian theory. In an ideal world there is symmetry between the information possessed by buyers and sellers; that is, both know exactly what they are getting out of the contract. When there is transparency in contracts, both buyers and sellers are usually satisfied. However, in the real world both buyers and sellers often conceal critical information from each other, and thereby gain a competitive advantage. For now, let's focus on information asymetry in favor of the seller. It's classic form is probably false advertising, where the seller induces the buyer to make a purchase by providing false information. Some instances of fraud in the inducement are easily decoded as simple theft: "I ordered a Mercedes and the car dealer delivered a Ford.!" The most difficult offers to decode can be found in those industries that have developed their own private languages: most notably, insurance, medicine, and law. Convoluted language obfuscates contracts and gives an unfair advantage to the sellers. Of course, if you do not know anything about these private languages you can pay someone to decode their contracts for you. But that's not always possible nor is it very efficient. A few libertarians are willing to allow government to enforce a degree of transparency in contracts and use the coercive power of government to force lawyers, physicians, and insurance salesmen to speak English. Others, argue that the free market will eventually weed out fraud in the inducement, as buyers become aware of these deceptive practices and competing companies offer transparency as an alternative. One of the problems with the free market solution is that we tend to grow acculturated to accept information asymmetry in certain domains. Many of us have been led to believe that the language of law, medicine, and/or insurance is unavoidably complex and therefore we must must simply TRUST our lawyers, physicians, and insurance agents. However, institutionalized gullability undermines the efficiency of markets and is very difficult to correct once it takes root. Therefore, in the final analysis we cannot forget the libertarian motto: "Buyer Beware." However, reliance on "Buyer Beware" is difficult in country plagued by functional illiteracy. If you can't read a newspaper you certainly can't read your health insurance policy.

Freedom's Philosopher