Tuesday, May 6, 2008

Who Could Have Forecast This

There has been a very curious turn of events in the People's Republic of Massachussets. Price controls were partially removed on auto insurance. The cost of auto insurance in the state is falling. Socialist politicians and economists have been thrown into confusion and are, at the moment, studying this anamoly. How could this be?


Karl Marx posited both an unrealistic paradigm by which to interpret history and an equally unrealistic economic scheme of government control, though that has not stopped a large portion of the world's "elite" from mouthing Marx's sophomoric propositions. Ronald Regan once said that communists are those who have read Marx and Lenin and mouth their views, while capitalists are one's who have read Marx and Lenin and understand them. And with that in mind, there is this in the WSJ today:

Remarkable news from Massachusetts, of all places. Car insurance premiums are going down. For three decades a Bay State regulator has set the price of car insurance, leading to an annual tussle between insurers and consumer groups over the size of the increase. This led to some of the highest insurance rates in the country.

. . . During this exercise in central planning, the number of insurers dropped to 18 last year, from more than 70 three decades ago. But as of April 1, the state government decided to try a little experiment in the free market. We do mean little – proposed premiums must still be filed with the regulator, who can approve them or not. And many factors used to set rates in other states – such as credit history – are barred.

Even so, this modest experiment in price competition is already working to reduce costs for consumers. Progressive, the third-largest insurer in the country, entered the market May 1 with rates that are on average 18% below the old price-controlled rates. Overall, premiums in the state are due to fall nearly 8% this year as insurers adjust to a world in which they need to compete to attract customers instead of bargaining with their regulator for price hikes. Imagine: When you remove price controls, supply increases and prices fall. . . .

Read the entire article.

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