Fee for Service Superheroes: Will Privatization Work?

You know, Spidey jests here, but what if superheroes did actually start changing fees for their services to those they save?

Obviously, this lends itself to moral arguments concerning the nature of superheroes as selfless arbiters of justice and champions of the human spirit. After all, how can ordinary humans come to respect a hero if that hero profits financially from his or her potential misfortune?

But let's think about Spider-Man and the residents of New York City for a minute. Spider-Man is essentially a public good offered to those living in New York (and occasionally those in Boston, as depicted above). To be sure, let's recall that a pure public good is generally regarded as a good that is non-rival in consumption, meaning that one person consuming the good does not in any way affect another's opportunity to consume it, and non-excludable, meaning that there is no way that anyone can be denied access to this good. A typical good that is considered a pure public good is national defense.

To be technical, Spider-Man is not really a pure public good, but rather an impure public good. He satisfies the aforementioned conditions to an extent, but not fully. Indeed, Spider-Man is non-excludable to NYS residents. He is an equal opportunity savior and does not discriminate against any citizen. All he requires is that they be in need of his assistance. However, unlike national defense, he is not really non-rival. He is only one, super-powered man. If the Green Goblin is throwing a citizen off of a high-rise building on one side of town and Doctor Octopus is blowing up a science facility on the other side of town, Spidey generally can't be at both.

And this is where the problem is. As it stands, the social costs imposed by Spider-Man's existence are paid for by the public. These social costs mostly take the form of negative externalities caused by his battles with evil. By this I mean the costs of repairs for all the damaged buildings, villain escalation, and others. It is extremely likely that the government responds to these externalities by imposing higher taxes on the public, particularly if they are subsidizing the costs of construction and repair.

This also means that there could be a moral hazard problem. Living in an area in which you know there exists such a public good might entice you to alter your behavior. In the case of Spider-Man and New York City, residents might elect either to live in more dangerous neighborhoods or engage in more risky behavior, knowing that they have a protector who has a high probability of saving them in any unfortunate circumstances.

You might claim that this is far-fetched. Why would anybody choose to throw themselves in harm's way? Well, it turns out this happens pretty often in comics. A perfect example is Lois Lane. Since the arrival of Superman, Lois has gone on more risky assignments for The Daily Planet, has kept more dangerous company, and has generally had near-death experiences at the hands of known thugs or villains to a significantly larger extent. Many citizens, like Jimmy Olsen, have even joked that she is nearly invulnerable, since it seems as though Superman had become her personal bodyguard. In the film Superman II, she even jumped off of Niagara Falls (and out of the Daily Planet in the Richard Donner version) with full certainty that Superman would save her.



This behavior could be particularly taxing on a hero like Spider-Man and could have catastrophic consequences on New York City. We already know that Spider-Man has trouble balancing his duty as a superhero with his personal life and part-time job. Even when he took up the job of crime fighter full-time in Mark Waid's recent "24/7" storyline, he was still incapable of being at every crime.

This would only be exacerbated if more and more people continued to engage in needlessly risky behavior. And this means that Spider-Man might one day have to start picking and choosing, neglecting certain crimes in order to stop the more high-priority ones. Or his attention towards the little ones might cause him to miss the big ones. One day, Spider-Man will be off saving some guy who thought he could jump from one roof to another on the Upper West side, while Mysterio captures Mary Jane and throws her off the Brooklyn Bridge.

The answer to these problems is privatization. Suppose that Spider-Man decides to charge for his services. This way if a Lois-like reporter was a frequent consumer of Spidey heroics, she would have to pay more for them. This could create a market for Spider-Man such that individuals would utilize an equilibrium quantity of him based on what they would be willing and able to pay for him. It would effectively reduce any potential moral hazard problems, as individuals would be willing to take less risks, knowing they would have to pay for those risks later.

Not to mention, Spidey would be able to make some cash on the side, which he might even use towards more effective means of fighting crime (though likely he'll just buy some air conditioning for his apartment).

Is privatization a good idea? Probably not. Once again, there might be some pretty disastrous effects for morale if superheroes only saved people for a fee. In addition, it would mean that villains would be successful more often. Further still, it is likely that the low-income populations will not be able to afford superhero services and would hence be excluded from the market. I generally think this is a bad thing, especially for something that could mean the difference between life and death.

Maybe Spidey can find ways to get around this. Maybe he can charge only people above a certain income. Or maybe he can charge by the nature of the situation. If somebody jumps off a roof, maybe he should pay. But if Green Goblin attacks, it's on the house. Obviously, however, this raises issues of equity.

Superhero privatization is a pretty ridiculous concept. But it's fun to consider. What do you think?

share on: del.icio.us digg reditt su

Supernatural Disaster Insurance 2: Insurance Harder

Cover from Superman #677 by James Robinson and Renato Guedes. Cover by Alex Ross.

Thank you all for your wonderful comments on the earlier Supernatural Disaster Insurance post. As promised, here is the sequel, equipped with some of my views on the matter.

There were three systems I had proposed in the first post: a full public system, a public/private mix, and a solely market-based system.

The merits of the market-based system are that it would allow individuals to choose the insurance system that they feel is most appropriate for their situation. It would also minimize public taxes and curb any potential moral hazard problems. The problem here is that, first of all, it is likely that the low-income individuals would be boxed out of the system. With the frequency with which supernatural disasters occur in the comic book world, premiums would likely be very expensive -- especially in Metropolis, New York, etc. It is also generally regarded that the income disparities in cosmopolitan cities in the comic world world are considerable and only widening by the month. The poor in Gotham can barely afford food (one of the factors which contributes to the significant crime rate in the city). Hardly would they be able to afford insurance on their homes. And that means that if Two-Face blows it up, time to get a new home!

The other issue is that I think there are potential adverse selection problems. A commenter, Ajay, pointed out that this is unlikely to occur with the higher-income people since they tend to have more property and assets and hence more expected loss (and more reason to insure against those losses). This is a great point. But consider other factors. What about region? In a voluntary system, it is likely that individuals living in particularly dangerous neighborhoods will purchase insurance, especially if premiums are not underwritten. People living in neighborhoods that don't see many pumpkin bombs or batarangs on the other hand will likely opt out. And those populations are not insignificant. Superhero violence, though having the potential to occur at any given neighborhood, does tend to be localized. How many times has the Daily planet been destroyed? How many times has Spiderman fought around Times Square? Let's face it -- certain neighborhoods are like tractor beams for superviolence. Hence, those choosing to opt out of the insurance system, feeling they are generally safe from harm's way, will cause average premiums to skyrocket, will impose an extra cost burden on those that need insurance the most and will further shrink the market.

A public/private system is an interesting solution because it will enroll more of society's low-income populations. Considering a "catastrophic" mechanism, the lower-income populations would be able to insure against major damages to their their property. So if I were living in New York, I would feel safe knowing that my home is protected against any potential throwdowns between the Green Goblin and Spiderman. If, however, I live in a neighborhood where lots of cars get blown up by pumpkin bombs, I might consider some supplementary insurance for the cheaper stuff. Again, though, unless there is a mandate, I think you would likely see similar adverse selection problems.

I think the solution that makes most sense is for the government to cover all costs imposed by supernatural disasters. The public would pay higher taxes, which would go towards a fund to cover these sorts of damages. You might argue that this could engender a moral hazard problem, as pointed out by commenter, Carl. I doubt this would be a huge problem. I don't see what kind of insurance fraud anyone is willing to commit that would pit them against the Joker. There are potential lives at stake with supernatural disasters. I don't think that the people of Metropolis would start flocking towards highly concentrated super-active areas simply because they know the government will pay for their toaster.

I tend to view this government spending as not all that dissimilar from national defense and security spending. For the most part, superheroes are government-approved (with exception of vigilantes like Batman). Consider the case of Superman. The Metropolis government, law enforcement agencies, and public have no problem allowing him to take residence in the city in exchange for their protection. It is a contract between him, the public and the government: Superman has free reign to conduct his business against evil-doers, while the police turn their heads barring any significant indiscretions. In exchange, the city is protected under the Man of Steel's umbrella. The cost of this security is the cost that the public pays towards repairing the negative externalities (destruction).

Now if only we had some way of curbing the destruction caused by Superheroes. Perhaps we do.

share on: del.icio.us digg reditt su