Toward Livelihood Insurance


Had Nobel Laureate Robert Shiller’s proposal for livelihood insurance been implemented, economic adjustment to the coronavirus pandemic would have been much smoother. Individuals hit especially hard economically, such as restaurant workers and small business owners, would have received payments based on the collective circumstances of those similarly situated. Because no such market existed, the government acted instead as social insurer. Unable to measure loss accurately, the government distributed payments to all taxpayers, providing fiscal stimulus but not effectively focusing relief on those suffering the most. This Article considers how the government might facilitate creation of robust markets in livelihood insurance. Such markets might smooth adjustment not only to pandemics, but also technological changes and unexpectedly weak economic performance in specific economic sectors, regions, or nations. Obstacles to creation of such insurance include limited ability of consumers to assess the benefits of this financial product and inability of businesses to obtain intellectual property protection. Short of creating a regime of mandatory insurance, which might easily be evaded, the government can facilitate such markets by collecting and distributing information, serving as a market maker, or temporarily subsidizing purchases.