The GEICO gecko mascot

Libertarians and conservatives often talk about the importance of deregulation in order to free up the economy and create more prosperity. However, regulations often solve very real problems and conflicts that otherwise might be difficult to deal with. For example, how do we incentivize drivers to drive safe? The mere threat of an agorist lawsuit against the perpetrator of an accident is not enough to get a driver to be safe. And what about pollution? Surely, courts could rule a class action lawsuit against a nearby factory belching smoke, but there are a lot of costs on both ends. Insurance solves almost every single one of these issues. In fact, some have claimed that government itself is an insurance program. Already in the hampered market we live in, insurance exists and protects us from each other and acts of God.

Insurance is a bet against a risk. There is a small possibility that something might happen to us, so we pool finances with others in order to have the whole lot available if something horrible befalls us, whether an injury, accident, or class action lawsuit. Insurers, of course, have to mitigate their own risks that an insuree might make a claim. To do this, they institute market-based regulations. You dont have to comply, but if you dont, you open yourself up to liability.

Several years ago, my family lost our home insurance because of nonpayment. After my dads death, my mom wanted to get us reinsured in the event of an accident. An agent from the company came by to inspect our property and make recommendations. The walk would have to be repaired, rotting broken garage doors replaced, and the stairs on the deck needed a solid handrail. Among other things, these were regulations enacted on us to keep our property insured. Unlike with government building codes, which are backed by the force of chains, guns, and imprisonment, we had the choice to be insured, find another provider, or not (and face potential liabilities if someone gets injured).

With cars, it would be easy to implement something similar. In a libertarian society, anyone can buy a car and drive, but a private highway operator might require vehicles and/or drivers be insured to use the road. Local free roads might not be so regulated, but it would be wise to carry insurance in case of an accident caused or received. Insurers can issue basic standards to get coverage, and might offer discounts if your car is inspected annually, if you take classes periodically, and for a good record. Of course, you can still go without, but you are liable for damages in those private courts.

Pollution, I have found, is one of the toughest things to deal with in a free market, but with enough thought, its easy to solve. A business might carry insurance against lawsuits for any pollution, etc. The provider then would institute regulations and protocols for the business to follow. Filters on smokestacks, proper disposal of waste, cleanup of tolerated damages. The business, again, has the choice whether to be insured or not. However, they face the possibility of billions in damages for harming the people and businesses around them. On the other end, another business or homeowner might carry insurance against being polluted. Its very expensive and difficult to fight a lawsuit against a big business on ones own, so it makes sense to, again, pool resources and have the insurance company fight for you. They wouldnt regulate you much, but would make it possible for you to get justice.

If anything, private regulations will be stricter and better enforced than government regulations. The profit incentive on the part of those big bad insurance companies ensures that they do their damnedest to reduce their payouts. A healthy balance is achieved between their efforts and the freedoms desired by their customers. There are numerous examples beyond what is outlined here. I plan to write a book one day expounding this view and providing plenty of examples based on real-world applications right here in our current system. Regulations are neither good nor bad; the heart of the matter is choice.