One day I decided to make some bikes, and I live in a country with bike insurance. This means that if you ever lose the bike that you have or decide that you want another, you can trade it in and get another. I make excellent bikes and many people buy bikes from me. This country has the best bikes in the world and everyone owns them! What a grand and equitable system! Oh, but I forgot to mention one part, I charge $3000 for one of my bikes. To be sure, these are not electric or anything special. These are your typical bikes with a few speeds. But hey, I craft a fine machine and I expect to be compensated. Thanks to the national insurance plan, I have a fine way of life and people have their bikes. What is the problem?
That is a terrible misallocation of resources! Imagine what could have been bought instead of everyone having $3000 bikes. I could have bought a new desk for my office. The street that I live on could have had the potholes filled. There are so many problems with such a system.
Of course, this is just going to beg the question: what if this insurance is paid for mostly by the rich? They won't notice the difference, right? Well, first off, let's just assume that only taxing the rich will be enough to pay for such a system: what are the negative effects of doing this? Well, that will be discussed later.
Bikes and healthcare, they're all goods and they all can have the same economic problems.
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