> "we WANT businesses without revenue for many months... to fail, their capital be put to more productive use and moral hazard avoided"
tell that to every startup that spends many months, sometimes years, without revenue, and certainly with negative income.
more directly, it's difficult to boil down misallocation to simply being out of revenue for some months, although econ 101 might indicate so (actually it's price x quantity at the margins, but we'll go with the simplistic interpretation here).
but more interestingly, inefficiencies are actually a key part of markets and capitalism. it takes many, distributed participants doing very similar things to get pricing right. many companies start and fade away. those are in fact inefficiencies in the ruthless game of survival of the fittest. in a perfectly efficient world, you'd only need 1 try to get it right.
the better analysis is to determine which factors in addition to to revenue to use to determine misallocation. if i had to hazard a guess, we probably want, as a policy matter, businesses to be able to weather up to a year of economic shock, not just a few months, without introducing any concerning moral hazard economy-wide, while providing the necessary resilience and stability.
regarding insurance, you're basically saying the businesses should pay for systemic risks, rather than all of us, but that risk is not idiosyncratic to just those businesses. it's systemic, so the system should bear them, i.e., the government (as representative of society as a whole).
tell that to every startup that spends many months, sometimes years, without revenue, and certainly with negative income.
more directly, it's difficult to boil down misallocation to simply being out of revenue for some months, although econ 101 might indicate so (actually it's price x quantity at the margins, but we'll go with the simplistic interpretation here).
but more interestingly, inefficiencies are actually a key part of markets and capitalism. it takes many, distributed participants doing very similar things to get pricing right. many companies start and fade away. those are in fact inefficiencies in the ruthless game of survival of the fittest. in a perfectly efficient world, you'd only need 1 try to get it right.
the better analysis is to determine which factors in addition to to revenue to use to determine misallocation. if i had to hazard a guess, we probably want, as a policy matter, businesses to be able to weather up to a year of economic shock, not just a few months, without introducing any concerning moral hazard economy-wide, while providing the necessary resilience and stability.
regarding insurance, you're basically saying the businesses should pay for systemic risks, rather than all of us, but that risk is not idiosyncratic to just those businesses. it's systemic, so the system should bear them, i.e., the government (as representative of society as a whole).