Banking Sounds More Interesting in German

Megan continues to work on her novel:

Heroic efforts by city workers saved the Port-O-Potties, but could not save Dahlia and her customer.

The memorial service, held at the nearby Church of the Holy Placebo, is sparsely attended. At the door, Dr. Feelgood holds Mae Rose's hand. "She was so young. And such a good earner."

Mae Rose sobs.

"He's creepy," says Muffin, as they walk to the car.

"I just don't know what we're going to do without Dahlia's cash," Mae Rose says, weepily.

"We can charge people fees to get rid of their cars," says Muffin, pausing briefly to contribute to the Church of the Holy Placebo's front lawn.

Megan pauses, and shifts uncomfortably in her chair. Ouch, she thinks. Mr. Joyce is an awesome writing coach, but a bit hard on the buttocks. She makes a mental note to change her 'safe' word to something other than 'Ulysses'.

Meanwhile, Rosa Behaarte-Beine brings up her favorite subject at today's 'Sunday Brunch with Parvelescu'. "Why doesn't anyone talk about the positive aspects about life in the GDR?" she asks between bites of gluten-free non-GMO granola.

Parvelescu sips his coffee. "Like what, for instance?"

"Well, free health care, for one."

"Bismarck introduced universal health care to Germany in 1883. The Commies can't claim credit for that."

"Very little crime."

"You're right about that, and the police were very responsive. You didn't even need to call them. Just say 'Erich Honecker is a moron' in a loud voice and they'd show up in no time."

"No pointless consumerism."

"That's true, too. There was nothing to buy. Let me guess, you're from West Berlin?"

"Ja, Zehlendorf."

"Your mother and father vote SDP?"

"No, they're Greens."

"And you were born after the wall came down?"

"Ja, 1995."

"So you don't really remember the Wall?"

"Why does everyone complain about the Wall? Israel has a Wall."

"The distinction being that while Israel has a wall to keep terrorists out, the Berlin Wall was built to keep citizens of the GDR in. Because wanting to leave the GDR was the ultimate crime, punishable by death. Those who wanted to leave the GDR were, in effect, saying that the GDR was not paradise, a belief that could not be countenanced."

Rosa shrugs. "I suppose you're going to complain about the Stasi. It's kind of hypocritical for Americans to criticize the Stasi when you have Guantanamo Bay and NSA wiretapping."

"With the 'subtle' distinction that the GDR put its own citizens in Torgau for thought crimes, while Guantanamo Bay holds stateless individuals who admit they want to kill and maim American citizens." Parvelescu uses his fingers to emulate "square quotes" around the word 'subtle'. "And whether you agree with the NSA's tactics or not, it's inarguable that they act in the interests of all Americans while the Stasi -- whose motto was 'Sword and Shield of the Party' -- was an instrument of the Party and not the state. The Stasi would be equivalent to a large security apparatus working for the Republican Party to suppress political action by Democrats."

Parvelescu is on a roll.

"The GDR justified harsh measures against those who wanted to leave by citing the state's investment in education and training. That is the essence of the socialist bargain, no? We pay for your education, you belong to us."

Parvelescu leans back triumphantly, relishing the pleasure of flattening a first-year student. Not coincidentally, his new book The Socialist Bargain goes on sale next week.

Lily whispers something in Roderick's ear, something that sounds like "chuck" or "luck". Roderick just smiles. "Maybe later," he says, which for Roderick is code for "No, thank you."

After dinner, Roderick calls Mr. Smiley.

"Hello?"

"Hello, Mr. Smiley, this is Roderick."

"Hello, Roderick."

Roderick talks about his day, ending with Parvelescu's demolition of Rosa.

"Ah, the Berlin Wall," says Mr. Smiley, waxing wistful. "I was there with Miss Kitty the night the Wall came down. We made passionate love in the Potsdamerplatz near the wall. I went looking for the spot last summer, but there's nothing there but a HypoVereinsbank."

Hmm, thinks Roderick. Hypovereinsbank. An Aktiengesellschaft fur Konten, Kredite & Finanzierung, Geldenlage & Vorsorge. Banking sounds so much more interesting in German.

A Useful Literary Device

Over brunch, Mr. Parvelescu opines on politics with Roderick, Lily Chang and Rosa Behaarte-Beine, visiting student from Germany. Rosa is a member of the Green Party, which would ordinarily make her something of a laughing stock on campus, but since she is somewhat hot the Old Ivy students tolerate her views on global warming.

They sit in the Dining Room of the Old Ivy Inn, near the fireplace. Outside, an icy wind blows from the Northwest. A cold front moves in, threatening to add several inches to the record snowfall this winter.

Earlier this week, Rosa tried to organize an anti-fracking demonstration at College Hall, but nobody showed up. Her timing was unfortunate; the demonstration coincided with several other events, including a lecture on "America's Natural Gas Boom" sponsored by the Political Economy Club; one of Molly's nude modeling sessions for the Human Figure Workshop; and a performance of the first of Haydn's "Apponyi" string quartets by the Old Ivy College String Quartet.

On that last point, the reader should note that if one is a devotee of the string quartet, one should not miss a single event in the Old Ivy College String Quartet's Haydn cycle. Six years ago, the quartet lost its funding when its donor, Mr. Lobkowitz of Beauneville, died and left his estate to care for his cats. Mr. Fermata, Dean of Music, told the members they would have to disband without additional funding, but agreed to support them for "one last Haydn cycle." At the current rate of one concert per month -- when college is in session -- the Quartet expects to wrap things up some time in 2016.

Meanwhile, nobody who has attended the first fifty-four concerts wants to miss the first of the "Apponyi" quartets.

Another reason for scant attendance at Rosa's demonstration: the administration, in solidarity with Rosa's opposition to use of fossil fuels, turned off the heat in College Hall. Their reasoning, which most on campus considered flawless, was that opponents of fossil fuel would not wish to be warmed by them. The result, of course, was that College Hall was almost unbearably cold. Rosa stood in the lobby, shivering, holding her sign ("Profits, No! People, Yes!") in one bemittened hand and banging a tambourine with the other bemittened hand for one hour. Roderick was actually kind of impressed with her performance -- he saw the last of it on the way back from the Political Economy Club and invited her to Sunday Brunch with Parvelescu.

Today's topic: the direction of American politics.

"Socialism," says Parvelescu, slurping his soup. Parvelescu is well-known for his concise and pithy commentary.

"Yay!" says Rosa.

"Oh, not that kind of Socialism." Parvelescu slathers butter on a roll and bites it.

"What kind of Socialism?"

"Free Stuff Socialism. That's where elected officials make timely and visible promises in return for votes, then actually deliver on small things like free phones and EBT cards."

"How does that differ from regular Socialism?"

"There is no planning, and no concern for actual human need. Nobody can live on a free phone and an EBT card; it's just a nice little gift, and since voting costs nothing voters can be bought cheaply."

"Isn't that bad for the economy in the long run?"

"Nobody knows what's good for the economy in the long run."

"Shouldn't we encourage people to be self-sufficient?"

"Think of democracy as a policy market. I prefer Beethoven to Lady Gaga, but in a mass culture Lady Gaga knows how to sell. I prefer Libertarian policies to Socialism of any kind, but Free Stuff Socialism appeals to the ninety-nine percenters who, by definition, outvote the one percenters. It doesn't matter if taxing the rich is bad for the economy; it's good politics."

Meanwhile, in her room, Megan continues to work on her novel.

"Where's Dahlia?" asked Mae Rose, several days later. The sinkhole has expanded, and now threatens the park out back.

"She's over by the Port-O-Potties, blowing some guy," says Muffin, who can't keep a secret.

"Damn, that girl can earn," mutters Mae Rose, glaring at Babs and Celia, who are sprawled in lounge chairs. "Not like some people around here."

"I'm working, Mama" says Emily, looking up from one of her books.

"You call that work?" says Mae Rose. "If you had any gumption, you'd be out earning some cash like your sister and not filling your head with them fancy books."

"But Mama," protests Emily, "I need a degree if I want to be a gender activist."

Muffin, bored with this conversation, runs outside to contribute a transformed version of this morning's dish of Alpo to the landscape.

Meagan pauses, reads that last line and smiles. Mr. Joyce, the writing professor is right; a talking dog is a useful literary device.

Megan's Wait

Lectures start tomorrow at Old Ivy. Megan works on her novel.

"Arf, arf, arf, arf, arf, arf, arf, arf, arf, arf!" says Muffin. "Arf! Arf, arf! Arf, arf, arf, arf, arf, arf, arf, arf, arf!"

"Muffin, shut up!" screams Mae Rose, throwing a shoe. Muffin deftly avoids the thrown shoe and runs out back, where Alice glides lazily on the rope swing.

"Arf, arf, arf, arf, arf, arf, arf, arf!" Muffin continues to bark, seemingly at nothing.

Alice bestirs herself slightly on the swing. "Ma! Shut up the fucking dog!"

Suddenly, there is a queer swishing noise, and the sycamore disappears into a sinkhole with a ploop, taking Alice with it. Muffin, being defter at foot than Alice, escapes.

Mae Rose runs out of the house and stares at the gaping hole where her back yard used to be. "Holy shit!" she exclaims.

"Don't say I didn't try to warn you," says Muffin.

"Now I'll never be able to sell this dump," says Mae Rose.

At the memorial service for Alice, Dr. Feelgood offers a eulogy. "She was lovely, big-boned, lazy, ignorant and a slut, and had no redeeming qualities to compensate. In the end, she was taken by a sinkhole, which seems ironic in a way that I can't quite articulate."

A woman in the church sobs. "So young, so young..."

Muffin rolls her eyes. "Please..."

Dr. Feelgood grasps Mae Rose' hands. "I'm so sorry for your loss."

"You mean Alice? At least she was insured, which I can't say for my house."

Megan's phone rings. It's Roderick. "Hi Megan."

"Hi Roderick." Megan's heart goes thumpety-thump.

"The Klemperers are over again and we need a fifth for Geschichte der Schweizer Eisenbahnen. Can you join us?"

"Is it the strip variation?"

"Yes." The Klemperers live dangerously, and play a mean game of Geschichte der Schweizer Eisenbahnen.

Megan hesitates. "I don't know...I really don't get that game." Last Sunday Megan lost big time, being completely naked before any other player had removed a stitch of clothing. Otto Klemperer had proposed upping the stakes to spanking, but Roderick saved Megan's bacon by feigning a need for bedtime.

"Just follow my lead and don't worry," says Roderick. "You can sleep over if you like."

That last point sold Megan. "Be right there," she says, breathlessly.

Megan arrives at the Smith house a few minutes later. The game is already set up. Berolina is blinged up, as is her custom when she plays strip Geschichte der Schweizer Eisenbahnen. Once again, Molly feels like living dangerously and wears a single garment, a sundress with no underwear. Her shoes are somewhere upstairs.

"Dealing!" says Otto, shuffling the cards and distributing five to each player. He places the remainder of the deck in the center and turns the top card face up. "Ach! Ze SBB CFF FFS Ae 4/7. Player to ze right of ze dealer remove one thing, pliss!" He leers at Megan, who sits to his immediate right.

"What? Already? We just started!" protests Megan, who didn't have time to bling up.

"It iss ze rules, you vill remove one item, pliss."

"Oh all right," says Megan, pouting as she removes one shoe. "I really don't get this game."

Play continues; Berolina, Roderick and Megan drop out of the hand, leading up to a showdown between Otto and Molly. Otto licks his lips. He's holding the BAM Ge 4/4, an almost unbeatable card; he imagines Molly naked, though he hardly has to imagine since she's sitting cross-legged and he can see her blonde bush.

"BAM!" he says, slapping down his card, leering expectantly.

Molly gazes at it for a moment and, hand trembling, reaches for the top button on her dress. With her other hand, she plays her card, the BLS Re 465. "Rated at 6400 kW, I believe the BLS Re beats the BAM Ge 4/4, which produces a mere 3200 kW."

Stunned, Otto stares at the card for a minute, then slowly removes a shoe.

"Wow!" says Roderick to Molly, admiringly. "How do you know so much about Swiss railway locomotives?"

Molly shrugs. "I studied."

After an hour of play, Megan and Otto are completely naked, while Roderick is down to his boxers and Berolina has removed all of her bling. Molly remains fully dressed, or at least as fully dressed as she started.

It's Molly's turn to deal. "So how does the spanking variation work?"

Otto and Berolina claim to be tired, and the game breaks up.

Shortly thereafter, Roderick lies in bed with nude Molly curled up on his left and nude Megan curled up on his right.

"Roderick?" whispers Megan.

"Yes?"

"When are you and Molly going to do it, so then we can do it?"

Roderick, mindful that Molly is still awake, tries to be tactful. "Oh, I don't know. We have another eighteen months before the deadline."

"Okay," says Megan, snuggling up against Roderick. "I'm waiting."

Megan's Novel

Megan works on her novel:

Mae Rose lives in a prewar bungalow on a tree-lined street with her five lovely but big-boned daughters (Alice, Babs, Celia, Dahlia and Emily) and a very intelligent Dandie Dinmont Terrier named Muffin. Alice, Babs, Celia and Dahlia are lazy and ignorant, while Emily works very hard at school to no avail because she is just plain stupid.

Pausing, Megan reads that passage to herself and smiles. Good characterization, she thinks. Now to the setting.

Two grand old sycamore trees -- one in the front and one out back -- shelter Mae Rose's bungalow from the Florida sun. The sycamore out back, which the girls lovingly refer to as "the big tree", has a rope swing attached to one of the branches. If you look at the trunk you can read the names of Alice and Babs' many boyfriends, but none for Celia because she is too fat and ugly, and none for Dahlia because she doesn't give it out for free. Also none for Emily because she is too busy with fruitless study.

There are many other interesting things in Mae Rose's back yard, but be careful where you walk lest you step in one of Muffin's contributions to the landscape.

The property abuts on a little park with many poinciana plants and a row of Port-O-Potties funded by a Federal UDAG Grant.

Megan smiles. She likes that line. She closes her eyes and takes a deep breath to relax. Writing is hard work.

One day, Mae Rose, dressed in a floral muu-muu, stands on her back deck smoking a cigarette waiting for Muffin to contribute to the landscape. Suddenly, the doorbell rings. "Emily!" shrieks Mae Rose. "Answer the gawdamn door!"

Setting aside the Susan B. Anthony doll she found in the neighbors' trash, Emily shuffles down the hall to the door; she has a club foot, and Mae Rose's ex-husband refuses to pay for corrective surgery. "I have to pay alimony, child support and fix her gimp?" he complains. "Forget it!"

Emily opens the door; a man wearing a white shirt and tie stands on the stoop. He holds a clipboard. "Hello, may I speak with your Mom or Dad", he asks pleasantly.

"My Dad ain't here."

"Okay, can I speak to your Mom?"

Emily screams in the general direction of the back yard. "Mom! Some guy wants you!"

Mae Rose screams back. "Who is it?"

"I dunno."

"What does he want?"

"How the fuck should I know?"

"Tell him to wait a minute!" Muffin needs a little more time.

Dahlia appears next to Emily. "Hi, I'm Dahlia," she says to the man.

"Hello, Dahlia."

"I'll blow you for twenty dollars."

"Um, not right now, I'm working."

"This evening, around eight, then? I'll be out back, near the Port-O-Potties."

Mae Rose appears. "Whattaya want?"

"Hello, Mrs. Owens, I work for the city, and I'm checking for sinkholes. Do you have any sinkholes to report?"

"You're checking for what?"

"For sinkholes."

"What's a sinkhole?"

"Ah," says the man, warming to his favorite subject. "A sinkhole, also known as a sink, swallow hole, shakehole, swallet or doline, is a depression or hole in the ground caused by some form of collapse of the surface layer. Some are caused by karst processes—for example, the chemical dissolution of carbonate rocks or suffosion processes in sandstone. Sinkholes may vary in size from 1 to 600 meters both in diameter and depth, and vary in form from soil-lined bowls to bedrock-edged chasms. Sinkholes may be formed gradually or suddenly, and are found worldwide. The different terms for sinkholes are often used interchangeably."

"Oh," says Mae Rose. "We ain't got none of those."

"Do you mind if I check out back? It will just take a few minutes."

Mae Rose shrugs. "Knock yourself out. Watch your step." She slams the door.

Retrieving his sinkhole detector -- a long stick -- from the truck, the man walks gingerly around the back of the house and towards the sycamore. Muffin greets him. "Hey, mister!" says Muffin. "Nice stick you got there. Want to play fetch?"

"Wow, a talking dog," says the man.

"And talking humans, too," says Muffin. "Isn't that precious."

"I'm checking for sinkholes, seen any around here lately?"

"No, but come back Friday morning, we're expecting a doozie."

"Hey, thanks for the tip."

"Don't mention it. Also you just stepped in one of my larger works from last March."

Megan's phone rings. It's Roderick.
"Hi Megan."

"Hi Roderick."

"Can you come over? The Richters are here, and we need a fifth for Geschichte der Schweizer Eisenbahnen. We're playing the strip variation."

"I don't really understand how to play that game, but of course I'll be right there," purrs Megan.

In the Smith's living room, Roderick sits on the floor with Molly and the Richter twins, Otto and Berolina. Berolina has prepared for the game by wearing many layers of clothing, plus bling. Molly wears a single garment, a blue dress that she ordinarily would never wear, but Molly likes the challenge of high-stakes strip Geschichte der Schweizer Eisenbahnen.

The doorbell rings; Roderick answers. It's Megan.

Soon It Will Be Christmas

"One cannot describe the status quo ante for the U.S. health care system -- the system that existed before Obamacare -- as a free market in health care. Health care and health insurance are among the most highly regulated industries, and in the case of health insurance the regulatory regime is a fragmented patchwork of conflicting state regulations."

Roderick pauses, and sips from a glass of water on the lectern.

"And so, one cannot characterize problems in the old system as market failure. It would be more apt to describe it as regulatory failure, or government failure."

Members of the Old Ivy Political Economy Club applaud Roderick's paper enthusiastically. Roderick beams, and waves to the crowd as he leaves the lectern. Lily Chang winks seductively as she passes him.

"Thank you, Roderick, For our next presentation, Penny Whiffenpoof will deliver her empirical study of marginal pricing in the Lake City S&M market. Penny?"

Penny strides onstage dressed in a black leather jacket, thong and high heels. She carries a whip.

Backstage, Roderick calls Mr, Smiley.

"Hello?"

"Hi, Mr. Smiley, it's Roderick."

"Hello, Roderick." Mr. Smiley is always pleasantly surprised when Roderick calls, because he does not look at the little thing on the phone that says who is calling. Smileys think it's impolite to check to see who is calling.

"I just delivered part four of my paper on health insurance."

"That's nice."

"Also, Christmas is coming soon."

"Yes, I suppose so," says Mr. Smiley matter-of-factly. Mr. Smiley doesn't seem too excited about Christmas because in Smileyville, every day is either Christmas Day, Christmas Just Happened or Soon It Will Be Christmas.

"What would you like for Christmas?"

"Oh, I don't know..." Mr. Smiley ponders the range of possible gifts. Not that there's much to ponder, since Smileys invariably give one another pickles, cheese or chocolate, or birdhouse kits that fathers and sons can build together. Oddly shaped and brightly colored bird houses.

"Heh!" says Roderick. "I'll bet you would like a nice slab of Emmenthal cheese."

Mr. Smiley thinks about a nice slab of Emmenthal. The thought makes him smile.

Smileys Do Not Squeeze...

Members of the Old Ivy Political Economy Club stop babbling to one another as Lily Chang steps to the podium. Per usual, Lily is impressively hot in her daringly low-cut and tightly-fitting bright pink cocktail dress. This morning, Lily added a chapter to her book in progress, How to Succeed Through Hotness.

"Just a few announcements before we start." Lily ruffles through her notes, pausing to display some cleavage. "The Annual Christmas Party will be here, in this room, next Saturday the fourteenth. Jews are welcome to attend if you refrain from whining about Christmas music or mentioning pogroms and the Holocaust. We already celebrated Hanukkah last week, so just shut up about it already." She pauses, and glares at a fourth-year student in the front row. "This means you, Joshua."

"Okay, okay!" says Joshua. "I was only kidding about the pogroms."

Lily continues. "We will celebrate Ramadan whenever that is. Kwanzaa is on the holiday break, so you can celebrate that at home. If anyone is offended or feels left out, you are welcome to organize your own religiously themed holiday party." A hand shoots up in the back of the room. "Yes, Albert?"

"What about atheists?"

"You are welcome to organize an atheist holiday party, although so far as I know there are no atheist holidays."

At Old Ivy, there is no competition or conflict over allocation of student activity fees, because there are no student activity fees. Each club charges whatever it likes for membership, and students who want to organize a party may do so and fund it however they like, including admission fees.

"Moving along...," Lily shuffles her notes again and shows a little more cleavage. "...there will be another "overflow" presentation of papers this coming Wednesday at noon. Roderick will deliver part four of his presentation, and Willard Fong will present his paper QE2: WTF? There will be a free lunch."

There is a general hubbub in the room as members of the club look at one another in confusion and consternation.

"Okay, that was my little joke. There's no such thing as a free lunch, it will be ten bucks."

Audible sighs of relief, and scattered applause.

"Now I'd like to introduce Roderick, who will deliver part three of his long thing about health insurance."

"Thank you, Lily," says Roderick, stepping to the lectern. As he passes Lily, she whispers something in his ear that he doesn't quite catch, but it seems to be an invitation and includes a word that sounds like "duck".

Roderick launches into his presentation. "You may recall from the first session that we discussed a three-part categorization of health and medical services: emergency care, for which it is difficult to speak of a "market" per se; services that are medically necessary but not urgent; and discretionary services. Today, I will outline policy solutions for urgent care and discretionary care, and on Wednesday I'll outline policy solutions for everything else.

"We begin with urgent care. It may surprise you to learn that this category accounts for just two percent of all health care spending. Under existing law, emergency rooms must treat all patients regardless of ability to pay, and most states offer subsidies to hospitals to fund free care. The quality of emergency care in the United States is excellent.

"It seems to me that emergency care is comparable to police and fire services: there is a reasonable case to be made that these services are a public good and should be made available to anyone regardless of ability to pay. Like police and fire, emergency care should be funded at the state and local level, since states and municipalities are best able to monitor quality and compliance, and to determine appropriate levels of service. There is no compelling reason for a Federal role in funding emergency health services, except to provide research grants, support emergency medical training and education and to assist local jurisdictions with capital spending.

"Since the Federal government already does these things, the appropriate course of action is to do nothing."

There is a murmur of approval in the room.

"At the other extreme, discretionary care, the policy options are also easy. There is no reason why anyone should be forced to subsidize breast implants, sex change operations, laser vision treatment and so forth. Discretionary care is also subject to moral hazard, and not an insurable risk. Those who want these services should pay for them out of their own pockets.

"Now, some might point out that it's not fair that wealthy people will be able to afford breast implants and psychotherapy, but poor people will not. They will seek to form an alliance with those who provide these services -- plastic surgeons, psychotherapists, acupuncturists, chiropractors, massage therapists, "past lives" counselors and the like -- that these services are all medically necessary. To which I have two responses: first, there are many things in life that are not fair; wealthy people have nicer homes and cars than poor people, and send their children to private schools. It's not possible for everyone to have the same share of the wealth, and in most areas of policy we don't even try.

"My second response is simply that risks are either insurable or they are not insurable. Discretionary medical spending is not insurable due to the moral hazard; this is true whether the insurance is underwritten by the government, by charities or a for-profit insurance company. European-style government-run health insurance programs do not cover discretionary health care expenses for the simple reason that they can't afford to do so. In this country, Medicare does not cover discretionary treatments, for the same reason.

"So, unless you are a Communist I think you will agree that discretionary medical spending is best left to the free market, and the Federal government should do nothing.

There being no Communists among the membership of the Old Ivy Political Club, the audience responds to this line with heartfelt applause.

Lily steps to the lectern and whispers to Roderick: "Nice presentation. Would you like to squeeze my buttocks?"

Roderick does so, and departs.

Later, in the Dining Hall, Roderick sits with Molly and Megan.

"I delivered the third part of my presentation on health insurance today," he announces, "and then I squeezed Lily Chang's buttocks."

"Really?" says Molly, raising her eyebrows. "How do her buttocks compare to mine?"

Roderick thinks about his response, recognizing this to be a trick question. Truth be told, Roderick has never actually squeezed Molly's buttocks, though he has seen them and snuggled against them many times.

"Your buttocks are the best," he murmurs, an answer that seems to satisfy Molly.

Megan chimes in. "I have lovely buttocks."

Roderick can't disagree with Megan on this point. He has observed Megan's buttocks at close quarters many times, and her buttocks are right up there with Molly's, maybe a little nicer, but he would never mention that last part in front of Molly.

Later, Roderick calls Mr. Smiley.

"Hello?"

"Hi, Mr. Smiley, it's Roderick."

"Hi, Roderick."

"Whatcha doing?"

"Oh, you know, the usual thing for a Sunday evening." Roderick understands this to be Smiley code for "nothing".

"I delivered the third part of my paper on health insurance today."

"That's nice."

"And at dinner we discussed buttocks, and the squeezing thereof."

Mr. Smiley isn't quite sure how to respond to this. Smileys, as a rule, do not squeeze one another's buttocks, nor do they consider it polite to discuss any body part "down there". Mr. Smiley understands, however, that Roderick can't be expected to comprehend Smiley ways. He thinks about happy cows, and smiles.

"That's nice."

Health Insurance in Smileyville

"Ahem." Roderick checks the mike and waits for silence. The Old Ivy Political Economy Club meets tonight to hear part two of Roderick's paper on health insurance.

He continues. "In the first part of this paper, I discussed the heterogeneous nature of health care services, and drew a distinction between urgent care, care that is medically necessary but not urgent, and care that is truly discretionary. I pointed out that at the two extremes, one can argue that there is a robust market for discretionary services (such as laser vision surgery), but that it is difficult to speak of a market at all for urgent care.

"Turning attention to health insurance services (as distinguished from health care services), we should draw a distinction between those risks that are insurable and those that are not. Insurable risks have specific properties: they are (1) well-defined and specific; (2) measurable; (3) predictable in a large population, and (4) distributed at random in the population. This last point covers the concepts of adverse selection and moral hazard, which I will illustrate with examples.

"It is possible, for example, to write an insurance policy that indemnifies a homeowner from losses in a fire because the risk is well-defined, measurable and the insurance industry has lots of data about the incidence of fires. Such policies necessarily exclude coverage in the case of arson by the homeowner, just as life insurance policies generally exclude coverage in the case of suicide. Arson and suicide are examples of moral hazard, where the insurance beneficiary can influence the probability of a claim.

"Insurance pools that do not prevent moral hazard will be subject to adverse selection, or the tendency to attract high-risk individuals. In other words, a fire insurance pool that does not exclude arson will attract a disproportionate number of potential arsonists and soon run out of money. This is true regardless of who underwrites the policy; the principles of insurance apply to government-issued insurance and private insurance alike.

"Health insurance is particularly susceptible to moral hazard. As previously noted, there is an entire class of health services that is discretionary, and entirely within the control of the beneficiary. There are other kinds of moral hazard in health insurance that are more subtle. For example, doctors are more likely to prescribe expensive medical treatments when they know that the patient has a generous health care insurance plan. Studies have shown that there are patterns in the distribution of medical diagnoses that are best explained as profit-maximizing by health service providers.

"In the political debate about health insurance, much attention is given to the question of insurance for those with pre-existing conditions. This is considered the acid test of any credible policy proposal, and it is the justification for the individual mandate. Aside from the fact that the actual incidence of this problem is greatly exaggerated, the most important thing to consider is that while this is a political and social question, it is not an insurance question at all. A person who is already diagnosed with Huntingdon's Disease, for example, does not face the risk of high medical expenses; they face the certainty of high medical expenses. It is not possible to write an insurance policy that will cover the cost of treatment for Huntingdon's Disease among the population of those already diagnosed with the disease, for the simple reason that such an insurance pool would rapidly become insolvent unless premiums are set so high to make it too expensive for anyone to purchase.

"In other words, it is not possible for anyone -- for-profit companies, charitable institutions or the government -- to insure against the cost of health care for previously diagnosed conditions. The only possible course of action is to subsidize the cost of these policies."

Roderick notices that Lily, who is exceptionally hot tonight in her low-cut and tightly fitting black cocktail dress, is motioning to him and pointing to her watch.

"Looks like I'm out of time here, so I'll deliver part three in another session." Roderick takes his papers and steps away from the podium, to polite applause.

Lily steps to the podium. "Thank you, Roderick, I'm sure we're all looking forward to that. Next on the agenda tonight, I would like to welcome fourth-year student Rodney Tinklestein, whose paper is titled "Bitcoin: The New Reserve Currency."

Rodney, who is something of a rock star among fourth years, steps to the podium amidst thunderous applause.

Backstage, Roderick calls Mr. Smiley. "Hello, Mr. Smiley, it's Roderick."

"Hello, Roderick."

"I just delivered the second part of my paper about health insurance."

"That's nice." Mr. Smiley doesn't really understand health insurance. In Smileyville, you go to the doctor when you are sick, and somebody else pays.