Making The Law Of Large Numbers Work For You

When I was growing up (far away from my father, I might add), my father was the secretary of the local bus driver’s union for his rural Pennsylvanian school district. In many ways, my political views are very similar to my father’s. He was a conservative independent who had moderate economic positions but strongly social conservative ones, and my own views are broadly similar, if a little less consistent than his own. I was born where I was born because it happened to be the hospital for the AFL-CIO, which the bus driver’s union was a part of. As a result of the comparison between my father’s experience as a bus driver and my own experience mostly living and working in parts of the United States that are decidedly unfriendly to unions (and workers in general) has led me to be very sensitive to the effects of collective bargaining.

There is another area of work life, that of health insurance, where collective identity is also greatly important. Insurance rates work on a somewhat perverse relationship by which rates are vastly cheaper when there are a lot of people calculated together as part of the same group. In health insurance rates, as well as polls, the law of large numbers works by attempting to discern the behavior of people, or the likelihood of bad things happening to them, by aggregating a large enough group of people together to shrink standard deviations down to a small amount. The more people, the more regular the behavior and the easier it can be calculated to a narrow bound.

What is the importance of this? If you can aggregate a large enough group of people together, their lives and occurrences will tend to be calculable to a fairly narrow amount, making it possible to give much lower rates because the likelihood of disaster or problems within a standard deviation or two will be vastly lower. The lower the chance of disaster or problems, the lower the premiums. In order to take advantage of the law of large numbers, though, one has to aggregate a large number of people together to pool their risks. With greater cooperation comes less risk and lower expenses for everyone. It would appear a no-brainer that people would want to take advantage of this.

But this is not always the case. All too often people condemn collective identities because they only see the expense that comes from collective identities and do not see the benefits of association with others in a larger whole. They do not see the advantages of efficiency that come from pooling the efforts of many people together. Interestingly enough, those people who are the most independent and the least interested in working together are often the most threatened by others who seek collective identity. Whether it is looking for low cost health care or better wages and working conditions, those who consider themselves to be lacking in power and influence have often sought to join together with others to take advantage of strength in numbers to offset the advantages of elites.

Of course, these responses lead to other effects. If one particular area seeks to defend the powerless, those who wish to exploit others will seek more friendly territory where there are fewer regulations and less interest in protecting the needy and vulnerable, because the heart of people is often set upon evil. In this case, the desire of companies and businesses to escape regulation often leads to less opportunity in places where regulations and protections are greater, because people often desire freedom from regulations. This is an entirely understandable desire, though it ought to be pointed out that regulations generally come about because of failures of people to behave according to moral standards. Self-regulation is far more efficient and far less costly than regulation that comes after the fact that self-regulation has failed and corruption is rampant.

There are only a few ways to overcome the problem of opportunity seeking more anarchical and less regulated territories. One is that regulations will tend to spread across nations and supranational organizations to deal with the anarchical rebellion of companies and individuals, denying them space to operate without (burdensome) regulations that seek to restrain their evil and corrupt deeds. If one does not wish this undesirable conclusion, there are only a few ways to avoid it. One is for those who benefit from collective bargaining to act in such a way that increased living standards and working conditions can lead to increased productivity and quality that pay for the increased labor costs and make it worthwhile and profitable for business to operate, even with greater expenses. Additionally, businesses can self-regulate and seek to go above and beyond the legal minimum in treating workers (and customers) with respect and consideration, to improve their own reputation and profitability, making the law of large numbers (of positive word of mouth) work for their bottom line.

There are many ways in which the law of large numbers can work for people. For one, workers historically have joined together in unions to engage in collective bargaining, and companies have responded by trying to move their operations to areas that are less friendly to unions and to regulations that seek to protect workers and others. For another, people benefit from the law of large numbers when they pool together and seek health insurance, making risk far less and far more easily contained through the use of statistics. Additionally, people can make the law of large numbers work for them by seeking to self-regulate their behavior and go above and beyond the minimum standard, gaining the benefit of increased productivity and quality as well as a good reputation to go along with their moral conduct. Why not let the law work for us, instead of only against us?

About nathanalbright

I'm a person with diverse interests who loves to read. If you want to know something about me, just ask.
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7 Responses to Making The Law Of Large Numbers Work For You

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