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The law vs. markets

One of the criticisms of raising the minimum wage is that it is Congress substituting its judgment for the market’s in determining pay. While Congress can force an employer to pay an employee a minimum amount, it can’t force the employer to keep the employee.

In a similar fashion, the Mississippi Attorney General has forced an insurance company to pay for damage its policies didn’t cover. He used a court of law to do that. What the court can’t do, however, is force the insurance company to keep writing policies in Mississippi.

State Farm, the nation’s largest home insurer, announced this week that it would no longer be writing new homeowner or commercial policies in Mississippi. Magnolia Staters wondering whom to thank for their rising insurance bills, assuming they can get insurance at all, should direct their catcalls at Attorney General Jim Hood. … State Farm will now be paying at least tens of millions of dollars in claims that it never factored into its risk premiums, and it has reasonably chosen not to make itself vulnerable again to Mr. Hood’s extortion. … State Farm joins Allstate, which last year also stopped writing policies along Mississippi’s coast. Together, the two insurers make up 40.5% of the Mississippi market. Homeowners looking for coverage will now have fewer companies to choose from, with higher premiums the likely result. If the rest of the industry follows suit and also exits Mississippi, consumers could have no choice at all.

— From “Steal Magnolia,” February 16, 2006 Wall Street Journal

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