Don’t look for any merit in meritocracy

A few years ago, someone asked me how to fix social care costs for the elderly. One eventual idea of ours was that, at age 65, people could pledge to pay a higher level of inheritance tax as a form of insurance against social care costs. If, say, you pledged £20,000 of the value of your estate, you would receive an annuity worth perhaps £150,000 should you develop dementia or need long-term care.

This, we thought, would be appealing enough to be made voluntary. The idea was designed to align with a known property of human psychology called Prospect Theory, which shows that people much prefer a small, certain loss to a small chance of a larger loss. Put simply, people prefer a definite 80 per cent of something to risking a 7 per cent chance of getting nothing. Economists describe this as irrational, or as a bias, but it is easy to see why our brains evolved this way.