First I have to admit that the loss of my Danish nationality was partly a mistake due to bad advice from the Danish Consulate in La Paz. I was quite shocked the first few hours after I found out I was going to loose my cherished Danish passport, but I quickly found several strong advantages of changing nationality, so I completed the process, and I haven't regretted it at all since my initial shock.

The first good reason for changing is commitment. Every economist knows that it can sometimes be an advantage to make a credible commitment to a certain policy. Nowadays, the wedding vow is not a credible commitment, since half of all marriages end in divorce. Changing nationality from Danish to Bolivian, on the other hand, is a very credible commitment, and it changed my husband’s attitude towards me tremendously. Any challenges I encounter in the future, either in my marriage or in my new country, I have to deal with. I cannot just run home to Denmark and let the social safety net pick me up. I realize, of course, that there could be revolutions and other events outside my control, but in that case I would just have to stay and fight for what I think is right, rather than be flown home to safety and comfort by the Danish embassy.

The other main reason has to do with responsibility. The Danish safety net is basically an insurance system. You pay hefty taxes and insurance fees in order to insure yourself against bad things, such as unemployment, sickness, theft, misfortune, laziness, and stupidity. But like most insurance schemes, the Danish safety net offers huge incentive problems. People can engage in all kinds of bad behaviour, from smoking to insufficient saving, because they don't pay the full cost of such behaviour.

In Bolivia there is no social security system, and no insurance system of any significance either. People need to take 100% responsibility for their actions, because nobody is going to bail them out if they screw up. You better eat well and take good care of your body, because you will have to pay 100% of the costs when damages need to be repaired. You better drive carefully, because your car is not insured, and how on earth would you compensate the family of a child that you killed or disabled? You better save a great deal of your income, because there is nobody to bail you out in bad times. In return, you get almost the full benefit of your good actions.

Taking full responsibility of your own actions does not rule out social behaviour. My family here in Bolivia supports a great number of less fortunate people, but we try to give the support in such a way that it doesn't spoil their incentives. For example in the form of study grants, in the form of jobs, or in the form of support to facilities for homeless children. Giving directly to those in need is a whole lot more satisfying than paying tax to a system that you think provides the wrong incentives.

Overall, the Danish system works in the direction of encouraging laziness and irresponsibility and discouraging hard work, entrepreneurship, and healthy living. Of course there are plenty of good people in Denmark, but the system tends to work against them, and that is not fair. They have to give up the main part of the returns to their good actions, to pay for the irresponsible behaviour of the bad guys.

The long term growth prospects for such a system are also depressing. Not only because of the bad incentives for the current population, but because the system tends to attract a bad type of immigrants and tend to push away the good guys in a world where people are becoming increasingly mobile. I think the disgusting increase in nationalism and racism in Denmark is partly due to the fact that the Danish system tends to attract the wrong type of people. Free migration by itself should theoretically be just as advantageous to everybody as free trade. Unfortunately the Danish system causes so many externalities, that the benefits of migration are greatly reduced, if not negative.

I am not saying that Denmark should change to the Bolivian system, which has many even worse flaws, but I do think that the Danish people should think about how they can improve incentives for all, while still taking care of the weakest people. A good and free education system goes a long way towards providing equal opportunities for all, but after that I think it might be possible to reduce the degree of insurance and overprotection, or at least make some of it voluntary.