« "Retirement Savings and Decision Errors: Lessons from Behavioral Economics" | Main | "This Global Show Must Go On" »

Saturday, June 07, 2008

"Libertarians and the Welfare State"

Bryan Caplan on libertarians and the welfare state:

Libertarians and the Welfare State: Is It Time to Drop the Hard Line?, by Bryan Caplan: Libertarians are widely seen as welfare-state abolitionists - people who want to eliminate government's "safety-net" role, not make it more efficient. Will Wilkinson rightly points out that many well-known intellectuals in the libertarian camp - including Friedman, Hayek, and Buchanan - didn't share the abolitionist position, and suggests that it might be time for libertarians to drop their extremism and get real:

The death of socialism as a viable competitor to the liberal-capitalist welfare state makes continued slippery-slope-to-socialism thinking look densely anachronistic. Other liberal welfare states, like the UK, Sweden, Denmark, Australia, New Zealand, etc., have moved in a rather more market-liberal direction, becoming rather less of a soft-socialist middle-ground between the American model and full-on economic socialism... In this context, the negative income tax looks much less like a dangerous concession to the world-historical forces of evil.

Will's right about Friedman, Hayek, and Buchanan, and right about the slippery-slope argument. But I still think that welfare-state abolitionism has the force of argument on its side.

First, though I'm not going to win Will over to "Ayn Rand and Murray Rothbard’s peculiar views of rights and coercion," the welfare state is an area where it's particularly apt. Almost no one thinks you should be legally required to financially assist your relatives - even your indigent parents who raised you. The welfare-state abolitionist can fairly ask all of these people a tough question: If your parents shouldn't have a legal right to your help when they really need it, why should complete strangers? ...

I'll answer that for unemployment insurance and other programs designed to cushion workers against shocks (I'm taking as given that unemployment insurance has social value, that market failure prevents the private sector from providing sufficient insurance, and that government can improve the situation by intervening, points that libertarians may not be willing to stipulate).

In order to be flexible and dynamic, capitalism has to be able to move people and resources out of declining industries and into other industries where they can be utilized more effectively, and this needs to happen as quickly and efficiently as possible.

As a society we do better if we can respond effectively when the economy is hit by shocks, but this capability comes at a cost to individuals. Workers can lose their jobs for reasons that have nothing to do with their own behavior. They show up to work each day, put in a full days work, and make their contribution to society. But one day, for reasons outside of their control, the job can suddenly end. Now, if somehow the individual's choices are the cause of their unemployment, there might be an argument for letting individual workers bear the full cost of losing the job. But that's not what generally happens, it's not usually the individual's fault that the plant closed or that people stopped purchasing Betamax (and there are rules to try to exclude people from receiving benefits when their unemployment is the consequence of their own behavior or choices).

The source of the insecurity for workers is the system we live under, capitalism. It's better than any other system yet devised at providing for our needs, but within this system changes in preferences, changes in technology, management errors, the weather - all sorts of things out of the worker's control can cause them to become unemployed. Because it's a risk that's due to the system we live under, the cost of insuring against it should be shared by all those living within the system and benefiting from it, i.e. the cost should be shared across the entire population. The burden of paying for capitalism's dynamism and flexibility shouldn't be limited to the individual or the individual's family. So I don't see any contradiction in saying that families should not be required to provide this insurance, but "complete strangers" should.

    Posted by on Saturday, June 7, 2008 at 01:08 AM in Economics, Social Insurance | Permalink  TrackBack (0)  Comments (61)


    TrackBack URL for this entry:

    Listed below are links to weblogs that reference "Libertarians and the Welfare State":


    Feed You can follow this conversation by subscribing to the comment feed for this post.