What goes under [the name of the welfare state] is a conglomorate of so many diverse and even contradictory elements that, while some of them may make a free society more attractive, others are incompatible with it or may at least constitute potential threats to its existence.
-Friedrich Hayek, The Constitution of Liberty
In its January issue, Econ Journal Watch held a symposium on economists’ opinions on the welfare state, titled “Economists on the Welfare State and the Regulatory State: Why Don’t Any Argue in Favor of One and Against the Other?” In response, Sam Bowman of the Adam Smith Institute voices his sympathy with Andreas Bergh’s contribution (no, not that Andreas Bergh): “Yes, There Are Hayekian Welfare States (At Least in Theory).” In “Let’s have a Hayekian welfare state,” Mr. Bowman writes:
[W]e should have a predisposition against regulation, even regulation that appears to solve problems, if it holds people back from experiments. There are also serious examples of regulations leading to bad things that are even worse because everyone has been forced to make the same mistake, which strengthens this predisposition even more. The more complex a system is is, the more we should value pluralism.
All of this has to do with having limited knowledge in a complex world, not incentives, though of course there may be good incentives-based arguments to be made on a case-by-case basis against certain regulations.
But this doesn’t tell us very much about the distribution of wealth in a society. To use Bergh’s terminology, redistribution may be something that can be done with relatively low amounts of knowledge. That doesn’t mean that it can’t fail – clearly it can, very easily, if the level of redistribution is set too high (or too low) – or that the system itself be badly designed.
The particular distribution of wealth in an economy may be an efficient reflection of who is most productive, and interventions that try to correct for that are likely to fail for the same reasons that other interventions designed at improving market efficiency will fail.
But we may have non-economic concerns about the distribution of wealth as well. An economy in which everyone is paid according to their productivity may be very brutal for people who are not very productive and cannot change that. We may wish to redistribute income for their welfare.
Myself, I’m sympathetic to Messrs. Bowman and Bergh’s notion of a Hayekian welfare state. I certainly believe that the most humane way of helping the poor politically today is by ending policies that have put up walls to them improving their own stations in life, whether those walls be vocational licensing or the war on drugs. Nevertheless, in a nation as wealthy as the United States, a welfare state can advance the general welfare by helping those who would otherwise down and out. The welfare state describes such an institutional means.
When advancing a Hayekian welfare state, we have to be careful to keep in mind that the welfare state is not beneficence. Politicians who claim to be beneficent in their support of welfare policies are lying. Beneficence must be freely given. In the welfare state, it is not and politicians would have nothing to give if it weren’t for the tax revenue, at the end of the day, coerced from the general population.
Nevertheless, keeping in mind that the welfare state is not an instrument of beneficence, I am sympathetic to the Hayekian welfare state, that is to a welfare state existing side-by-side to a minimal regulatory state. Importantly, Messrs. Bowman and Bergh argue, in my mind successfully, that there is a plausible economic reason for opposing the welfare state as there is for the regulatory state. Instead, the issue is one of morality and expediency. On both counts, there is a case for the welfare state.
On this issue, I think that contemporary libertarians, otherwise opposed to any welfare programs, should take a Whiggish view on the matter. They need to accept the political changes around them, even if their hearts may not be fully on the side of those changes. The existence of the welfare state is something that liberal political theory needs to adapt to, if it is to be relevant. Concerns about knowledge do matter in providing a, shall I say, efficient welfare state. There is much the Hayekian position can add to welfare policies. Taking a pig-headed opposition to it as the sole acceptable position only serves to cut off the value of that position from political discourse.
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