Welfare Cases

Social Welfare and Individual Responsibility, by David Schmidtz and Robert E. Goodin, New York: Cambridge University Press, 240 pages, $14.95 paper

Social Welfare and Individual Responsibility is the first in a philosophical "for and against" series launched by Cambridge University Press. Robert Goodin, a philosopher at Australian National University, defends the welfare state as an efficient vehicle for collectivizing responsibility. David Schmidtz, a philosopher at the University of Arizona, sees the welfare state as a destructive institution that prevents people from taking responsibility for their own lives. Despite the premise of the series, the essays included here are not of the point-counterpoint variety. Goodin and Schmidtz wrote their essays (both of which are extremely well-written) with knowledge of the other person's views, but they only occasionally remark on those views.

This much they agree on: Rather than assigning blame, the issue is what makes people better off in the future. Otherwise, however, the authors inhabit very different frameworks. Goodin says that the virtue of responsibility is largely irrelevant to the welfare state debate. For him, the key question is: Given that certain people can't or won't take responsibility for themselves, what do we do? Schmidtz thinks Goodin's question exemplifies a static, or snapshot, perspective. For Schmidtz, the proper question is: How do we make it less likely that people will need help in the first place?

Goodin criticizes those who object to unconditional welfare payments because they promote "dependency" and those who extol the virtues of "self-reliance." He points out, correctly, that there is nothing wrong with dependency per se--we are all dependent on one another--and that the suggested alternative to state-funded welfare is more reliance on others, such as family and friends, rather than setting up an independent household. But while Goodin shows that the notions of dependency and self-reliance cannot by themselves be used to criticize welfare policies, he may win the battle and still lose the war on the issue. For what critics have in mind, one suspects, is that the kind of dependency or lack of self-reliance promoted by unconditional welfare payments fails to prepare one for responsible adulthood, making a living for oneself, and in that sense being independent.

Goodin's criticisms of those who celebrate independence and self-reliance are mainly a backdrop to his two main arguments in support of the welfare state. He contends that lack of opportunity for the chronically poor justifies welfare and that greater efficiency justifies social insurance.

The argument for the former at times rests on a very static perspective. Goodin argues that it is false to claim that any able-bodied welfare recipient can get a job, because at any given time one person's success at landing a job precludes others from doing so. Indeed, he even flirts with the argument that those who are unemployed do the rest of us a favor, since they enable us to get jobs that otherwise might not be available. Such notions clearly ignore the actual dynamics of job markets in a capitalist economy, which, in normal times, produce a net increase of tens of thousands of jobs per month.

At other times, Goodin argues that we are in a long-run period of structural unemployment. There are not, he says, enough jobs, or at least enough jobs that pay sufficiently well to get out of poverty. So what critics take to be a lack of will on the part of long-term welfare recipients is actually a lack of opportunities. Suffice it to say that, in American context, it is jarring to read such claims when the United States has historically low unemployment rates and when even the formerly hard-core unemployed are getting jobs. Europe and other similarly regulated economies do have higher levels of "structural unemployment," but that is largely due to state-mandated restrictions on hiring, firing, and compensation (as Schmidtz points out).

Goodin's other main argument--for state-funded and administered social insurance--involves three claims. First, using worker's compensation as a model, Goodin argues that when causes are complex and intertwined, it typically costs more than it is worth to try to disentangle them and establish personal responsibility. Thus, a no-fault system is the best way to establish liability for workplace accidents. Second, he argues that certain common risks, such as being unemployed during a severe recession or depression, make private insurance unfeasible. Finally, in discussing retirement plans, Goodin argues that since private companies can go bankrupt, the state must inevitably be involved in providing some sort of guaranteed pension.

None of these three arguments, however, establishes the need for "social" as opposed to market insurance. As University of Chicago law professor Richard Epstein has shown, no-fault systems of worker's compensation arose in the 19th century as a contractual way of handling industrial accidents.

The interdependent risk argument is also empirically suspect. Schmidtz points out that, as early as 1919, the Metropolitan Life Insurance Company in New York was prepared to offer private unemployment insurance, but a bill allowing it was vetoed by then-Gov. Franklin Roosevelt. Even during the Great Depression, the percentage of the population that was eligible for unemployment insurance was never higher than 25 percent, not enough to bankrupt a company. True, an insurance company cannot predict when economic downturns will occur. But it can require savings to cover unpredictable unemployment along with premiums to cover predictable unemployment (based upon occupation, region, age, etc.). Goodin is cognizant of this point, but he suggests that requiring savings ruins the logic of insurance, since premiums from the winners (insureds who suffer no loss) aren't covering payments to the losers. Perhaps, but combining insurance with savings is hardly a new idea, and the combination shows that government is not needed to provide unemployment insurance.

When it comes to retirement pensions, the bankruptcy of companies is indeed a risk, but it is a relatively low one that must also be compared with the political risk that programs such as Social Security and Medicare won't be able to keep their promises--which affects everyone, rather than just a few who might be harmed by private insurance's bankruptcies.

Given the book's title, one might expect David Schmidtz to defend "individual responsibility," just as Goodin defends "social welfare." But Schmidtz does not think that the real issue is individual vs. collective responsibility. Collective responsibility per se is not, he says, a problem--not every individual can take responsibility for himself. The issue for him is "externalized" responsibility. Economists say a decision involves a negative externality when someone other than the decision maker bears some of the decision's costs. Analogously, Schmidtz defines externalizing responsibility as failing to take responsibility for the messes one causes or the messes one finds oneself in.

To internalize responsibility, by contrast, is to take responsibility, either as an individual or as a group, for one's welfare, one's future, and the consequences of one's actions, rather than dumping it on others. Schmidtz argues that the key to making individuals and societies prosper is internalized responsibility. He focuses on property rights, since they are the preeminent institutions by which people take responsibility for their own welfare. They do this in large part by eliminating or minimizing varieties of the tragedy of the commons--what results when open access to a common scarce resource makes people unable and unwilling to take responsibility for that resource. Property rights help prevent such "tragedies" because they give owners a right to exclude nonowners, giving the former the ability to capture the benefits of their effort but also making them pay for their own mistakes.

Exclusion, of course, is not solely a feature of private property. Communes, for example, restrict the access of nonmembers, and the use of public property is restricted in all sorts of ways. Private property, however, is more efficient in rewarding individual contributions. While communal and public property tend to cultivate overconsumption and underproduction, private property makes it harder for people to shirk their responsibilities. Communal property can avoid tragedy of the commons problems by limiting membership and intensely monitoring members' consumption and production activities.

The Hutterite sect has a strict sharing of assets and has maintained successful communal ownership since the 16th century. They require formations of new settlements when the numbers get above 120; communal dining and worship, which occur several times daily, provide immediate feedback on members' activities. Public property can also succeed if it is based on the local evolution of shared customs rather than control by a distant government bureaucracy.

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