Contemporary Liberal Welfare Policies

Abstract

Classical liberals have a long and convoluted history with the welfare state. Welfare policy has engaged liberals ever since the debates round poor relief, land ownership, and distributive justice in authors like John Locke, Thomas Paine, Herbert Spencer, and Henry George. However, the majority of the welfare state debate, from David Hume and Adam Smith to Milton Friedman and Richard Epstein, has been conducted primarily on the basis of rule-consequentialist reasoning, weighing the expected (long-term) costs and benefits of different institutional rules. Classical liberals tend to be primarily concerned with welfare in the “happiness of individuals” sense and only secondarily with welfare in the “government handout” sense. This necessitates an investigation into the expected benefits and costs of various institutional rules and social policies. As a result, any disagreements about the best institutional pathway forward must be settled through comparative institutional analysis. Today, classical liberals face a choice between roughly three alternative pathways, each of which has its pros and cons, and each of which seems compatible with the abstract and general rules of the market society: 1) The Minimally Redistributive State based on a classical liberal constitution supported by robust market institutions and a civil society mosaic of polycentric mutual aid networks; 2) The Welfare State of Law which, in addition to all of the above, adds a few carefully rule-bound and market-conforming redistributive mechanisms, the most important of which is the robust guarantee of something like a conditional minimum income scheme or an unconditional UBI/NIT scheme; and 3) “Third Way” models of the Social Market Economy and the Free Market Welfare State, which defend “neoliberal” variants of European universal social insurance schemes.

Keywords: welfare, classical liberalism, neoliberalism, social insurance, UBI, negative income tax

JEL Classification: H55, D63, P16, P14, K11