Sunday, September 25, 2011

The fundamental problem of who deserves help

I've been thinking more about some of the issues surrounding "fairness", partly because it has become so controversial in the last few weeks again. President Obama is arguing for tax rises on "millionaires and billionaires" and the tea party is resisting as much as ever. In Europe the German public fiercely resents being expected to bail out a broke Greece.

I think there is a basic underlying issue with many of these arguments. People resent being asked to contribute when those who have not worked hard or acted responsibly benefit.

How do you prevent people misbehaving, or taking advantage of the system? The left typically thinks this is not a problem in practice. The right typically thinks that some people will take advantage of opportunities to behave badly.

It stretches back to arguments in the 19th century over whether there was such a thing as the deserving and underserving poor. Are people poor through no fault of their own - misfortune, lack of talent, lack of advantage or education or connections? Or are they poor because they are feckless, lazy, venal or lack of ability? The left instinctively resists the latter.

Clearly, there are some people in each category. But where does the balance lie? The welfare state is sold as a safety net, for those who accidentally fall. But it runs into trouble where the average citizen feels they are paying taxes not to help unfortunate fellow citizens, but the lazy and work shy.

Liberals work hard to increase take-up rates and remove the stigma from claiming benefits. And they argue for economic rights. Conservatives feel that making welfare or state support a "right" means that making support unconditional undermines personal discipline and honesty and independence. So they want time limits on aid and means tests and other conditionality.

If you want to see what the backlash against helping the irresponsible can look like in practice, take the famous Rick Santelli rant on CNBC which many see as marking the beginning of the Tea Party movement. It was motivated by resentment at bailing out irresponsible mortgage holders.

The fact that this feeling went viral and ended up upending one of the two major political parties just shows how powerful this intuition can be.

People will never be happy about making sacrifices for those who are playing the system, or just being lazy or underserving. At the heart of this is what economists call the "free rider" problem. Public goods are undermined by those who fail to pay their share.

I think the social democratic left would be much more successful if it understood these reactions. It does believe some similar things, after all. Ordinary taxpayers should not have to bail out plutocratic bankers.

But it also means you cannot support the "rights" of every member of the poor if you want to help the poor. There only likely to be durable public support for assistance to those who are poor through no fault of their own. If you try to break the link between assistance and behavior you cross some cultural tripwires. And you get massive tax revolt and delegitimization of the entire social democratic project.

You cannot look at people's situation as a single snapshot of a moment in time. How they got to that situation, their actions, their behavior, their story, their motivations all matter too. "Fairness" actually entails some orderliness, some substantive historical reason for who gets what and why.

If you ignore this you also kill much of the chances of any alternative economic improvement or new economy, which is what I care about. People will suspect it is a charter for freeloaders.

If we reduce the emphasis on working in the formal economy for exchange value, then many people will see that as a scheme to transfer rewards from those who have worked hard to those who have not.

Contemporary liberalism has created many of its own problems with the talk of "fairness", which I discuss in connection with Rawls and Sen here. They see "fairness" as largely being unbiased and impartial in judgments - procedural fairness. But much of the force behind the word fairness - and justice - is people get what they deserve. Most liberals stop at the idea of equality, or at best a general meritocratic view that those who have good education and credentials should take precedence.

That just leaves the field wide open to the more venal parts of the conservative coalition to argue that the only criteria for desert is market earnings - fair and voluntary exchange in a free market, for the libertarians.

But if we are running out of road for the economy on labor market exchange value, this is no answer either. If most goods and services are becoming so abundant that people cannot earn a living providing more of them, we need alternative ideas. We need different ways to decide who gets what.

For any society or economy to work, there has to be some confidence among the majority that the deviants and exploiters and the corrupt will not be allowed to game the system. Democrats fail that test with their undifferentiated, rights-enabled, generic member of the "poor" who has no history and no record of effort or achievement. Republicans fail the test by being too narrow and unimaginative about who deserves what.

One of the primary advantages of the money system is it does provide incentives and hard outcomes and personal discipline and reward for effort, as a rule. Any alternative has to do the same.

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