All I know is that I don't know

Defense of the welfare state

In this post I will argue that a ‘comprehensive welfare state’ (henceforth referred to as simply ‘the welfare state’) is necessary for a system to be economically just. I will defend the welfare state against significant criticisms and reiterate my reasons for considering it to be an economically just system.I will define the welfare state as a system in which the means of production are owned primarily by the private sector, but are regulated by the government for the protection of the individual and his/her society. Additionally, with money received from taxes, the government will provide all those unable to provide for themselves with the economic resources necessary to maintain a decent life. 

What does it mean for an economic system to be just? My conception of economic justice is based on the criteria of economic justice articulated by Stephen Nathanson. Nathanson’s criteria of economic justice asserts that an economic system is just if it promotes well-being for all of society, rewards people with what they deserve, and protects the liberty of the individual.[1] The demands of economic justice cannot be met by socialism exclusively nor capitalism exclusively. The welfare state serves as the golden mean between these two systems. By avoiding the downfalls of both capitalist and socialist systems, the welfare state meets the criteria for economic justice.

The demands of economic justice cannot be met by capitalism alone because, despite the high volume of production it promotes, the system fails to distribute the fruits of that production fairly or deservedly. A high level of production means nothing from the perspective of economic justice if that which is produced is only enjoyed by a small portion of the population. Capitalism’s distribution of income is based on the market’s determination of a given position’s value, which is based on the supply and demand of labor. In consideration of the fact that capitalism does not provide individuals with equal opportunities and advantages to compete for market-valued positions, nor does it offer assistance to those unable to compete due to reasons outside of their control, the system’s distribution of income is economically unjust. Capitalism fails to reward the deserving, promote the well-being of all members of society, and protect positive individual freedom.

The welfare state corrects for the failings of capitalism because it uses government-implemented tax programs to restructure the distribution in a way that brings every individual to a society’s respective ‘decent level’, while still allowing for ‘individualized income’ so as not to affect incentive and, by extension, production. By allowing for the growth of the market and production levels, the welfare state ensures that the production of goods and services remains large. Because the means of production are primarily owned by the private sector, income is determined by market value, which necessarily creates disparities in income. The fact that a large portion of incomes determined by the private sector will inevitably be greater than the necessary amount to provide a ‘decent life’, means that, welfare state or not, there will still be great incentive for members of society to work in the private sector as opposed to living off welfare provided by the government. In preserving incentive, the welfare system ensures a high level of production. Additionally, the welfare system provides assistance for those unable to work or unable to afford the means to a decent life, which corrects for capitalism’s utter abandonment of them.

The demands of economic justice cannot be met by socialism alone because the elimination of incentive drastically reduces production to the point that the amount equally distributed leaves everyone in poverty. The greatest downfall of the socialist system is that when every member of society is provided for with essentially the same amount of money regardless of how much or how little they work, it is in every individual’s self-interest to not work very hard, if it all. This drives down aggregate production and stunts economic growth. Socialist thinkers, though accounting for the likely decrease in production[2], fail to realize how drastically a decline in production can affect the government’s ability to provide for its citizens. The fact that the distribution of wealth is equal is irrelevant to the concern of economic justice when the amount being distributed isn’t enough to provide all members of society with their basic needs. Socialism thus fails to reward the deserving, promote the well-being of all members of society, and protect positive individual freedom.

The welfare state corrects for the failings of socialism by making use of capitalism’s self-interested-based, competition-promoting economy. By doing so, the welfare state ensures large-scale production. Additionally, the welfare state’s tax system corrects for the grossly unequal distribution characteristic of capitalism. Unlike socialism, the welfare state does not use government as a means of equally distributing income, because doing so does not automatically create an economically just system, but it does reduce the range of income disparities. The welfare state protects individual liberty, which is understood to be like the socialist conception of liberty: the freedom to act, made possible by the provision of resources necessary to maintain a decent life. Furthermore, the welfare state rewards the individual according to the socialist concept of desert, which asserts that all members of society deserve the means to a decent life.   The welfare state is economically just because it promotes the well-being of all members of society, rewards the deserving, and protects individual liberty.

The most significant criticism of the welfare state is that, as opposed to helping those in genuine need of assistance, it provides incentive for otherwise-able individuals to not work and rely on the government instead. According to this argument, the more resources as welfare system provides, the greater incentive individuals have to ‘fake’ need for assistance. Though this is an understandable concern, it is not one that need be blown out of proportion. Given the vast array of opportunities available to those capable of competing successfully, it remains in one’s best-interest to compete for private sector positions, which more often than not offer more money. Additionally, private sector positions offer other incentives, such as giving an individual’s life greater meaning, keeping them busy, etc. To this end, it is not as if the incentive to not work outweighs the incentive to work for well over the majority of people, and thus the welfare state is capable of success. To be sure, however, provisions would be put in place so that obtaining and maintaining welfare resources is not simply automatic, but actually requires ‘work’ on behalf of the recipient. It is important that a welfare system can provide the means necessary for a decent life for those in need without creating incentive for those close to the ‘decent level’ income line via the private sector. For this reason, a progressive tax system that takes a very small percentage from members close to or in the ‘decent level’ income bracket is necessary.

Proponents of capitalism argue that the government intervention of the welfare state interferes with market processes and slows production as well as the ability of markets to fix themselves, i.e. ‘snap back’ after economic downturns. In Capitalism and Freedom, Milton Friedman argues that the Great Depression was prolonged by government intervention,[3] but the market had time to fix itself before FDR’s implementation of the New Deal and it did not. Meanwhile, ever-growing human cost of the Great Depression was overwhelming, and it demanded the attention of the new president as it should have anyone in his position. Laissez-faire capitalists put far too much trust in the market’s ability to fix itself, despite having next-to-no proof, and argue against theories of economists like Keynes who argue that government can and should ease the leaps and valleys of the market for the benefit of society’s members. The welfare state provides an answer to the human cost of capitalism by protecting those unable to help themselves, while still maintaining the benefits of a capitalist economy insofar as it promotes high productivity and a forward moving market. So, while it could perhaps be argued that a pure-capitalist economic system would produce a higher level of production than the welfare state, it is abundantly clear that such a system would fail to provide economic justice, because the fruits of production would only be enjoyed by a very small number of people.

 The welfare state provides the necessary ‘middle path’ between socialism and capitalism and in avoiding the downfalls of each system, it produces an economic system that can be characterized as just. By allowing for the growth of the market and production levels, the welfare state ensures that the ‘pie’ of economic resources remains large. By providing all individuals with at least a ‘decent level’ of economic well-being and/or income, the welfare state ensures that the ‘pie’ of economic resources will not be distributed in a grossly unequal, unfair way. Furthermore, the welfare state gives people the economic resources necessary to have the freedom to live at least a decent life as well as the freedom to choose their livelihood, and to use their economic resources from that livelihood as they wish, without government intervention. The welfare state accounts for individuals as well as businesses without harming either significantly. Unlike other welfare systems, the ‘comprehensive welfare system’ provides enough (as opposed to too little, as in the emergency relief system, or too much, as in the Rawls’ system or others) to secure that every individual have access to a decent life. The comprehensive welfare system promotes well-being for all members of society, protects individual liberty, and rewards the deserving, and is thus an economically just system.

[1] Nathanson, Stephen. Economic Justice. Foundations of Philosophy Series. London: Prentice Hall International, 1998. (41)

[2] Karl Marx and Friedrich Engels. The Communist Manifesto.

[3] Friedman, Milton. Capitalism and Freedom. 40^th Anniversary ed. Chicago: The University of Chicago Press, 2002 (74-75)

Today was my last day at Northeastern. It doesn’t really feel real, but it’s weird to think about. No doubt what I will miss the most is the time I spend hanging in the Philosophy & Religion department & with my friends - but I don’t have to say goodbye to that just yet :)

In honor of good NU memories… here’s a picture of me eating in Stetson with friends and feeling glamorous in Cynthia’s sunglasses.hollahollahollahollahollahollaholla 

Economics needs a public smack by philosophy

In my last International Economics class today, my professor talked about a few things that gave me the overwhelming feeling that economics desperately needs (publicly) some philosophy to slap it back to reality. With philosophy, there is constant work at the strength and/or validity (or weakness and invalidity) of an argument - down to its analytical framework. No circular reasoning or invalid logic make it past critics. Philosophy of Economics exists as a subfield of philosophy, but it isn’t often a part of the average economics curriculum.

Economics is a social science - it attempts to explain the decision making of individuals with theories, methods, etc. - most of which are interrelated. Economics has a tendency, however, to present its hallmark theories as of the same type as, say, physics theories.* Without constant (or even frequent) reminder of many assumptions underlying economic theories, students of economics are essentially indoctrinated with sets of beliefs that they never learn to question or critique analytically. 

Sure, economics has advanced and changed over the years. Once upon a time Mercantilism was the predominant economic system and its emphasis exports exceeding imports was one of the primary reasons colonialism boomed in the 15th through 18th centuries. Major powers like Spain, Portugal, England, & France wanted to increase their wealth and to do so they needed more to export - so they took over new lands and used them for their resources. 

But it takes a very smart mathematician and broad thinker to be able to see a flaw and come up with a different approach that will somehow better the world economy. Mercantilism was abandoned when David Hume and Adam Smith showed that trade was not a zero-sum game (meaning multiple nations could gain without some nations having to lose). They didn’t get it right either. It wasn’t until Ricardo came up with the concept of comparative advantage as being the appropriate determinant of trade patterns did we get one of the prominent models we use today (there are other models of trade that differ in specific ways). 

The point of this is, there is nothing about our current economic system - or ANY theories and methods surrounding how the economy works (both domestically and abroad) - that are or ever will be confirmed true unconditionally. This isn’t to say that market operations don’t work or aren’t good for something, but the notion that the unfettered market left to its own devices is efficient, flawless, and the best method in itself is simply wrong. There is no evidence to suggest (no way to accurately determine) whether the market has or ever will get it ‘just right’ (after all, what is ‘just right’- the ideal economy - supposed to look like? Without this defined, what are theories and methods in economics really telling us?)

This is where philosophy need step in. Philosophy seeks to clarify terms, identify values and examine value judgments. Philosophy is a quest for understanding and acquisition of answers regarding fundamental issues using reason. It attempts to explain things using logic and reason (sound arguments) that, despite not being thought of by many, are at the basis of bodies and disciplines of knowledge. It does not attempt to merely describe the way things are. It seeks truth and concrete understanding of the fundamentals of knowledge. It is an analytical attempt at examining core values, motivations, practices, etc. that are behind a variety of ‘things’ in our (and beyond) world – morality, environmental sentiment, science, economics, and beyond. These ‘core values’ need be identified to determine appropriate methods and theories regarding the management of ‘the’ economy.

Why a ‘public’ smack? Because philosophers often work on issues relating to the philosophy of economics, but none of this debate is well known or known of at all except among certain individuals who are interested in the subject matter. The fact that these questions need be asked and examined is not a thought many consider. 

There are a lot of philosophy of economics issues that have great room for debate - some of which I’ll discuss here eventually. 

This isn’t meant to question economics as a whole or any particular theory (or economists themselves, for that matter),  it is merely meant to show where clarification and refining of concepts would be useful. 

*There’s a bit of controversy here. Karl Popper argued that a scientific theory is scientific because it is falsifiable - meaning the theory reflects reality, and in the event that ‘reality’ should contradict the theory, it will be thrown out and a new theory formed. Popper argued that what differentiated scientific theories from social scientific theories was that the former are falsifiable. Marx’s social theory, for example, could never be falsified. However -Thomas Kuhn argued, alternatively, that in actuality the history and advancement of scientific theories is paradigm based, and only overwhelming evidence to the contrary will lead to scientists attempting to come up with a new theory. So it’s not clear that science operates in as rigorous a way as Popper postulated. 

the unfortunate irony of boosting the economy by putting environmental efforts on hold…

Why is it that the environment always takes the hit when concern over the economy grows? Politicians, especially/primarily republicans - but really any politician on energy, etc. businesses’ payroll, always seem to want to stop efforts aimed at improving the environment when they set out to improve the economy. Sure, removing some environmental regulations gives a bit of a boom to businesses, who may then spend that money on hiring people, etc. - but at what cost? The environment’s fate is certainly not something far off and/or improbable. Putting off efforts that may only SLIGHTLY improve the situation we face ahead of us are counterproductive - why? Because no economic disaster we’ve ever experienced can compare to the one we will face when the environment is significantly deteriorated. I am blown away by continued attempts to ignore an obvious problem, meanwhile acting as if there aren’t dire consequences in the future. The environment and the economy (domestic and abroad) have ALWAYS been intimately related and they ALWAYS will be. The destruction of one will undoubtedly coincide with the destruction of the other.