November 12, 2024
By Otto Lehto
Half a century after the Moynihan report, we are still cursed and blessed with copious ignorance about the effectiveness of our government policies. The dialectical dance between conservative prophets of doom and progressive peddlers of secular salvation remains as motivated and untiring as ever. But the core institutions of the modern welfare state are ingrained in American life. Unlike a hundred years ago, few people today (except some libertarians) demand a rollback to a nineteenth-century laissez-faire or a full replacement of government aid by private charities. Similar trends occurred throughout the rich world, so that “mixed economies” now share the horizon of left-right politics.
Nonetheless, people still disagree about how far government programs should be pushed, both in terms of cost-effectiveness and moral merit. Although matters of justice are often “stickier” than matters of empirical fact, the two are often difficult to disentangle, since people are biased towards evidence that confirms their priors. For this reason, debates about redistribution are, themselves, a tangle of pathologies.
No doubt I also have my biases. I am on the record supporting a Universal Basic Income (UBI) or Negative Income Tax (NIT). This makes me a rather peculiar libertarian (in the wild, we used to be known as Bleeding Heart Libertarians). But it easily makes me a classical liberal. Milton Friedman, James M. Buchanan, and Friedrich Hayek are on the record advocating similar ideas. Recent UBI libertarians include Matt Zwolinski, Michael Munger, and even, shockingly, Charles Murray, the arch-critic of the welfare state. In this rejoinder, I defend the classical liberal (or libertarian) case for UBI.
This means that I take issue with Charles Fain Lehman’s overall thoughtful commentary. To be sure, I agree with my esteemed interlocutor that “the Great Society is less a testament to the power of government than to the limits of what it can do.” I also share his general worry that focusing on giving people money cannot address deeper issues of virtue, culture, and character. Nonetheless, I take issue with a few key points. I do not think that the proper lesson of the Moynihan report, after several decades of cash transfer experiments, is that direct cash transfers have been a net failure. The results, to be sure, are mixed. Cash transfers are no panacea. But direct cash transfer programs—which includes everything from targeted and means-tested to universal and unconditional programs—remain some of the most economically effective and, I believe, ethically justifiable tools in government hands. The debate should be about which programs to cut and which programs to keep. My recommendation is to replace most existing programs with UBI.
Let me start from the empirical evidence from cash transfer programs. A brief summary suffices to make my point that the data thus far, although inconclusive, is less negative than Lehman suggests. Although Lehman correctly points out that some of the more recent experiments in the United States have yielded disappointing results, there are many decades of experiments to draw from. It is worth starting from another major study, the 2017-2018 UBI trial in Finland. In that study, the UBI recipients actually worked slightly more than the control group (although within margin of error), and reported noticeable improvements in psychological well-being:
Basic income recipients experienced less stress and symptoms of depression and better cognitive functioning than the control group. In addition, the financial well-being of basic income recipients was better. (...) Moreover, they had higher confidence in their future possibilities.
Even the U.S. experiments that Lehman cites are ambiguous. They confirm the well-supported observation that the temporary injection of unconditional money gives some people the option to increase their leisure time. However, the reductions in weekly work hours are always modest, roughly in the order of the 2.0%-point (or 1.3-1.4 hour per week) reduction mentioned by Lehman. A recent metastudy in The Lancet: Public Health concluded that the “common argument against basic income, that it will lead to major reductions in employment, is not supported by the evidence.”
The evidence on behavioral effects is equally mixed. First, why should we assume that increased leisure time automatically correlates with vice rather than happiness and self-development? Second, even if playing video games is bad, other positive effects may compensate for it. In their 2011 book Poor Economics, the Nobel economists Banerjee & Duflo argued that, at least in poor countries, cash transfer programs have led to improvements in schooling, health, poverty, and inequality. One of their conclusions is that, from the point of view of social outcomes, it often does not matter at all whether you give people money with or without strings attached. In the developing world, in addition to the promising Finnish study, Evelyn Forget has shown that the 1970s minimum income experiments in Canada correlated with reductions in hospitalizations and mental health diagnoses. The above-cited Lancet study, aggregating across several studies, found “positive effects on child labour, health, and a wide range of structural determinants.”
Overall, the data looks less bad than Lehman makes it out to be. When carefully used, and properly implemented, cash transfers seem useful tools for helping the poor. However, advocacy should not be blind. In particular, careful consideration should be placed on weighting their negative and positive expected consequences. Crucially, we cannot simply use cash to solve underlying behavioral or attitudinal problems. Broken families, failing schools, lack of human capital, joblessness, and moral degeneracy are caused by complex factors that require complex solutions. So, I wholeheartedly agree with Lehman that “social dysfunction is not merely about deprivation. Just giving people money can do very little to change their behavior for the better.” Nonetheless, we are led down a dark path if we give up our faith in liberty simply because a free society does not guarantee virtuous behavior.
Living in freedom is an exercise in danger, and it is only against a solid backdrop of risk tolerance that society flourishes. An unconditional UBI, paradoxically enough, is compatible with an approach to governance that encourages risk-taking and self-responsibility. Sure, some poor people have identifiable mental health issues, developmental deficiencies, low skills, or moral vices that render them suitable for society’s paternalistic concern.
Nonetheless, the classical liberal hypothesis has always been that the threshold for paternalistic intervention is high. Ordinary rules of just conduct, and ordinary welfare programs, should be designed to support autonomy, even if this autonomy can be abused and lacks guarantees of success. We condemn the prodigal son who wastes his inheritance, the drunkard who drinks away his wages, and the miser who sits on his idle fortune. These are all examples of how vice flourishes in a free society. And yet we generally do not consider these sufficient arguments against private property, although they may become such arguments if vicious behavior is sufficiently widespread.
The arguments for imposing welfare conditionalities on the poor need to be exceedingly strong (on economic or moral grounds) before they justify interfering with poor people’s right to be left alone to pursue their own goals. Indeed, conservative arguments for imposing moralized conditionalities on poverty relief have the same structure, and are vulnerable to the same objection, as progressive arguments for imposing moralized conditionalities on private property. “Surely, rich people will only waste their money!” argues the socialist. “Surely, poor people will only waste their money!” argues the conservative. Both have a point, yes. But both also spectacularly miss the point. We want a risk-loving program of exceptionless liberty because we expect it to generate salutary effects on average, not because we expect it to eliminate vice in each instance.
So, even if we feel that taxpayers have the right to demand behavior modifications from the poor, it may be unwise to pursue them if the unintended consequences of paternalistic policies prove loathsome. For advocates of free enterprise, mutual tolerance, and individual responsibility, the main question is whether a given policy agenda advances, or at least does not hinder, the free choices, experiments, and exertions of individuals. In this regard, both Johnson’s Great Society programs and conservative paternalism, as I have indicated, fail the “sniff test.” Matters of virtue are probably best addressed indirectly, through education and economic policy, rather than directly through targeted government policy and paternalistic control. Nonetheless, conservatives may be right that an active Tocquevillian civil society that takes care of community norms may be indispensable for virtue.
With such guardrails in place, some cash transfer programs—even solidaristic ones—can be maintained with tolerable impact on work ethic, wealth creation, and family composition. A free society can tolerate, and perhaps requires, some delegated welfare authorities. However, before conceding to discretionary policy, we need to think about the rules of the game. Cash transfers are fickle and dangerous instruments, unless bound by rigid redistributive rules. This includes rules of simple, efficient, and fair taxation. And it also includes the rules of simple, efficient, and fair benefits. Classical liberals, libertarians, and conservatives should take rule-based unconditional cash transfers, and especially UBI and NIT, seriously. As Friedman, Hayek, and Buchanan have argued, such programs seem (prima facie) consistent with principles of the free society, including the rule of law, individual freedom, and personal responsibility. And I frankly see no better alternatives around the corner. I share the solidaristic view that poor people have claims of justice to basic income, but even people who deny this should care about how well their money is spent.
I agree that solving poverty is not always a matter of “just give them money.” Poverty attracts a cluster of problems. However, simple cash transfers can be useful, and perhaps indispensable, tools in alleviating poverty, as part of broader efforts at fostering virtue.
My preferred welfare system would be a simple redistributive program enshrined into the “fiscal constitution” of the country. It would be transparent, simple, uniform, and predictable. This entails a welfare scheme that is managed more like a Friedmanite central bank than the discretionary, technocratic agencies of the post-New Deal administrative state.
The most obvious models, in this group, include full unconditional UBI or NIT models. If these prove too expensive or vicious, the second-best option might be to retain limited, cost-checking conditionalities by, say, expanding the current Earned Income Tax Credit (EITC) system. However, conservatives should reconsider. Conditional programs tend to require continuous assessment of people’s economic and social circumstances, which makes them paternalistic and subject to Hayekian expert failure. In addition, James Buchanan has argued, shockingly, that constitutional UBI schemes may have an advantage over targeted schemes from the point of view of minimizing “rent-seeking” incentives, which refers to the ability of special interest groups to bend the rules of the game to their own advantage.
At least in theory, if people can agree on a set of mutually binding welfare rules (such as the rules of UBI), and if these rules are actually enforced, it will be harder for people to game the system to their own advantage. Picking discretionary programs that lack guardrails against political rent-seeking might end up costing society more—both morally and economically—in the long run. At the same time, since cash transfers do not directly address people’s moral deficiencies or broader social problems, there is room for complementary civil society efforts and government programs focused on improving citizens’ capacities and virtues.
Pinched between the pincers of left and right moralists, classical liberals like myself try to advocate solutions that strike a decent balance between conservative precaution and progressive abandon. Regardless of where we land on the question of redistribution, one ignominious calumny can be put to rest. The Moynihan report, whatever its flaws, cannot be reduced to prejudice and malice towards minority groups. Its data-driven warnings about vice, social disintegration, and other unintended consequences of hubristic social planning are signs of noble, paternalistic concern for the most vulnerable members of our society.
Indeed, the purported rot at the core of ill-conceived welfare programs should be investigated most judiciously by all serious and sincere advocates of tax-funded poverty relief and government responsibility for the welfare of its citizens. Among this group, I count Senator Moynihan and myself. It is a lamentable fact that so many advocates of “social justice” in our time remain so wilfully dismissive toward the mere existence of tragic tradeoffs and unintended consequences. Uncaring attitudes towards the plight of the poor—and even racism, classism, and xenophobia—may lie behind many criticisms of the welfare state. Likewise, envy and laziness may motivate many advocates of redistribution. Nonetheless, people’s motives are inscrutable, so we profit more by approaching genuine, non-trivial criticisms with liberal curiosity, as John Stuart Mill argued in On Liberty. If reading Hayek or Buchanan is too intimidating—although it should not be!—the Moynihan report can capture something of the same spirit. Many of the report’s substantive concerns have been vindicated by time. And although some of its conclusions and policy recommendations remain disputed, its brazen honesty has made the debate saner. The same could be said for Lehman’s thoughtful and well-argued criticisms, to which I have only sought to add a modest addendum.
Dr. Otto Lehto is a moral and social philosopher who is currently a Postdoctoral Research Fellow at New York University’s School of Law, Classical Liberal Institute.