Welfare State Economics
Samenvatting – Economics of the Welfare State – Nicholas Barr
Part 1 - Concepts
H1 Introduction
1.1 The approach
Theoretical arguments support the existence of the welfare state: in particular reasons of
equity and of efficiency.
The welfare state can be thought of both:
- as a series of institutions which provide poverty relief, redistribute income and
wealth, and seek to reduce social exclusion (the ‘Robin Hood’ function).
- as a series of institutions which provide insurance and offer a mechanism for
redistribution over the life cycle ( the piggy bank function).
One of the core functions of the welfare state is risk sharing.
This book approaches policy by asking two fundamental questions:
- what are the aims of policy?
- By what methods are those aims best achieved?
In the Western world the main aim of policy is: efficiency in the use of resources; their
distribution in accordance with equity or justice; and the preservation of individual freedom.
This is obviously a normative and ideological definition of policy.
The second fundamental question- methods – has a purely technical nature. Is public
provision / state intervention or the market mechanism / private provision a superior
method? The distinction between methods and objectives of policy is essential.
1.2 Defining the welfare state
‘Welfare state’ is concept that is hard to define and impossible to measure. Three
complications arise when trying to define a welfare state:
1. Welfare derives from many sources in addition to state activity.
Individual welfare comes from 4 sources:
- The labour market : through wage income (labor wage, salary) and
occupational welfare (employers paying for disability or pension funds).
- Private provision: voluntary private insurance and individual saving.
- Voluntary welfare: charity, family and friends, the church
- The State: cash benefits and benefits in kind, and tax concessions.
2. Modes of delivery zijn divers. A service may be financed by the state, but it does
not follow that it must necessarily be publicly produced.
3. The boundaries of the welfare state are not well defined.
Samenvatting – Economics of the Welfare State – Nicholas Barr
Part 1 - Concepts
H1 Introduction
1.1 The approach
Theoretical arguments support the existence of the welfare state: in particular reasons of
equity and of efficiency.
The welfare state can be thought of both:
- as a series of institutions which provide poverty relief, redistribute income and
wealth, and seek to reduce social exclusion (the ‘Robin Hood’ function).
- as a series of institutions which provide insurance and offer a mechanism for
redistribution over the life cycle ( the piggy bank function).
One of the core functions of the welfare state is risk sharing.
This book approaches policy by asking two fundamental questions:
- what are the aims of policy?
- By what methods are those aims best achieved?
In the Western world the main aim of policy is: efficiency in the use of resources; their
distribution in accordance with equity or justice; and the preservation of individual freedom.
This is obviously a normative and ideological definition of policy.
The second fundamental question- methods – has a purely technical nature. Is public
provision / state intervention or the market mechanism / private provision a superior
method? The distinction between methods and objectives of policy is essential.
1.2 Defining the welfare state
‘Welfare state’ is concept that is hard to define and impossible to measure. Three
complications arise when trying to define a welfare state:
1. Welfare derives from many sources in addition to state activity.
Individual welfare comes from 4 sources:
- The labour market : through wage income (labor wage, salary) and
occupational welfare (employers paying for disability or pension funds).
- Private provision: voluntary private insurance and individual saving.
- Voluntary welfare: charity, family and friends, the church
- The State: cash benefits and benefits in kind, and tax concessions.
2. Modes of delivery zijn divers. A service may be financed by the state, but it does
not follow that it must necessarily be publicly produced.
3. The boundaries of the welfare state are not well defined.
