On the Ethics of Welfare

According to Wikipedia, “Welfare is a type of government support for the citizens of that society.” So to make a good welfare system, we have to determine WHY we should support folks, WHAT support will be distributed, WHO that support should go to, and HOW it should be funded.

First, the why. What are the ethical justifications for welfare?

1. Probably the most prominent justification is utilitarianism: the idea that we should aim to maximize happiness/well-being. Under this framework, we should redistribute, because a poor person gets more good out of a dollar than a rich person does.
2. A similar justification is that we should maximize freedom. Simply put, how much money you have limits what you can do. The more you have, the more you can choose to do. But if someone who makes $1 million a year gets, say, $100k, they aren’t much more free in any real sense. They had enough money before to do and go wherever they want, and the same is true after. But giving that money to a homeless person greatly increases the options they have available to them in life. They could eat what they please, get a roof over their head, buy whatever clothes they need, etc. This is another reason to redistribute income.
3. Another common justification is that folks have a right to a decent standard of living. This is article 25.1 of the UN Declaration of Human Rights, and is also the 3rd Freedom in FDR’s famous “Four Freedoms” speech. As anther example, “healthcare is a human right” has become a common refrain. This “decent standard of living” includes the basics of human life: food, water, shelter, housing, healthcare, and clothing.
4. Many right-libertarians follow the non-aggression principle, or NAP, which states that aggression and coercion are inherently wrong. It’s… strange to me that right-libertarians believe this. After all, in a totally free capitalist market, you can only survive if you get a job: so you are coerced into work. Whether from individuals or society, coercion is coercion. The only solution to this is welfare, and enough of it to be safe. So, again, food, water, shelter, housing, healthcare, and clothing.

Next, the what. What kind of welfare should we give out?

Under justification 2, it’s clear that we should mainly be redistributing through cash. Money will, by definition, always give you the most freedom to buy what you want. Compare this to something like food stamps, which you can only buy certain things with. Under justification 1, these paternalistic limitations could theoretically be the right way to go. But several studies have concluded that such in-kind benefits are 20% more expensive, yet change outcomes little compared to giving cash. This makes sense: if folks are getting in-kind benefits that they don’t really want, they will find a way to trade them for something they want more. So, both justifications 1 & 2 conclude that welfare should mainly be cash.

Now, there are some exceptions to this where there are market failures. Take healthcare. It has a natural information asymmetry (your doctor knows what you need, you don’t). Your health effects others around you in many ways (especially during a pandemic!), and this isn’t factored into the cost of healthcare. Plus, many hospitals have monopoly power. Just giving folks cash won’t fix this: those problems will still be there. That’s why universal health insurance and/or public provision of healthcare is needed.

We’ve seen that 3 & 4 are the same-welfare as a right, you could call it. This already lines up nicely with the government paying for healthcare. But what of other areas? Well, different folks will require different amounts and kinds of food, water, clothing, and housing, so it’s not as simple as just giving them enough to keep them safe. They need some control over their welfare. Especially given that restrictions on use of welfare don’t really change what it’s used for, welfare as a right also justifies mainly using cash welfare.

In other words, 1 says to maximize happiness, 2 says to maximize freedom, 3 says to guarantee a good standard of living, and 4 says to minimize coercion. It’s unsurprising that these goals all align. I’ll add another, general reason to do cash welfare, since we should keep this in the real world of politics: cash is obvious. Holding a check from the government in your hand is a much more tangible benefit than a tax credit or mortgage deduction. And when the government delivers obvious benefits to people, that government tends to get re-elected. This of course extends to universal healthcare as well!

Now, there are slight differences to these justifications. Mainly, 3 & 4 justify redistribution to eliminate poverty, but 1 & 2 justify even more redistribution (as long as total happiness or freedom keeps going up). These are relevant to some discussions, but at least we can all agree to end poverty, which no country has done yet!