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Über dieses Buch

This book is the sequel to Fighting Europe's Unemployment in the 1990s, the collection of papers presented at the Salzburg Symposium of the Egon-Sohmen-Foundation in 1994. Though the problem of un­ employment was urgent already then, it has not found a practical solution in the meantime, and even intellectually it remains somewhat of a mystery. A clue is offered by the contrast with the United States: they have the working poor; we, on the old continent, have the welfare recipients. This brings the relationship between unemployment and the welfare state to the fore. On closer inspection, however, the matter appears to be much more complicated than the transatlantic contrast suggests. Consider only that the welfare state and what is called "social policy" have a long tradition in Europe. They obviously did not pre­ vent or noticeably hamper the decline in unemployment in the 1950s and the emergence of full employment in the 1960s. This leaves room for various conjectures. Does the welfare state matter only after a long time lag or after it has grown too fast or too much beyond a critical size? Is it the welfare state per se that is harmful to employment or do its harmful effects arise only under certain conditions, e. g.

Inhaltsverzeichnis

Frontmatter

The Present Malaise

Frontmatter

The Past Rise of Social Security: Historical Trends and Patterns

Abstract
When the hard social sciences seek the opinion of historians on any topic, it is usually a matter of politeness and courtesy rather than a trawl for real enlightenment. The attitude of the social sciences to history, or so it seems to most historians, is summed up in Catherine Morland’s famous line from Northanger Abbey: “History tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars or pestilence; the men all so good for nothing, and hardly any women at all, it is very tiresome; and yet I often think it odd that it should be so dull, for a great deal of it must be invention.” Nor, truth be told, have the lines of communication been more open in the other direction. Historians envy the influence and pecuniary pull of their methodological cousins while disdaining the—in their eyes—narrowly pragmatic and temporally blinkered approach followed by the more quantitatively oriented and generalizing of the social sciences.
Peter Baldwin

Moral Hazard in the Welfare State

Abstract
There is no generally accepted definition of moral hazard. Here I shall refer to certain (but not all) behavioral effects related to provisions in the form of insurance, that is, plans for risk sharing where one party (the insurer) agrees to carry some part or the whole of a loss that the other party (the insured) might face as a result of a specified risk, for example illness. In particular, I shall look at insurance provisions in the welfare state. Sandmo (1991) and Barr (1992), among others, have drawn attention to moral hazard as a potentially large problem in the welfare state.1
Lars Söderström

Comment on Lars Söderström “Moral Hazard in the Welfare State”

Abstract
The theme of Lars Söderström’s paper is to what extent moral hazard problems limit the amount of social insurance that can be provided in the welfare state. This is a very important and timely topic. I see two main motivations why we should devote interest to it now.
The first motivation is that incentive effects of social insurance are likely to take a long time to develop before they reach their full impact (see, e.g., Lindbeck, 1995). As noted in the paper, it is a question of developing social norms. For this reason, it may be first now that we really start to observe the adverse behavioral effects of the welfare systems that were introduced in most Western European countries after the Second World War.
Lars Calmfors

The Welfare State at a Crossroad: Fundamental Choices

Frontmatter

Pros and Cons of a Negative Income Tax

Abstract
This at first glance paradoxical statement by Milton Friedman precisely describes current developments in economic and social policy not only in the United States but also in Germany. In spite of the 1989 victory of individualism over collectivism, socialistic ideas, as a consequence of their long tradition, are so deeply ingrained in the minds of a majority of voters and politicians that the absurd consequences of such political behavior are not recognized. The erosion of social norms and value systems has obviously gone so far that today even Western societies are confronted with chaotic situations. Consequently, almost any political action can be justified by claiming that it improves “social justice”—a term which is used very frequently by politicians because it is so devoid of meaning.1 Not only are politicians and voters infected, but also a substantial part of the economic profession. Therefore, the discussions on minimum income strategies and the negative income tax (NIT) are often puzzling, and surprising coalitions between opponents and proponents of different ideological positions can be observed.
Hans-Georg Petersen

Comment on Hans-Georg Petersen “Pros and Cons of a Negative Income Tax”

Abstract
There are many more pros than cons in this paper. Professor Petersen is quite enthusiastic about the negative income tax (NIT) as a substitute for current welfare state transfers in accordance with what he calls the social aid principle (Fürsorgeprinzip). I do not share his enthusiasm. In my view, NIT is both expensive and inefficient.
Lars Söderström

The Future Scope for Self-Reliance and Private Insurance

Abstract
Many years have past since a number of young liberal economists, including myself, raised the question—not then on anyone’s political agenda—as to whether the welfare state was a passing phenomenon (see Watson [ed.], 1957). It seemed only possible then to give rather tentative replies, and my own was contained in a pamphlet (Peacock, 1961), which achieved a certain temporary notoriety:
There is not much point in talking of individual freedom and responsibility to those who live in fear of want. But if poverty is abolished, if income and wealth can be equitably distributed, if economic fluctuations can be mitigated, then individuals are in a situation where, potentially at least, they can plan their own and their children’s future, and where it is less necessary for them to rely upon the State.… The true object of the Welfare State, for the Liberal, is to teach people how to do without it.
Alan Peacock

Comment on Alan Peacock “The Future Scope for Self-Reliance and Private Insurance”

Abstract
The emphasis that Sir Alan Peacock puts on self-reliance in his paper is in itself a value judgment. It is the value judgment that it matters whether you make an economic or some other decision yourself or whether it is made for you by someone else. Japanese scholars like, e.g., Yuichi Shionoya call this decision for self-decision “biblical.” This is enlightening, since behind the emphasis on self-reliance there is a whole interpretation of human existence that assumes that a decision for right or wrong taken by the individual him-or herself has a different quality from a decision for right or wrong taken for this individual by someone else. The shift from the quality of the decision as being right or wrong to the quality of the decision as being self-induced and free or enforced can be traced in philosophy in the transition from the interpretation of the human in Antiquity to the interpretation of human in the Judeo— Christian tradition. In Plato and Aristotle, it is stated that it is better to make the right decision when it is induced by someone else than to make the wrong decision by oneself. For Plato it is better to be ruled reasonably by someone else than to be ruled unreasonably by oneself.
Peter Koslowski

Reform Issues of Specific Welfare Systems

Frontmatter

The Swedish Model: Past, Present, and Future

Abstract
Ten years ago, Erik Lundberg (1985), in one of his last writings, discussed “The Rise and Fall of the Swedish Model.” The opening passage of the article points out that the notion of a specific Swedish model “has been used in a vague and unscientific way by economists, journalists, and politicians since the 1930s.” This indicates that many observers have for a long time actually identified a specific Swedish model, but also that it is not all that clear exactly what this model is. In all likelihood this vague notion has also been changing over time. It is, thus, a delicate matter to discuss the past, present, and future of the Swedish model. I will not make any attempt to supply a comprehensive definition of the Swedish model. Instead, I will settle below for a provisional list of features which can be considered typical of the Swedish economy.1
Anders Forslund

Reforming the Welfare State: The German Case

Abstract
The Federal Republic of Germany has a long tradition of social policy. Social policy in Germany was restricted to safety regulations for workers until the second half of the last century. However, a milestone in this development was the buildup of a state-organized social security system in the 1880s by Chancellor Bismarck. Health and accident insurance for workers were started in 1883 and in 1884, respectively, whereas pension insurance for workers was installed in 1889. In 1911, pension insurance for employees was added. The public social security system was further extended during the Weimar Republic (1919–1932) and completed by the installation of an unemployment insurance system in 1927 before the start of the Great Depression. Apart from the further extension of safety regulations for workers, several new social policies were added during this time: labor market policy (autonomous and collective wage negotiations, state-run job counseling and placement services, etc.), codetermination rights, public welfare, and housing policy. After the Second World War, the already existing social policies (safety regulations for workers, social security, codetermination rights, public welfare, and housing policy) were not only preserved and enforced, family, education, and redistribution policies were also added.
Norbert Berthold, Rainer Fehn

Comment on Norbert Berthold and Rainer Fehn “Reforming the Welfare State: The German Case”

Abstract
In these brief comments on Professor Berthold’s and Rainer Fehn’s paper I shall concentrate on raising some general issues, since I am not familiar with the details of the recent German experience. I have three such observations to make.
First, I was struck by the way in which politics and the political process are treated in the paper as “noises off.” The issues are addressed in what might be termed a “technocratic” style; that is, they are debated in a form that presupposes that achieving solutions is a matter of achieving the right technical mixture of policies. Voters are admitted briefly into the analysis, as reluctant taxpayers and in the specific context of reunification (which otherwise received far less attention in the paper than I would have expected, as an outsider). Politicians are merely irrational vote maximizers. I venture to suggest that the real position may be rather more complex, both in relation to the motivations of all those engaged in the political process and in estimating possible outcomes.
Nicholas Deakin

The Worm at the Root: An Exploration of the British Welfare Case

Abstract
In contrast to some other contributors, who are presenting models of welfare in their countries, I am invited to consider “the British case.” This may be nothing more than a backhanded tribute to that celebrated British characteristic: pragmatism. But I suspect it would have greatly irritated William Beveridge. Whatever else you may say about the approach embodied in his report on social insurance, (and there have been a great many criticisms over the years, covering the whole spectrum from new right to feminist) it most certainly presented a coherent model. Indeed, it is possible to write the history of welfare in Britain over the last fifty years as a long retreat from the clarity of Beveridge’s model (cf. Hills et al., 1994). It is not for nothing that the periodic attempts to provide a consistent framework for new developments are regularly presented as a “new Beveridge” (Fowler, 1985; Borrie, 1994). It is also striking that we are currently in the middle of a series of (largely polemical) attempts to reinterpret Beveridge. This is not so much a reflection of the national mania for anniversaries, I suggest, as of a widespread perception that current policy and, indeed, practice on welfare lacks any focus or sense of direction. So, like the Michelin green guides, I start with un peu d’histoire.
Nicholas Deakin

Reform Issues in Specific Areas of the Welfare State

Frontmatter

Old-Age Pension Systems: A Theoretical Evaluation

Abstract
Since the end of World War II, many countries have introduced public pension systems. Other countries, where such systems already existed, have expanded them considerably. The sheer size of these systems is startling. Germany, for example, spent over 300 billion marks on public pensions in 1992, that is, nearly 15% of its national income.1
Stefan Homburg

International Reforms of Health Care Systems: Quasi Markets, Privatization, and Managed Care

Abstract
International reforms of health care systems over the last decade have addressed three fundamental issues: coverage, cost, and control. The general approach has been to move the health care systems toward the use of markets or quasi markets and to decentralize as much as political and social structures will allow. In this paper I assess the three issues raised above (referred to here as the three c’s) and provide examples of different reform proposals in the United States, the United Kingdom, and the Czech Republic. I conclude with some thoughts on where the reforms are headed in the twenty-first century.
Richard M. Scheffler

Comment on Richard Scheffler “International Reforms of Health Care Systems: Quasi Markets, Privatization, and Managed Care”

Abstract
Doubtlessly, Richard Scheffler has written a fine and truly convincing paper in which he very ably summarizes the fundamental issues of health care as well as the current patterns of reform in the United States, the United Kingdom, and the Czech Republic. In general, the results of the study are consistent with and reinforce those made of other countries’ public health care or social health insurance systems. With regard to most of the evaluations made in this paper I can fully agree. But in view of the discussions and developments in Germany, I must confess to a certain skepticism. Therefore, the tenor of the paper seems to be somewhat too optimistic. I will demonstrate this by focusing upon two of the three c’s discussed in Scheffler’s paper: coverage and control.
Hans-Georg Petersen

Unemployment Compensation: Theory and Practice

Abstract
In contrast to the “full-employment” optimism which reigned in the industrial world three decades ago, the consensus of economists now appears to be that unemployment is a necessary evil of capitalist economies. Especially evident in the European Union, where unemployment has reached 10% of the labor force, this view has now been exported to Central and Eastern Europe, where previous jobless rates were negligible under communism and have now reached 15% in most countries.1 Mass unemployment carries with it societal stress as well as social exclusion, and this has been nowhere more evident than in the formerly planned economies, where a massive rollback in labor participation risks destroying initial consensus for economic reform.
Michael C. Burda

From Welfare State to Social State: Individual Responsibility and Compassion

Abstract
In the European welfare states, we enjoy high quality health care, historically unprecedented unemployment and pension benefits, and an otherwise dense social safety net. Yet we know that we pay too high a price and cannot sustain it at its current level. First, many social security provisions are inefficient, as they give rise to moral hazard; regulations and outright central planning, such as in health care, lead to unnecessarily high costs. Second, the total cost of the social security system is higher than what we can bear: in world markets, we can no longer command prices that are generous enough to finance the welfare state, as is evidenced by the loss of jobs. Finally, we will, in the future, not be able to sustain major elements such as the pension system, since its pay-as-you-go financing is conditioned on a sizable future generation, which we, collectively, have not been willing to raise.
Wilfried Prewo

Explaining Private Giving

Frontmatter

On the Transfer Value of Gratitude

Abstract
The literature on private transfers tends to differentiate between two main transfer motives: exchange and altruism (for a recent review see Laitner [1997]; for a recent empirical analysis see Cox and Rank [1992]). An exchange-driven transfer is positively correlated with the income of the recipient; a recipient is better equipped to provide a service (for example, insurance or support) to a donor when the recipient’s income is higher. A higher anticipated return then prompts a higher transfer. This reasoning implicitly assumes the recipient’s willingness to provide a service. An altruism-driven transfer is negatively correlated with the income of the recipient. The donor cares about the recipient’s well-being. A decline in this well-being prompts an infusion of support aimed at raising the recipient’s income and consumption. This reasoning explicitly assumes that the donor’s attitude toward the recipient is parameterized by an altruism coefficient attached to the recipient’s utility in the donor’s utility function, and implicitly assumes that the recipient’s attitude toward the donor is given; indeed, that in the donor’s mind or heart it plays no role whatsoever.
Oded Stark, Ita Falk

Backmatter

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