Welfare Policy: Point and Counterpoint
D. Eric Schansberg
Various arguments are made for and against varying degrees of income redistribution to the poor, reflecting underlying ideological positions and assumptions. I examine the importance of ideology with respect to helping the poor and its historical evolution, which eventually led to current welfare programs. The results of the government's War on Poverty are evaluated, and the chapter concludes with possibilities and prospects for reform.
Proponents of income redistribution to the poor usually invoke a version of equity or fairness by arguing that current economic outcomes are unjust and should be altered through government income transfers. Two general underlying philosophical approaches yield this conclusion: contractarianism and utilitarianism.
Contractarianism is best illustrated with a thought experiment developed by John Rawls. 666 Imagine that your income is determined randomly from the set of people living in the United States. Rawls argued that rational, risk-averse individuals would prefer a certain chance at a middle level of income to a gamble that results in either a high income or abject poverty. This preference implies that some form of social insurance or income redistribution resulting in greater income equality should be pursued by society. 667 All things equal, people prefer a greater degree of income equality than exists naturally. At least to some extent, people prefer efforts to equalize incomes.
The goal of utilitarianism is to maximize the "utility" (well-being) of society, as measured by the sum of the utilities of that society's individuals. Given diminishing marginal utility -- the fact that individuals receive less and less satisfaction from each additional unit of the goods they consume --