Freeman

ARTICLE

The Government as Robin Hood

DECEMBER 01, 1994 by E.C. PASOUR

Dr. Pasour is Professor of Agricultural and Resource Economics at North Carolina State University.

Robin Hood robbed the rich to give to the poor. Although most people are critical of Robin Hood’s actions, relatively few question the legitimacy of governmental coercion to redistribute income. The typical justification for government welfare programs hinges on a highly dubious assumption. It is assumed, at least implicitly, that government has both the motivation and the ability to aid the poor. As shown below, there are a number of reasons to question this assertion.1 Collectivization of charity is objectionable on ethical grounds and there is mounting evidence that it is harmful to the long-run interests of the poor.

Information and incentive problems that complicate both the administration and analysis of government poverty programs are first discussed. These problems are partly responsible for the fact that the programs have done little to improve the lot of the poor in the United States. Ethical issues are then explored in addressing the question of whether government should be involved in poverty relief.

Information and Incentive Problems

Poverty programs assume that decision-makers in the political process, being imbued with supernatural power like Aladdin’s magical lamp, have both the knowledge and desire to act in ways that promote the public weal. However, information and incentive problems stymie collective efforts to alleviate poverty.

First, there is the question of why poverty exists. In the case of the minimum wage and similar governmental restrictions on competition, poverty results from constraints beyond the control of the individual. In other cases, such as poor job skills that can be traced to dropping out of school, poverty results from choices made by the individual.

Second, there is a difference between short-run and long-run effects of food stamp and other poverty programs. Recipient benefits are highly visible in the short run, but an important part of the costs—the effects of the programs in fostering dependency—occur in the long run. However, whatever the time period, the greater the stigma associated with poverty relief, the greater the effort people will make to be serf-reliant and, hence, the smaller will be the poverty problem.

The effectiveness of poverty relief is eroded over time because the programs create perverse incentives that affect both the poor and the non-poor. First, any program that transfers income to the poor decreases the incentives of the poor to provide for themselves. Consequently, donors face what has been termed a “Samaritan’s dilemma” (the term is based on the biblical parable of the Good Samaritan).2 A dilemma arises because the assistance rendered will lead to a decrease in serf-reliance and, consequently, an increase in the amount of need. An increased willingness on the part of the state (the Samaritan) to offer food stamps, for example, will reduce the incentive to work which, in turn, will increase numbers of people seeking and qualifying for this type of dole.

Moreover, both welfare recipients and decision-makers in the political process have incentives to overstate the need. In transfer programs subject to a means test, there is an incentive to underreport income because the penalty is likely to be quite low. In the school lunch program, for example, individual schools are responsible for monitoring but have no way to verify incomes reported on students’ application forms. Moreover, such programs provide an important source of support for members of Congress having large low-income constituencies and a livelihood for officials administering the programs.

Why Poverty Programs Are Ineffective

Let us now consider other reasons why poverty relief may be counterproductive in the long run.

In a competitive system, one’s income is earned in the process of producing and marketing goods and services and is determined largely by the individual’s contribution to output, as evaluated by consumers. Government transfers inevitably influence individual choice, adversely affecting the production of goods and services. As marginal tax rates increase, leisure is substituted for work, people work more on jobs where they are less productive, and more resources are used to avoid and evade taxes. In short, redistribution reduces productivity and, consequently, the creation of wealth.

Moreover, government relief tends to prolong and intensify the very disease it seeks to cure. Henry Hazlitt draws two lessons from the effects of the dole in ancient Rome.3 First, once public relief programs are introduced, they almost invariably get out of hand. Second, once this happens, the poor become more numerous and worse off than they were before. The programs become counterproductive not only because of their harmful effects on recipients’ self-reliance, but also because the sources of wealth and production on which the poor depended for either doles or jobs are adversely affected.

The nature of the state has not changed since the Roman days of providing bread and circuses for the masses.4 Historically, the state has been a device for producing affluence for a few at the expense of the many. Poverty programs in a majoritarian democracy are not produced in isolation; instead such programs emerge as part of a package of programs affecting education, agriculture, and other sectors that redistribute income mainly among the middle class. It is naive to expect the political process to implement only programs that assist the destitute while ignoring special interest programs that transfer income mainly among middle- and upper-income groups. Over time, the redistribution destroys wealth and weakens the very means of achieving income security. Thus, there may well be a direct relationship between the size of the transfer sector and the incidence of poverty.5

In short, there are practical implementation problems related to the effectiveness of governmental efforts to improve the lot of the poor—even if there were a consensus that people should be protected against severe deprivation. During the past forty years in the United States, for example, distribution of income has barely changed despite huge outlays by government ostensibly designed to assist the poor.6 The relief programs have had virtually no effect on the rate of poverty because almost all of the expenditures tend to promote self-destructive behavior among the poor.7

Ethical Considerations

As F. A. Hayek has shown, the concept of a fair distribution of income has little meaning other than the distribution of income as determined by market forces.8 Certainly there is little evidence that the political process is superior to the market process in this respect. Indeed, it is likely that most citizens agree that a system in which financial rewards are unrelated to one’s contribution is not fair. This attitude is reflected in the chronic complaints about government handouts to able-bodied people.

Some people contend that government relief is objectionable because redistribution is wrong in principle. The law can be an instrument of equalization only as it takes from some and gives to others. Frederic Bastiat provided an argument against redistribution through state power that continues to be persuasive. In this view, the mission of the law is to protect persons and property, but once the state exceeds this proper limit “you will then be lost in an uncharted territory . . . . because fraternity and philanthropy, unlike justice, do not have precise limits. Once started where will you stop?”9

Hazlitt’s objection to redistribution on ethical grounds is no less clear cut. “It is clearly wrong in principle to allow the government forcibly to seize money from the people who work and to give it unconditionally to other able-bodied people whether they accept work or not.”10 Indeed, Madison and other Founding Fathers of the U.S. Constitution held that justice was obtained in the process of protection of private property and destroyed in the process of forced transfers.11 In this view, individuals have no legal obligation to help others because this would imply that potential recipients have a right to take what is not theirs, which is inconsistent with the laws of justice.12 Individuals acting on their own are free to help the less fortunate of course and, indeed, as moral persons “ought” to do so.

Conclusions and Implications

Coercion is inherent in government redistribution. Robin Hood behavior that is objectionable on the part of the individual is no more legitimate on the part of the state. That is, if it is not right for two people acting privately to take the property of a third, neither is it legitimate for them to do so when they form a political majority and invoke the name of government in their behalf.13

Any government transfer program is subject to the “law of unintended rewards”—it increases the net value of being in the condition that prompted the transfer.14 Consequently, responses by both poor and non-poor people to the perverse incentives inherent in poverty relief programs over time erode the effectiveness of such programs. Moreover, the reduction in productivity and destruction of wealth accompanying government redistribution weaken the very means of achieving financial security.

In short, government acting in the role of Robin Hood is neither ethically defensible nor effective. []

  1. 1.   Some of the following discussion is adapted from E. C. Pasour, Jr., “Redistribution and Constitutional Political Economy,” Constitutional Political Economy, Winter 1994, pp. 81-98.
  2. 2.   J M. Buchanan, “The Samaritan’s Dilemma,” pp. 71-85 in Edmund Phelps, ed. Altruism, Morality, and Economic Theory (New York: Russell Sage, 1975).
  3. 3.   Henry Hazlitt, The Conquest of Poverty (New Rochelle, N.Y.: Arlington House, 1973), p. 71.
  4. 4.   Yale Brozen, “Welfare Without the Welfare State,” The Freeman, December 1966, pp, 40- 52.
  5. 5.   D. R. Lee and R. B. McKenzie, “Helping the Poor Through Governmental Poverty Programs: The Triumph of Rhetoric Over Reality,” in J. D. Gwartney and R. E. Wagner, eds., Public Choice and Constitutional Economics (Greenwich, Conn.: JAI Press Inc., 1988), p. 92.
  6. 6.   D. R. Lee and R. B. McKenzie, Regulating Government: The Positive-Sum Solution (Lexington, Mass.: D.C. Heath and Co., 1987), p. 169.
  7. 7.   R. Rector, “Requiem for the War on Poverty: Rethinking Welfare After the L.A. Riots,” Policy Review 61 (Summer, 1992), pp. 40-46.
  8. 8.   F. A. Hayek, Law, Legislation, and Liberty, Vol. 2: The Mirage of Social Justice (Chicago: The University of Chicago Press, 1976).
  9. 9.   Frederic Bastiat, The Law (Irvington-on-Hudson, N.Y.: The Foundation for Economic Education, 1964), p. 69.
  10. 10.   Hazlitt, op. cit., p. I 16.
  11. 11.   J. D. Gwartney and R. E. Wagner, “Public Choice and the Constitution: A Madisonian Perspective,” Ch. 3 in Public Choice and Constitutional Economics. p. 92.
  12. 12.   Ibid., p. 92.
  13. 13.   R. E. Wagner, To Promote the General Welfare: Market Processes vs. Political Transfers (San Francisco, Cal.: Pacific Research Institute for Public Policy, 1989), p. 206.
  14. 14.   Charles Murray, Losing Ground (New York: Basic Books, 1984).

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