Value and the Welfare State

Mr. Summers is a member of the staff of The Foundation for Economic Education.

Society moves as its individual members move. and individuals act according to their ideas.

Thus if one wants to know where society is going, one needs to examine the ideas held by its members. If one wishes to change the course society seems to be taking, one must present one’s fellow men — society — with better ideas.

The ideas that nurture and sustain the welfare state are innumerable, but a few basic conceptions run through them all. And one such notion is that welfare programs somehow "increase the general welfare."

In conventional usage, "general welfare" is taken to mean some sort of sum of the welfares of the individuals composing society. To form any such sum, one must assume that the welfares of individuals can somehow be measured.

The "welfare of the individual" is a subjective value judgment. Unless one considers himself somehow superior to his fellow men, he will readily assert that the only judgment of the welfare of the individual that matters is the judgment of the individual himself.

Can a person measure his own welfare and then report the resulting number back to the state? Welfarism is based on the assumption that an individual not only can do this for himself, but a case worker can do it for him.

The measure used, of course, is the material well-being of an individual — in rough terms, how much money he has. That is, the material wealth of a person is taken as the measure of his welfare. The state, using these figures, then forcibly takes from those with "too much" wealth and gives to those with "too little."

Thus are the actions of the welfare state founded on the assumption that an individual can measure the values he places on goods and services. That is, state welfarism is based on the notion that personal values can be measured and that the appropriate measure is money.

Subjective Values Change

This notion is false. For money to be a measure of value, the value an individual places on a unit of money, say a dollar, would have to be constant. In reality, as an individual changes, and as his economic circumstances change, the value he places on each dollar also changes.

To confirm this, merely reflect on your own experiences. If you received a raise, did not the value of each dollar in your eyes decline? Were you not more willing to spend these dollars for luxuries you wouldn’t have bought in the past? Also, as prices change, does not the value of each dollar in your eyes also change? Reflection upon your own experiences, and your own changing tastes and values, will show that a unit of money is no more a standard of measurement than is an elastic ruler.

Thus is it seen that the welfare of the individual is not amenable to measurement. This reveals the folly of egalitarian leveling schemes, for they are based on the assumption that individual welfares can be measured and compared, usually in terms of dollars. There is no reason to believe that equally wealthy people are "equally happy" people. In fact, one has only to look among his acquaintances to find graphic evidence to the contrary.

The immeasurable nature of human welfare also demonstrates that there is no way of determining if the welfare state helps beneficiaries more than it harms taxpayers because there is no way to measure the help and the harm. That is, there is no way of telling if welfare programs "increase the general welfare." In fact, "general welfare" — viewed as a sum of the welfares of the individuals comprising society — is a meaningless expression.

One may thus conclude that the welfare state has no meaningful criterion to judge its effects on the welfares of the people.

Voluntary Charity As Alternative to Welfarism

Fortunately, welfare is not the only way that people may give direct aid to the needy. There is one alternative: charity. Charitable acts are voluntary acts. An individual accepts charity because he feels he is better off doing so than not. That is, he feels his welfare is improved. A bestower of charity does so because he betters his own standing in his own eyes. That is, he experiences a psychic profit. Hence he also feels that his welfare is improved. Thus in charitable transactions, as in all free market transactions, each party feels that he is better off. If both parties didn’t feel this way, they wouldn’t have made the transaction.

We may thus conclude that in charitable acts all parties involved improve their own welfares from their own points of view—the only points of view that matter.

The voluntary nature of charity, in contrast to the coercive "pay these taxes or else" nature of welfare, convinces me that charity is far the better alternative.