Paul Ryan’s welfare plan, including stronger reliance on case managers to guide clients out of income support and into work, reminds me an awful lot of the Beaulier and Caplan piece on behavioural economics and welfare. It was published in Kyklos; the link above goes to the ungated version.
If we take behavioural economics seriously, we’ve good reason to believe that the anomalies it describes are found primarily among the poor and are exacerbated by the welfare system. Poor people are more likely to exhibit behaviours that reflect more than just high rates of time preference: they demonstrate little ability to foresee the consequences of actions. The poor (and less educated / lower IQ – the two go together) are more likely to be heavy drinkers, to be obese, to smoke, to buy lotto tickets, to take illegal drugs, and to commit even non-economically motivated crimes (theft would not be surprising, but violent crime isn’t lucrative). Low IQ amplifies behavioural anomalies. And, the dole makes things worse. If you start out with big self-control problems, you’re likely to overestimate your ability to motivate yourself to find work – “I’ll go on the dole for now but will look hard for work tomorrow”. Absent the income backstop, you’d have to look for work. Worse, if welfare payments are more comfortable than the first year of work, after which work is better as income rises, folks with high discount rates and self-control problems may decide never to leave even though it would be in their long run interest. Consequently, welfare payments may make welfare recipients worse off, contra neoclassical economics.
Ryan’s plan has recipients working with case managers to develop short- through long- term goals, with wraparound tailored support in place of some current federal programmes:
The OG system will promote a more holistic form of aid to move individuals and families out of poverty. One promising method this proposal envisions is the use of case management. Here’s an example of the number of steps illustrating the OG in practice:
- First, each state will approve a list of certified providers that are held accountable for providing quality service and achieving results (such as moving people to work, out of poverty, and off of assistance).
- Next, a person will select a provider, and the provider will conduct a comprehensive assessment of that person’s needs, abilities, and circumstances.
- Then, the two of them will develop a customized plan to address the recipient’s needs. The plan could take the form of a contract—with sanctions for failing and bonuses for exceeding expectations. The plan would offer financial assistance to address immediate needs, like food, clothing, child care, and housing. But it would also work on setting goals, learning skills, and developing a broader support system.
- At the most basic level, successful completion of a contract will involve an able-bodied individual obtaining a job and earning enough to live above the poverty line. Each state may choose to define success slightly differently insofar as those basic conditions are met.
I’m not a particular fan of paternalistic approaches. They’re insulting. But at least this variant is targeted at those who have demonstrated that they need a bit more of this assistance. Further, help to get out of poverty already comes with strings. Between this kind of approach and one that simply provided a minimum income with no strings, well, it’s a tough call. I don’t like the paternalism, but I do expect it could be more effective in getting people into better situations, conditional on there being some sufficiently competent and empathetic army of social workers to do the job. [update: link fixed]
- Welfare reform
- The poor aren’t like us
- Coercion everywhere: welfare edition
- Guaranteed income and living wages