All right. So today, I'm going to talk about probably the single most important argument in wealth and welfare states, which all of you are assigned to read. The argument in the book is that welfare state programs increase our productivity and economic growth. That argument runs counter to what most people including a lot of academics believe in the United States. This is not just a question of opinion, it's either true or it's not true. At Columbia University School of Social Work, we believe in evidence-based practice. So, the question is what's the evidence? In a moment, I'll get to that, but I want to first say why this is a critically important question for social workers. All social workers have two masters. One, the clients we work for, and second, society as a whole if it's social policy and agency if we're working for a particular agency. In the case of social policy, we need to consider society, the well-being of society as a whole, as well as the well-being of clients. Those people who argue that the welfare state and social work are a drag on productivity, basically, it's the same wrap. They say that the welfare state or social workers cuddle those people who were in need, when really what they're in need of is a good swift kick in the ass. So, what's the evidence? What's the evidence that welfare state programs are effective? First, there's no question and that's detailed in the book that both education, public education, and public health are incredibly productive. In economics literature, the range of estimates for the rate of return to education suggests that education is on the low end, a really good investment, very good investment, and on the high end, an unbelievably god investment. Longevity increased dramatically at the beginning of the end of the 19th century, and beginning of the 20th century as a consequence of public health innovations primarily clean water and sanitation. If it's the case that people lived a lot longer, we're talking about 15 years longer gain in life expectancy. It must be the case that it was productive. So, that's too big pluses. On the other side, the cash transfers which have been studied a lot. The evidence is some studies small effects, some studies find big effects. Taken as a whole, if there was a big negative effect, it would show up in all of the studies. The fact that we get inconclusive results suggests the effect is close to zero. You take two big pluses and add it to a even a small negative, you wind up with a big plus. So, the evidence that the welfare state is productive as a whole is incredibly strong. What's the argument the other way that the welfare state is not productive? Well, first, those who make this case leave out education and public health. That's pretty clever. Leave at the most productive parts, focus on the parts that are more questionable, that's a very good strategy. Unfortunately, the left has been sucked into this, this is not just the right wing argument, that's number one. Number two, there's economic theory which focuses on the cash transfers. Economic theory says cash transfers have negative disincentive effects, and there's empirical evidence that confirm it. So, it's true, there are negative costs from these cash transfers, but that does not mean that they are not productive. You have to weigh the cost as economists are fond of saying, no such thing as a free lunch. Also true for transfers. So, there are costs. The question is, do the benefits exceed the cost? As described a minute ago, the benefits in terms of productivity and growth of the cash transfers seemed to be pretty much equal to the costs, whereas for education and public health benefits far exceed the costs. After the welfare state grew really big during the '60's and '70's, economic growth in the rich nations slowed dramatically relative to what economic growth was in the '50's and '60's. People talked about a crisis in the welfare state, that this was all to blame, the economic low growth rates. We're all to blame from the welfare state. I call this a case of historical myopia. That period, the 50's and 60's of post-war, World War II period, has been referred to as the golden era, because growth rates were so high. If you look at previous growth rates, you go back to the beginning of the 19th century long before there was a large welfare state, growth rates were much lower than they are today. So, historical myopia is at the heart of the evidence of a crisis in the welfare state. Having said all that, when you come to any particular program, it may or may not be efficient. It may or may not contribute to economic growth and productivity. That's particularly true for the services we deliver; we don't know. We need to measure that. Any program could be a good or a bad program. A welfare state as a whole is very effective and contributes to wealth.
