The authors present two schools of thought regarding public employment, welfare transfers, and size of government: the “neoliberal school, whose inspiration is neo-classical economics and liberal political philosophy, contends that where the state offers citizens minimalist social protection from [engages in minimalist intervention against] private market forces, economic development flourishes and general incomes will be higher;” the “Marxist…radical political economy schools,” interject “that in regions and periods where the state was more interventionist on behalf of citizens, incomes were higher and income inequality lower.” (520) The authors’ “neoliberal school” closely reflect the “liberal” welfare regime (they do not argue that this school seeks to abolish the welfare state just minimize it) as described by Esping-Andersen, who attributes include: “a limited array of governmental obligations, generally modest social benefit levels, strict criteria for eligibility, a preference for targeting public money very narrowly to the “needy” rather than the citizenry at large, and active encouragement of market solutions” for achieving economic well-being. (Hicks and Esping-Andersen, 2005, 512) The competing view presented by the authors fits Esping-Andersen’s “Institutional” Welfare State “by defining the scope of public welfare responsibilities extremely broadly, by giving high priority to social equality and redistribution, by actively attempting to secure citizen’s welfare ‘from cradle to grave,’ and by striving toward universalism in coverage and eligibility. (512)

The authors, very competently, present the neoliberal argument that “private market mechanisms, even when imperfect perform better than state planning. Government [intervention] inherently distorts competitive market processes operating among populations; the market interference is at best ineffective, and at worst counterproductive.” (523) They present four reasons that neoliberals say cause the negative effects of the welfare state: reduces labor supply by employing citizens in government or by allowing them to choose leisure over work due to welfare transfers; perverts business incentives by rewarding certain businesses or by increasing the cost of business by bidding up labor costs or raising costs through other egalitarian regulations; misallocates resources “toward undeserving and under performing populations,” regions, and businesses; and finally by pitting the interests of the poor, receivers of redistributive and egalitarian policies, and the non-poor, the providers of the resources that are being redistributed. (524-526) The consequences will be lower overall income, the atrophy of cultural and familial relationships, and an ever growing state that becomes more and more unchallengeable as dependency on it grows.

When presenting the contrary schools argument, Lobao and Hooks put forward very little effort to contradict the neoliberal schools arguments a priori. They a make a few ad hoc pleas, without much evidence or reasoning, that the conclusions of the neoliberal school are misguided but they mostly argue that the goals of the radical political economy schools are simply different: equality of outcomes through redistribution and increased overall income. (527-528)

The authors then set out to statistically show through econometrics how effectively the policies of both schools achieve the welfare state goal of reducing inequality and the shared goal of increasing overall income, the neoliberal is satisfied if all classes or individuals increase their wealth and do not concern themselves if certain groups or individuals gain wealth at a faster rate, thus increasing inequality while also increasing overall income. The authors focus their study on the county level econometrics of aggregate population since both schools have both done extensive research that “extrapolate[d] from national trends to anticipate sub-national shifts” in income and inequality. (528) The authors go into great detail on their methods of viewing the data, weighting variables, and testing hypothesis in an honest and rigorous effort to validate their analysis.

The authors analysis of the data indicates that in “counties with greater federal employment and where income transfers better cover the needy population…[there is] significantly higher median family income. Higher AFDC (Aid to Family with Dependent Children) benefits and a larger public adminstrative sector have no significant relationship to median family income. Only state/local government employment is significantly related to lower family income.” (537) The authors also found that “the state’s effect on income growth and redistribution showed no strong differences between Keynesian and post-Keynesian decades.” (538)

The Weakness in Lobao and Hooks’ Argument and in Econometrics in General

In the introduction to the first edition of his book, “America’s Great Depression,” Murray Rothbard describes the inherent flaws of econometrics:

“…economic theories cannot be “tested” by historical or statistical fact. These historical facts are complex and cannot, like the controlled and isolable physical facts of the scientific laboratory, be used to test theory. There are always many causal factors impinging on each other to form historical facts. Only causal theories a priori to these facts can be used to isolate and identify causal strands.” (xxxviii)

In other words, due to the complexity of society and human interaction the facts of given events, and especially the facts of general periods in history, cannot be isolated to test for causal relationships. Instead causal theory must be developed by tracing the logical connections from axiomatic principles, or self-evident truths. Also, due to the complexity of historical fact, the statistics that numerically represent these facts can be interpreted many ways and manipulated, sometime unintentionally or through neglect, to present an inaccurate picture, usually biased towards whatever the presenter is advocating. Many of these pitfalls, or techniques, can be quickly perused or understood from Darrell Huff’s, “How to Lie with Statistics.” Huff and others note that biased sampling, using the best looking average (mean, median, mode, and several other techniques exist), excluding relevant data (intentionally or because its existence is unknown), the correlation vs causation and post hoc fallacies(“b” comes after “a:, therefore “a” must cause “b”), incomparable or vague measures, etc. will lead to faulty analysis and unfortunately encountering some of the aforementioned problems to some degree is inevitable in all statistics. Rothbard goes on to explain how policy formulation plays out when based on econometrics:

“Suppose a theory asserts that a certain policy will cure a depression. The government, obedient to the theory, puts the policy in effect. The depression is not cured. The critics and advocates of the theory now leap to the fore with interpretations. The critics say that failure proves the theory incorrect. The advocates say that the government erred in not pursuing the theory boldly enough, and that what is needed is stronger measures in the same direction. Now the point is that empirically there is no possible way of deciding between them. Where is the empirical “test” to resolve the debate? How can government rationally decide upon its next step? Clearly, the only possible way of resolving the issue is in the realm of pure theory—by examining the conflicting premises and chains of reasoning.” (xxxix-xl)

In the case of the data presented by Lobao and Hooks, proponents of the neoliberal school could argue that neoliberal policies were not taken far enough and that is why they did not to have much, if any, impact on overall income growth, and they would have plenty of their own statistics to back it up. For example, Tax levels, as a percent of GDP, was unchanged in the 80s compared to the 70s (Even though the income tax was reduced, social insurance taxes were increased).(www.usgovernmentrevenue.com) Federal spending actually increased from 18-20 percent of GDP in the 70s to 21-23 percent in the 80s. (www.usgovernmentspending.com) Comparatively low prime interest rates for most of the 1970s and record high prime interest rates through the first half of the 1980s could also explain the expansion and contraction of the US economy during these time periods. Economic lag of decisions made in the previous decade, such as the dissolution of the Bretton-Woods agreement, which was the dollars last attachment to the gold standard, and a many many more reasons could be provided to explain overall income or even wage inequality differences between the two sampled decades. The authors themselves declare in their conclusion that there is “no strong differences between Keynesian and post-Keynesian decades.” (538) If there is no strong difference between decades, that seems to invalidate the rest of their analysis that one policy performed better than the other based on comparing the supposedly representative decades.

Policy regarding the welfare state is best considered by elaborating on the “basic axiom of the ‘right to self-ownership,’” which “asserts the absolute right of each man, by virtue of his (or her) being a human being, to ‘own’ his or her own body…[and] since each individual must think, learn, value, and choose his or her ends and means in order to survive and flourish, the right to self-ownership gives man the right to perform these vital activities without being hampered and restricted by coercive molestation. (Rothbard, 2006, 33-34) The next logical step is that if man owns himself, to include his will and his physical body, then he must own his labor which is their result. Further, once his labor is used to transform unclaimed, or unused, resources found in nature, the product is now also owned by that individual. This is the same idea expressed by English philosopher John Locke, who was a main source of inspiration for the founding fathers of the United States:

“…every man has property in his own person….the labour of his body and the work of his hands…are properly his. Whatsoever, then, he removes out of the state that nature hath provided and left it in, he hath mixed his labour with it, and joined it to something that is his own, and thereby makes it property.” (Locke, 1948, 17-18)

If the above principles regarding “self-ownership” and basic property rights are accepted as true then there are only three ways to acquire property ethically. 1) Mix one’s labor with resources in their natural state. 2) Inheritance or gift, absent coercion. 3)Free exchange between consenting parties. Any other method would violate the basic axiom of self-ownership and the logical extensions of that axiom. The welfare state is the understood not as an answer of “Who gets what from government?” but instead as an answer to “Who gets what from whom through the coercive proxy known as government?” Government has to violate the self-ownership principle, and therefore either partially or wholly enslave individuals, in order to confiscate and then redistribute their property. This makes the welfare state and all other forms of coercion unethical simply to their assault on the natural right of self-ownership.

Works Cited

Lobao, Linda. (2003). Public Employment, Welfare Transfers, and Economic Well-Being across Local Populations: Does a Lean and Mean Government Benefit the Masses?. Social Forces, 82(2), 519-556.

Locke, John. (1948). An Essay Concerning the True Original Extent and End of Civil Government. In E. Barker (Ed.), Social Contract (17-18). New York: Oxford University Press.

Hicks, Alexander & Esping-Andersen, Gosta. (2005). Regimes and Contention. In T.A. Janoski, A.M.
Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (509-525). Cambridge, UK: Cambridge University Press.

Huff, Darrell. (1993). How to Lie with Statistics. New York: Norton and Company, Inc.

Rothbard, Murray N. (2005). America’s Great Depression. (5th ed.) Auburn, Alabama: Ludwig von Mises Institute.

Rothbad, Murray N. (2006). For a New Liberty: The Libertarian Manifesto (2nd Ed.) Auburn, Alabama: Ludwig von Mises Institute.

In “Human Action” Ludwig Von Mises explains human nature or human action as being the result of social evolution that began with the very basic need of survival. Modern society is also the result of the evolutionary process beginning with the most primitive forms of the division of labor which even Marx appears to recognize. “In every society…we find a particular mode of cooperation, corresponding to a particular level of echnological development, in which different productive tasks are relegated to different people. The most basic form of the division of labor…is that manifested in the sexual act. It takes two people each performing a unique role to produce a third.  Almost as basic is what Marx calls the “spontaneous” division of labor found in very technologically primitive societies. Here different tasks are assigned on the basis of natural or biological attributes. The stronger will become the hunters, the weaker food gatherers, and so forth.” (Text, 329) However, this seems to imply that society created the division of labor instead of the division creating society. This is why Marx is apt to conclude that society and “for the benefit” of society are and should be the primary motivators of men. The truth, however, is that men formed societies out of self-interest, a motivation evolved from the very basic instinct of survival. If this is in fact true the idea of communism nearly crumbles from this false assumption alone.

Another fatal flaw to communism is Marx’s misconception of economics. Marx posits a theory that “asserts that the market or exchange value of any commodity is the amount of labor embodied in it.” (Text, 335) However, history and modern economics have proved that labor is not necessarily what determines the value of a good or service but rather supply and demand. Demand being the subjective value placed on a good or service by those who would purchase it, the price they are willing to pay, as well as the number who wish to receive said product or service. Supply is simply the availability of the product or service. Supply and demand are what determine price which is what determines the allocation of property, not necessarily the amount of labor. Value has always been subjective to the individual and so is hard to incorporate into a general philosophy. The text also makes the following claim in reference to objections to Marxism or communism: One “objection implicitly assumes a condition of scarcity in which well-being, even survival, depends upon the ceaseless struggle to acquire more. Such a condition will not exist in a communist society.” (Text, 347) The very nature of economics is the assumption of a “condition of scarcity” based on finite resources. If communism somehow provides infinite resources and eliminates the concept of “scarcity” then it may very well work. A third economic problem with Marxism is the doing away with “specializations”, which are generally recognized as drastically increasing the efficiency, in a communist society. “In Marx’s words, communism ‘makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, to fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd, or critic.’” (Text, 346) Without experts or specialists progress will be much more difficult to obtain and quality and innovation will almost certainly suffer. More advanced fields that take years of extensive training to master will all but fade away. For this the suggestion appears to keep some specialists but with the following caveat: “The specialist need not acquire more than others simply because he or she performs a highly skilled function.” (Text, 347) However, if a man could receive the same benefits from doing a task that can be learned in a day and requires significantly less effort to perform why would he spend much of his life studying and expend vast amounts of energy to perform a more specialized task. Marx claims the man would because it would benefit society and he would have no desire to receive more for his increased efforts. This, however, defies common sense and the burden of proof that such a consciousness can be achieved is on those who defy common sense with their theories and speculations.

Marx recognized that his ideas were contradictory to common sense or what he called consciousness so he claimed that the current consciousness was based on false perceptions and that his ideas would both require and cause “the transformation of social consciousness.” (Text, 348) While it may true that reality both forms the consciousness and is formed by it or that the actions of man are determined both by nature or the environment as well as man himself; the transformation of social consciousness is not likely to occur abruptly through revolution but gradually through evolution. That is why even if it were some day possible for leadership to lead solely “at the behest of the whole community” and that their “relations with others will be cooperative rather than conflictual” it is not according to the current consciousness and that will not change through any sort of revolution.

The evidence that Marx’s philosophy is incompatible with today’s social consciousness is through his own standard of praxis or practical application of his theories. Those who have claimed to be Marxists have failed to achieve anything remotely similar to that posited by Marx and “the failure of the proletariat…may be interpreted as a failure of Marx’s theoretical analysis of capitalism and, by extension, of the whole philosophy of historical materialism upon which it rests.” (Text, 351) Some may claim it is because the principles were never properly applied but the reason they were never properly applied is because they are incompatible with the nature of man in his current state of evolution. I can not say whether or not the nature of man will ever be compatible with communism or if it will ever be a viable philosophy. However, if it is in our future of social evolution it is more likely to occur as the Marxists who hold the classical view of Marxism insist…after capitalism has “become a worldwide phenomenon.” (Text, 354) Even then it will happen gradually and not through revolution.

Note: This essay was written for a college class. The source “Text” used in the citations refers to:
Nelson, Brian R. Wester Political Though: From Socrates to the Age of Ideology. 2nd Edition
Prentice Hall. New Jersey: 1996.