"The Outcomes of Income transfers"

Richard Worth has cut and paste my press release for his newsletter, News Worthy. Good. But here is the rest of it for anybody interested in Mark Harrison's new book, The Outcomes of Income Transfers.

New Book Questions Case for Welfare

Monday, June 18, 2007

A new book The Outcomes of Income Transfers assesses the benefits of state redistribution. Economist Mark Harrison examines not only the financial cost of income transfers but the link between happiness and income as revealed by economist-led 'happiness research'.

Welfare commentator Lindsay Mitchell says, "Rather than supporting more redistribution Mark Harrison believes the research does the opposite."

Mark Harrison writes, "(Further), the factors that research shows do promote happiness - marriage, achieving something yourself, being engaged in useful work, good prospects for your children, self-respect, self-reliance, safety, self-fulfilment, social connections, and a belief that you have control over your life - are often undermined by current welfare policy.....receiving money without working does little for happiness which explains why the growth of the welfare state has not increased happiness."

Behavioural economists, according to Mark Harrison, hold that people are subject to self-control problems and misjudge or disregard factors that will lead to long term happiness; "A focus on immediate gratification reduce(s) future happiness."

To this end Harrison says that behavioural economics tells us more about welfare recipients than the rest of the population. "Specifically welfare recipients have more extreme judgmental biases and self control problems than the general population. Their deviations from standard economic assumptions about behaviour are especially pronounced. The social pathologies of crime, substance addiction and illegitimacy are more common among welfare recipients, and are linked to impulsive behaviour that develops in a culture of poverty and low IQ."

Turning to the conflicting issue of wanting to help children of beneficiaries while recognising the harm welfare may be doing to their parents, Harrison cites welfare reformer Charles Murray's thought experiment. It asks, should your child be orphaned tomorrow, which family would you choose to raise him. The poor working couple who value integrity and responsibility or the couple who have never worked, have no regard for the aforementioned values but have plenty of food, good clothing and amenities provided by others?

Most people would choose the first which leads Harrison to conclude, "We need to worry about the incentives created by programmes and be careful of supporting policies that condemn more children to a fate we would not choose for our own children."

Mark Harrison has produced a thought-provoking study that reveals firstly the economic cost of transferring income to the poor is very high, but secondly, and arguably more importantly, the results are not necessarily worth pursuing.