Chapter 9 - Why No Net Loss of GDP or Work?

Summary

Recent experience suggests some economic reasons for Chapter 8’s “free lunch puzzle.” At least four positive features of the real-world welfare state bundle of policies have cancelled any anti-growth effects. One consists of those economies of scale in delivering social insurance: the more universal the coverage, the smaller the administrative, or bureaucratic, costs of raising tax revenues and allocating transfers. A second is that the large welfare states raise their tax revenues through broad consumption taxes and sin taxes, the type of taxation that conventional theory predicts will favor growth the most. Third, the welfare state policies of parental leave and pre-school child development foster better human productivity for both the child and the career-interrupting parent, usually the mother. Fourth, single-payer public health insurance is more cost efficient than voluntary private insurance.