What Can Economics Contribute to Social Policy?'

When it has been decided that universal access to a good is to be provided, governments in some cases provide it directly, as with public education and old-age benefits almost everywhere and health benefits in many countries. In other cases, governments mandate that employers provide benefits to workers or that persons obtain benefits directly themselves. Requirements that employers keep workplaces safe and provide Workman's Compensation Insurance represent a clear example. Unemployment insurance provides an interesting middle ground. While in most European countries it is financed from general revenues, in the United States, employers are required to pay for the benefits their workers receive, because unemployment insurance taxes are experience rated, albeit imperfectly. As a general proposition, liberals rank alternative strategies in the order of public provision, mandated benefits, then no action for addressing social concerns. Conservatives have exactly the opposite preferences, ranking the alternatives no action, mandated benefits, and then public provision. With these preference patterns. it is little wonder that governments frequently turn to mandated benefits as a tool of social policy. Mandated benefits raise a host of questions, however: What determines the choices governments make? Are there differences in the real effects of mandated benefits and taxfinanced programs? Are there efficiency arguments for the use of mandated benefits?