From the archives: On the possibility of a Hayekian welfare state

The latest issue of EconJournalWatch contains several short papers on the fact that economists who oppose extensive economic regulation are also likely to oppose a welfare state with income redistribution.

In my piece, I suggest that this is not necessarily the case, and that there are good reasons to support a “Hayekian welfare state” that combines economic freedom with some well-designed social insurance schemes.

So far, some actually seem to agree with me. Sam Bowman at the Adam Smith Institute writes:

An economy in which everyone is paid according to their productivity may be very brutal for people who are not very productive and cannot change that. We may wish to redistribute income for their welfare.

We might also want to redistribute money to encourage the sort of experimentation that drives innovation […] I am with Bergh. A ‘Hayekian welfare state’ would do almost no regulation of the economy, but redistribute quite a bit of money for welfare reasons. This looks not just possible, but very desirable.

Finally, it should be noted that while a Hayekian Welfare State may be an interesting theoretical possibility, there are probably no existing examples. Sweden and the Nordic countries come close in some aspects (such as the Swedish public pension system), but in other areas, these countries are highly regulated (such as the Swedish labor market).