Rediscovering social investment in developmental welfare state ...

R E D I S C O V E R I N G S O C I A L I N V E S T M E N T I N D E V E L O P M E N T A L W E L F A R E S T A T E P O L I C I E S :
B A C K T O T H E F U T U R E
DWSPs, which emphasized in-kind and universal transfers, higher overall levels of expenditure than
economic logic would suggest is beneficial, and a focus on family policy and ALMPs. The predicted
effects of these types of policies are broadly at odds with mainstream economic theory. Here I
briefly compare the logic and relevant assumptions of the mainstream economic view with the
developmentalist view. While I cannot review mainstream economic perspectives on the welfare
state or specific policies in detail in this paper, I briefly clarify the limitations of the second-best
theory and market failure explanations, and propose several hypotheses about the consequences of
DWSPs.
With respect to the political economic logic of DWSPs, a substantial contrast can be drawn between
welfare developmentalism and the standard economic view. Recognizing diversity among
economists, welfare developmentalism is contrasted with the standard view with respect to
embedded values, central assumptions, and policy implications. 39 To more fully understand the
economic logic of DWSPs, it is important to appreciate the economic observations or assertions that
are associated with developmentalist principles and the ways in which these differ from the standard
economic perspective. 40 This is valuable because it can help clarify the theoretical basis for the
distinctive predictions offered by welfare developmentalism relative to the mainstream view, offering
a plausible explanation for the empirical results and a basis for future research. Further, owing to the
nascent character of this conceptual framework, identifying the economic concepts on which it is
based can lend deeper theoretical coherence to welfare developmentalism by grounding it in
established economic ideas and traditions and can pave the way for further theoretical development.
Table 2. Situating Welfare Developmentalism in Economic Thought: Summarizing Differences
Value approach
Normative
status
Standard economic view
Rooted in the positive economic
perspective. Little can be said about
the fairness of allocation. Marketbased
allocation is generally seen as
optimal.
Welfare developmentalism
Rooted in the normative economic
tradition in that it is focused on how
resources should be allocated. Marketbased
allocation is typically suboptimal
and needs to be supplemented.
39 I follow the contingency-based view of social protection and economic efficiency (Gough, 1996; Tomassi, 2005) (see
also Karelis, 2007; Pasinetti, 2007; Pressman, 2005 on the limitations of economic laws) and more broadly the spirit of
the heterodox economic tradition. The later reflects the effort to restore realism and complexity in economics (e.g.,
Fullbrook, 2004, 2006, 2008; Harvey & Garnett, 2008; Keen, 2001; Lawson, 2006), which reflects a return to classical
notions of political economy where the contingent nature of economic laws as well as people‘s preferences is recognized,
and the constructedness (Polanyi, 1944) and self-fulfilling (Merton, 1949) or performative nature of economics
(MacKenzie et al., 2007) is acknowledged. There are at least two main reasons that it is difficult to understand the
economic implications of social policy and in particular to discover interdependencies and synergies across policies. The
first is the piecemeal and pragmatic way in which public policy is made. The second is that microeconomic policy
analysis is constrained by the tendency to focus on specific polices and problems. See Johnson (2010, pp. 70–71,
footnote 61) for further discussion.
40 It is important to recognize that in considering ongoing changes throughout economics, there is some dispute about
whether there is still a mainstream and whether that can be described as neoclassical. Davis (2006) suggests that
neoclassical perspectives no longer dominate and that there is no longer a unified mainstream view but an increasingly
diverse set of perspectives. However, neoclassical perspectives still arguably dominate instruction and are the primary
focus in public policy (Lefeber & Vietorisz, 2007).
C E N T E R F O R S O C I A L D E V E L O P M E N T
W A S H I N G T O N U N I V E R S I T Y I N S T . L O U I S
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