Lindblom - The Market System - Afghan Journalists' Committee

116 What To Make of Itple nevertheless defend the rule as itself sufficient withoutsuch supplements as pensions and unemployment compensation.Although they offer several defenses, all are flawed;and the flaws represent misunderstandings of the marketsystem worth our attention.The rule is efficient, it is claimed, because if you cantake out only an equivalent of what you put in, you willstrive to make a greater contribution. Reasonable as itsounds, this defense claims too much. The rule does not atall encourage—does not reward—many kinds of contributions.It rewards market contributions only, not parentalcontributions to child rearing and not great political leadership,to mention only two of many possible examples. As anincentive system, it is incomplete, narrow. It distorts incentivesby rewarding some kinds of activities but not others,however great their value.As for market contributions, the rule may motivatethem or retard them, depending on circumstances. Becausethe rule reduces some people to the weakness of disease andthe demoralization of poverty, incentives to make a marketcontribution are often dulled or extinguished rather thanstimulated. For people not near such an extreme, reducingrewards for contributions, as through taxation, sometimesstirs them into greater market efforts rather than discouragesthem. Historically, the rise of the welfare state, withits loosening of the quid pro quo tie, has not reduced workeffort; in fact, it has probably raised it, a probability strengthenedby the welfare state’s contributions to health and education.Research shows that nations with high taxes, whichreduce taxpayer income and finance governmental benefits,thus reducing the tightness of the quid pro quo, do not lag inproductivity or capital growth. There is no correlation betweena tight quid pro quo and high output. Although in-