INSTITUTIONAL SCLEROSIS OF MODERN WELFARE STATES: Analyses of the “Fundamental” of Modern Welfare States
The present volume addresses the issue of ‘efficiency and institutions’ from a number of different angles. The first three papers by Streit, Schlieper and Wickstrom constitute straight analyses of the “fundamentals” of modern welfare states: As self-interested politicians are likely to give in to pressure groups, the market process is complemented and/or impeded by
competitive rent-seeking activities of special-interest groups and redistributive coalitions. In this view, government activity is assumed to be predominantly redistributive. This is not only so, because “social justice” is considered an important social goal by many groups, but also because public actions and institutions being not primarily implemented with redistributive intentions nonetheless do have a strong redistributive impact.”[PETHIG & SCHLIEPER, 1987:v]
“In the first contribution of the present volume Streit focusses attention on the institutional sclerosis (Olson) of modern welfare states. He argues that the indeterminateness of the principle of social justice generates all kinds of legislature that is predominantly redistributive, and therefore elicits rent-seeking activities which in turn tend to cripple the power of parliament. One way to curb this tendency could be constitutional constraints restricting activities of parliament. Another could be neocorporatism. Streit doesn’t see great chances for the enforcement of constitutional constraints, and he rejects neocorporatism because of its misperception of market order. He points to a few self-correcting forces, such as international competition, technological innovations and the shadow economy, but he concludes that the
institutional sclerosis represents “a threat to welfare states which should not be ignored”[PETHIG & SCHLIEPER, 1987:v]
“According to Schlieper, the competitive market mechanism is characterized as some unstable mix of competitive behavior and cooperation. These behavioral patterns are interrelated and none of them is unambiguously efficiency-enhancing. For example, ‘’beneficial’’ cooperation is impeded by self-interest behavior; on the other hand, cooperation is also sought by’ redistributional coalitions to resist the harsh winds of competitive change. Since macroeconomic policy has important distributional consequences it can be among the prominent targets of rent-seeking special interest groups. To be more specific, Schlieper elaborates on the relationship between rent-seeking and macroeconomics in the context of a scenario in which the labour unions seek to increase real wages by way of an aggressive wage policy
whereas the government pursues an accommodating fiscal policy. In Schlieper’s model the medium term effects of these strategies are superficially favorable both for the unions and the society but since the market sector declines in the long run, the rent seekers may destroy
the source of their rents.” [PETHIG & SCHLIEPER, 1987:v-vi]
“Wickstrom approaches the issue of rent-seeking activities by competitive pressure groups within a formal model in which government intends to redistribute a given “cake” (tax money) to a set of pressure groups such that each group’s share depends on its relative pressure. Neglecting coalition formation among pressure groups the Cournot-Nash equilibrium appears as an appropriate solution concept being interpreted as a state of equilibrating
forces in the pressure groups’ tug of war. The advantage of keeping the model simple is that a unique Nash-equilibrium exists. This, in turn, allows for economically meaningful comparative-static analysis. Government growth is “generated” in Wickstrom’s model by successive exogenous increases of the size of the cake. Wickstrom not only shows that each group’s share of the cake is positively related to its power but also, and more importantly,
perhaps, that the number of active pressure groups increases as the cake grows.”[PETHIG & SCHLIEPER, 1987:vi]
“So far the efficiency of modern welfare states was studied on a quite general level, focussing in particular on rent-seeking inefficiencies. Very important institutions of welfare states are their social security schemes that usually imply inte~generational transfers. Breyer and von der Schulenburg turn their attention to these institu~ions. But rather than being preoccupied with institutional design they investigate the efficiency-related issue of acceptability under majority rule of such a scheme. Their model takes its institutional setting from the German statutory helth insurance system. Whether a voter fares better under a social health insurance scheme or under a private one depends on the size of his or her family. Hence the
family structure, i.e. the distribution of children across families becomes decisive for the outcome of the vote (along with the population growth rate and the rate of time preference). Their numerical comparative-static calculations contradict a number of widespread beliefs concerning the acceptability of intergenerational transfers via social insurance.” [PETHIG & SCHLIEPER, 1987:vi]
BIBLIOGRAFIA
PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions,
and Economic Policy Proceedings of a Workshop held by the
Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987.
SCHULENGURG, J. -Matthias Grafv.d., Comment on WICKSTROM, Bengt-Arne., The Growth of Government and the Rise of Pressure GroupIN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions,
and Economic Policy Proceedings of a Workshop held by the
Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp. 59–62
SCHLIEPER, Ulrich., Macroeconomic Policy, Rent Seeking and Economic Order.IN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions,
and Economic Policy Proceedings of a Workshop held by the
Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp. 27–34
STREIT,Manfred E., Economic Order and Public Policy -Market, Constitution and the Welfare State IN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions, and Economic Policy Proceedings of a Workshop held by the
Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp. 1–22
WINDISCH, Rupert., Comment on STREIT,Manfred E., Economic Order and Public Policy -Market, Constitution and the Welfare State IN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions, and Economic Policy Proceedings of a Workshop held by the Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp. 23–26
ZIEMES, George, Comment on SCHLIEPER, Ulrich., Macroeconomic Policy, Rent Seeking and Economic Order IN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions, and Economic Policy Proceedings of a Workshop held by the Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp.35–38
WICKSTROM, Bengt-Arne., The Growth of Government and the Rise of Pressure Groups IN PETHIG, R., & SCHLIEPER, U., (eds.) Efficiency, Institutions, and Economic Policy Proceedings of a Workshop held by the
Sonderforschungsbereich 5 at the University of Mannheim, June 1986. Springer, 1987 pp. 39–58