2.5 - The Morality of Incentives and Deterrence

Summary

It is standardly said that public policy ought to provide positive incentives to encourage good behavior and negative disincentives to deter bad. It is commonly alleged that, instead, public policy in general and social welfare policy in particular provide “perverse incentives” making vice pay more than virtue.

Such complaints have long been familiar. Reverend Malthus and his followers criticized the old poor law's lax assistance regime for discouraging taxpayers from saving, industrialists from investing, and welfare administrators from vigorously enforcing the law. They demoralized recipients, undermining their character and their morals, encouraging them to lie, cheat, and steal, to cut corners, and to live as leeches on the commonweal rather than as upright, self-reliant citizens.

Of course, the “impotent poor” – those too old or infirm to earn their own living – were always supposed to be bracketed out and treated more generously. But as for the “able-bodied poor,” the guiding rule of the 1834 reforms to the English Poor Law (which in turn guided Anglo-American social welfare policy throughout the next century) was the infamous “principle of lesser eligibility.” According to that principle, every incentive should be given to the able-bodied poor to find paid labor if they possibly can. Relying on public support should be made the “least eligible” option.