Moral Hazard and Social Justice

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From Hoppe’s “Democracy: The God that Failed.”
The recognition of democracy as a machinery of popular wealth and income redistribution in conjunction with one of the most fundamental principles in all of economics that one will end up getting more of whatever it is that is being subsidized provides the key to understanding the present age.
All redistribution, regardless of the criterion on which it is based, involves “taking” from the original owners and/ or producers (the “havers” of something) and “giving” to nonowners and nonproducers (the “nonhavers” of something). The incentive to be an original owner or producer of the thing in question is reduced, and the incentive to be a
non-owner and non-producer is raised. Accordingly, as a result of subsidizing individuals because they are poor, there will be more poverty. By subsidizing people because they are unemployed, more unemployment will be created. Supporting single mothers out of tax funds will lead to an increase in single motherhood, “illegitimacy,” and divorce. In outlawing child labor, income is transferred from families with children to childless persons (as a result of the legal restriction on the supply of labor, wage rates will rise). Accordingly, the birthrate will fall. On the other hand, by subsidizing the education of children, the opposite effect is created. Income is transferred from the childless and those with few children to those with many children. As a result the birthrate will increase. Yet then the value of children will again fall, and birthrates will decline as a result of the so-called social security system, for in subsidizing retirees (the old) out of taxes imposed on current income earners (the young), the institution of a family-the intergenerational bond between parents, grandparents, and children-is systematically weakened. The old need no longer rely on the assistance of their children if they have
made no provision for their own old age, and the young (with typically less accumulated wealth) must support the old (with typically more accumulated wealth) rather than the other way around, as is typical within families. Parents’ wish for children, and childrens’ wish for parents will decline, family breakups and dysfunctional families will increase, and provisionary action-saving and capital formation-will fall, while consumption rises.
How do we, as Catholics, give to others in a way that is not subsidizing the very poor lifestyle we are trying to get people out of?
 
From Hoppe’s “Democracy: The God that Failed.”

How do we, as Catholics, give to others in a way that is not subsidizing the very poor lifestyle we are trying to get people out of?
While helping the poor may reduce the incentive to get richer by a small margin, the reduction in incentive is not as significant as the increase in opportunity that comes from their getting the help that they need. People still want to get rich if they can. So I dispute the conclusion that says that the help leaves them worse off than if they didn’t get that help.
 
From Hoppe’s “Democracy: The God that Failed.”

How do we, as Catholics, give to others in a way that is not subsidizing the very poor lifestyle we are trying to get people out of?
First, ensure that it is not structured in such a way as to discourage people from moving up or doing the right things :mad:

Second, help people to do good, don’t enable them to do evil. IMO, this requires private, small-scale charitable giving in order to keep an eye on the situation of those who need help.

While it may have been intrusive to inspect the homes of welfare recipients to ensure there were no men involved, that did avoid the situation I see where I live: welfare mother providing housing, etc., to a drug dealer, so there has to be a balance found there.

OTOH, one cannot have blanket requirements because each situation is different.

Have work available for youngsters–don’t make it difficult for them to do by putting restrictions on them or (srsly???) giving tickets to kids with lemonade stands.
 
I think the negative effects are unavoidable. Man is naturally lazy. If you give him things he will not try as hard. This is true for poor men and rich men. Who doubts the reality of spoiled, lazy rich kids?

We first must answer what we are trying to accomplish. The War on Poverty is supposed to end poverty. This would be merely laughable if people weren’t serious about it. Instead it is a tragic revelation of a completely warped worldview.

If we are merely guaranteeing a basic level of existence then we can do that, but we will at the same time get more of what we are trying to lift men out of. If we make the judgement that it is better to assist people even though we have this negative consequence, then the negative consequence is judged of less importance. What I mean is the economic reality is unavoidable, but economics is not morality. It may reveal in some way the value of morality for individuals, but when deciding policy we don’t do so based primarily on economics.
While helping the poor may reduce the incentive to get richer by a small margin, the reduction in incentive is not as significant as the increase in opportunity that comes from their getting the help that they need. People still want to get rich if they can. So I dispute the conclusion that says that the help leaves them worse off than if they didn’t get that help.
How do you know this? There is a very large underclass that in my experience are very much incentivized. People do still want to get rich but plenty of poor people seek that out by hoping to play professional sports, dealing drugs, or playing the lottery. And some folks just want to work a simple job and be able to go home at night to drink and watch TV. I think this is true of not just poor people but many middle class.
 
I think the negative effects are unavoidable. Man is naturally lazy.
I think man in naturally ambitious.
If you give him things he will not try as hard.
But if you give him things he could not have gotten even by trying hard, no harm is done.
We first must answer what we are trying to accomplish.
We should be trying to accomplish the will of God the best we can.
If we are merely guaranteeing a basic level of existence then we can do that, but we will at the same time get more of what we are trying to lift men out of.
That is Hoppe’s claim - a claim that has not been substantiated, and one that I dispute.
If we make the judgement that it is better to assist people even though we have this negative consequence, then the negative consequence is judged of less importance.
Close. I would say that it is not so much a matter of a negative consequence being of less importance as it is a matter of the negative consequence being not so consequential as the positive consequence, even when the two consequences are of equal importance.
How do you know this?
I don’t claim any special insight. I know this or don’t know it to the same extent that Hoppe knows or doesn’t know his claim of the opposite.
There is a very large underclass that in my experience are very much incentivized.
What exactly do you mean by “in your experience”? Have you worked as a social worker, or otherwise come into frequent and intimate contact with members of this large underclass enough to understand their deepest personal motivations?
People do still want to get rich but plenty of poor people seek that out by hoping to play professional sports, dealing drugs, or playing the lottery.
Perhaps they don’t see a viable alternative. What if you identified a young child in this underclass you speak of and promised to that child and his mother that you would ensure that child had school supplies, transportation to an excellent school, and a guaranteed paid tuition, room and board for a four-year degree in the best of American colleges? What is likelihood such a child would eschew those opportunities and seek instead to deal drugs or play the lottery? I’m not saying such charity is practical. I’m just pointing out that people’s choices often depend on what they see as their choices.
 
Just a note on the title of this thread: The term “moral hazard” does not really apply here. That terms applies to when someone undertakes an optional risky venture, knowing that he is protected from the risk by someone else who will bail him out if things go badly. Applying this term to the situation of Social Justice is not a good fit. Where is the optional risky venture? I suppose life itself is risky. But it is hardly optional.
 
Just a note on the title of this thread: The term “moral hazard” does not really apply here. That terms applies to when someone undertakes an optional risky venture, knowing that he is protected from the risk by someone else who will bail him out if things go badly. Applying this term to the situation of Social Justice is not a good fit. Where is the optional risky venture? I suppose life itself is risky. But it is hardly optional.
I would argue it does for many cases.

Women who have children out of wedlock or divorce can count on financial support. People who are lazy in their jobs knows there is a safety net if they get fired. etc.
 
I would argue it does for many cases.

Women who have children out of wedlock or divorce can count on financial support. People who are lazy in their jobs knows there is a safety net if they get fired. etc.
Also, many entrepreneurs take excessive risks because bankruptcy shields them excessive downside risk. I would argue that we ought to have some form of debtor’s prision which probably would have reduced the excessive risk taking from bankers before the financial crisis.
 
That is Hoppe’s claim - a claim that has not been substantiated, and one that I dispute.
I think Hoppe is claiming that it is a basic law of economics that you get more of what you subsidize. I agree. And I think there is plenty of evidence in other areas that this is true. So it would be natural to conclude it applies here.
What exactly do you mean by “in your experience”? Have you worked as a social worker, or otherwise come into frequent and intimate contact with members of this large underclass enough to understand their deepest personal motivations?
No, I’m not a social worker. But social workers are a biased source of info. Their very job depends on the continued existence of an underclass.

My knowledge is various experiences. One interesting experience was a man who had a job who bought food stamps at fifty cents on the dollar. He used it for his food. The sellers used it for drugs, sex or whatever. The poor people without food were still without it even though they were given the means to buy food.
Perhaps they don’t see a viable alternative. What if you identified a young child in this underclass you speak of and promised to that child and his mother that you would ensure that child had school supplies, transportation to an excellent school, and a guaranteed paid tuition, room and board for a four-year degree in the best of American colleges? What is likelihood such a child would eschew those opportunities and seek instead to deal drugs or play the lottery? I’m not saying such charity is practical. I’m just pointing out that people’s choices often depend on what they see as their choices.
Interesting that you mention a child’s mother but not the father. This is a huge problem of course. Giving money to single mothers no doubt further contributes to it. We can dispute causality but the growth of the welfare state has coincided with a growth in fatherless homes.

I agree that people’s choices do depend on their perception of choices. But this is not just a financial issue but a moral issue. Plenty of rich kids deal drugs. Plenty of poor kids don’t. Children today are given far more opportunities than any group ever in the history of the world. And yet we have not seen an increase in people taking advantage.
 
I think Hoppe is claiming that it is a basic law of economics that you get more of what you subsidize.
But he is applying that law to situations that are not the marketplace, and he is assuming that chasing subsidies is the only motivation of human nature. I disagree. People do want to better themselves. Giving someone something they could not get on their own just by trying harder does not affect their motivation. It just expands their opportunities.
No, I’m not a social worker. But social workers are a biased source of info. Their very job depends on the continued existence of an underclass.
My knowledge is various experiences. One interesting experience was a man who had a job who bought food stamps at fifty cents on the dollar. He used it for his food. The sellers used it for drugs, sex or whatever. The poor people without food were still without it even though they were given the means to buy food.
This is not an experience which would lead you to be able to make an authoritative statement about the degree to which poor people are incentivized, which is the knowledge you claimed to have “in your experience”. Hearing about a man who bought food stamps at fifty cents on the dollar is the not the same as getting to know poor people personally so that you might actually understand their personal incentives. So your claim remains unjustified.
I agree that people’s choices do depend on their perception of choices. But this is not just a financial issue but a moral issue. Plenty of rich kids deal drugs. Plenty of poor kids don’t.
But more poor kids deal drugs than rich kids because rich kids know they have lots of better opportunities.
Children today are given far more opportunities than any group ever in the history of the world. And yet we have not seen an increase in people taking advantage.
You certainly do see an increase in people taking advantage of increased opportunities. More people go to college now than 100 years ago.
 
From Hoppe’s “Democracy: The God that Failed.”

How do we, as Catholics, give to others in a way that is not subsidizing the very poor lifestyle we are trying to get people out of?
I think Ben Franklin said it best…

“I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

I am also reminded of the quote by the Spanish philosopher Maimonides:

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

We as Catholics should be benevolent. It is not immoral for the “non-producers” to accept our benevolence, provided they are unable to produce, unable to deserve it, unable to give us any value in return.
 
I think Ben Franklin said it best…

“I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

I am also reminded of the quote by the Spanish philosopher Maimonides:

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”
I’m sure there are many secular philosophers, authors, politicians, etc. who hold this view. But since the original question was posed in the context of Catholic Social Justice, shouldn’t we be looking to authoritative Catholic sources for guidance on that question?
We as Catholics should be benevolent. It is not immoral for the “non-producers” to accept our benevolence, provided they are unable to produce, unable to deserve it, unable to give us any value in return.
I don’t understand how this goes with what you said above. If you believe Ben Franklin, you are actually doing a bad thing by being benevolent toward the poor. (And as far as the fish analogy goes, it is fine if the guy you teach to fish actually has legal access to a fishing site.)
 
This is not an experience which would lead you to be able to make an authoritative statement about the degree to which poor people are incentivized, which is the knowledge you claimed to have “in your experience”. Hearing about a man who bought food stamps at fifty cents on the dollar is the not the same as getting to know poor people personally so that you might actually understand their personal incentives. So your claim remains unjustified.
I know we live in an age of authorities. Basic common sense and observation are of little value. But I don’t hold that view.

I have the feeling no amount of experience would qualify me to have a ‘justified’ opinion. But I certainly have more experience than that one story I recounted.

I’m curious, exactly who would be an authority?
But more poor kids deal drugs than rich kids because rich kids know they have lots of better opportunities.
I’ve not done a thorough study of poor vs rich kid drug dealers. I know there are a lot more poor kids. So numbers alone will not tell you much.

The number of kids in the US who don’t have opportunity is extremely small. The government pays for and subsidizes almost everything. The biggest problem for many poor kids is a bad home environment. Giving the parents money doesn’t make them better people. In fact it can and I think mostly does make them worse people. No matter how much you help the kids, by way of the parents, you aren’t going to overcome that.
 
I know we live in an age of authorities. Basic common sense and observation are of little value. But I don’t hold that view.

I have the feeling no amount of experience would qualify me to have a ‘justified’ opinion. But I certainly have more experience than that one story I recounted.
Did you personally see the man selling food stamps? Or did you just hear about it? If you just heard about it, that does not justify your use of the phrase “in my experience”, because so far you have not related one single experience of yours that would lead to you believe that poor people are negatively incentivized. It would be more honest if you just said “in my opinion” instead of “in my experience”.
I’m curious, exactly who would be an authority?
I don’t mean any official authority, such as the author of a book, or a college professor. I mean the kind of authority that anyone, including you and I, can become by having first-hand personal contact and knowledge of a significant number of the people whose motives you are claiming to know. I don’t consider myself such an authority, but then I am not the one claiming to know anything “in my experience” about the motives of poor people. Like you, I am just offering my opinion.

I mentioned social workers only because they do get to have such contact. And I would not discredit what such a person said. If someone with their degree of training was just looking for a cushy job, there are many more profitable lines of work for them. If they continue to choose the job of social worker, I think it can only be for altruistic reasons. Therefore I see little reason for them to lie about the poor they work with.
I’ve not done a thorough study of poor vs rich kid drug dealers. I know there are a lot more poor kids. So numbers alone will not tell you much.
I was obviously referring to percentages of their respective population, since that is the only interpretation that addresses your claim that is just as easy for a poor kid to avoid dealing drugs as it is for a rich kid to avoid dealing drugs.
The number of kids in the US who don’t have opportunity is extremely small.
That depends on what level of opportunity you mean. If you set lower standards for the poor than for the rich, then sure, there would be many fewer poor kids without opportunities. But if you set the standards of what you consider a “good” opportunity the same as what a rich family would consider a “good” opportunity, then no, poor kids do not have that much opportunity.
The government pays for and subsidizes almost everything.
The government subsidizes less than half of college tuition. And it does not subsidize high school in poor areas to the same extent that it does in rich areas.
The biggest problem for many poor kids is a bad home environment.
This is a big problem, to be sure. And it is not the kids’ fault. All the more reason to consider what we can do to correct that problem.
Giving the parents money doesn’t make them better people.
No, not automatically. But it does give them the opportunity to do better by their kids.
In fact it can and I think mostly does make them worse people.
Then we should take away what little they have and they will become saints, or at least somewhat better people.
 
I’m sure there are many secular philosophers, authors, politicians, etc. who hold this view. But since the original question was posed in the context of Catholic Social Justice, shouldn’t we be looking to authoritative Catholic sources for guidance on that question?
I am an authoritative Catholic source. I use Ben’s quote because his observations are correct in both religious and secular context.
I don’t understand how this goes with what you said above. If you believe Ben Franklin, you are actually doing a bad thing by being benevolent toward the poor. (And as far as the fish analogy goes, it is fine if the guy you teach to fish actually has legal access to a fishing site.)
Benevolence takes many forms. Remember Ben suggest that leading the poor out of poverty is “the best way of doing good to the poor,” "Leading: in this case is benevolent.

As for the legal access to fishing sites…(:rolleyes: oh brother) You are getting very contemporary here…Perhaps we should put a modern spin on a 1000 year old quote.

How about: “If you give a man food stamps he can go to the supermarket and get a fish, If you take away his food stamps he realizes that he must now WORK to buy his fish.”
 
I am an authoritative Catholic source.
Well, so am I then. Can you site any Catholic source (other than yourself) to back up Ben’s view of charity?
I use Ben’s quote because his observations are correct in both religious and secular context.
If you are using yourself as the Catholic authority, there would be no need to quote anybody else. You could just quote yourself.
Benevolence takes many forms. Remember Ben suggest that leading the poor out of poverty is “the best way of doing good to the poor,” "Leading: in this case is benevolent.
Benevolence can indeed take many forms. But since you were responding to my use of the word, you should at least continue to use the meaning that you intended when you first used the word in post #11. It was my understanding that you were referring to material aid there, and not just some wise words of advice. Because otherwise your use of “benevolence” in that sentence doesn’t make sense. Why would anyone doubt that it is "not immoral for the “non-producers” to accept our words of advice"?
As for the legal access to fishing sites…(:rolleyes: oh brother) You are getting very contemporary here…Perhaps we should put a modern spin on a 1000 year old quote.
How about: “If you give a man food stamps he can go to the supermarket and get a fish, If you take away his food stamps he realizes that he must now WORK to buy his fish.”
But your modern spin has lost an important aspect of the original saying. It was assumed that anyone can fish, once he learns how. But it is not at all clear how anyone who is denied assistance can automatically go out and work for that same assistance on his own. Thus it sidesteps the objection I raised, with actually addressing it. That objection was that in some cases the aide being given is not something the recipient was capable to getting through his own powers, no matter how hard he tried. Until you address that objection, you cannot apply the fish saying. That’s what I was getting at by my reference to “a legal fishing site”. The point is, knowing how to fish does you no good unless someone lets you near the water. You see the analogy?
 
Well, so am I then.
Of course you are…I have always considered you to be a reliable, Catholic authority.
Can you site any Catholic source (other than yourself) to back up Ben’s view of charity?
Of course. Although I don’t agree with much of his economic philosophy, Charles Clark, a professor of economics and senior fellow at the Vincentian Center for Church and Society at St. John’s University in New York says:

"How do we help people get out of poverty? First, promote full employment and healthy job market.”

This goes right along with Ben’s idea of “…leading or driving them out of poverty.”
If you are using yourself as the Catholic authority, there would be no need to quote anybody else. You could just quote yourself.
Yes, I could, but Ben has a better use of words than I do. Anyway if I did use one of my quotes you would be searching all over the internet trying to prove me a plagiarist. 🙂
Benevolence can indeed take many forms. But since you were responding to my use of the word, you should at least continue to use the meaning that you intended when you first used the word in post #11. It was my understanding that you were referring to material aid there, and not just some wise words of advice. Because otherwise your use of “benevolence” in that sentence doesn’t make sense.
Ah…I see the misunderstanding. Benevolence can consist of material things as well as time and effort. One can be charitable (benevolent) and give alms to the poor. One can also be benevolent with time and effort…and actually do better by helping or assisting the poor to find work.
Why would anyone doubt that it is "not immoral for the “non-producers” to accept our words of advice"?
No one should doubt that…

Words of advice can, in many ways, be assistance. Education is nothing more than words of advice. Technical training is words of advice (in a hands-on sort of way). These things lead to helping (or “driving”…as Ben would say) the poor out of poverty.
But your modern spin has lost an important aspect of the original saying. It was assumed that anyone can fish, once he learns how. But it is not at all clear how anyone who is denied assistance can automatically go out and work for that same assistance on his own. Thus it sidesteps the objection I raised, with actually addressing it. That objection was that in some cases the aide being given is not something the recipient was capable to getting through his own powers, no matter how hard he tried. Until you address that objection, you cannot apply the fish saying. That’s what I was getting at by my reference to “a legal fishing site”. The point is, knowing how to fish does you no good unless someone lets you near the water. You see the analogy?
You are complicating a simple concept. 🤷

Yes, it is assumed that anyone can fish (excluding physically disabled or those allergic to fish) And …yes it is assumed that the “old fishing hole” does not have a NO FISHING sign on it.

So to take Maimonides’ quote and make it more contemporary, let’s say:

You can provide welfare but those receiving welfare tend remain in poverty. You can provide opportunity (jobs) and those who are capable can work their way toward prosperity.
 
Although I don’t agree with much of his economic philosophy, Charles Clark, a professor of economics and senior fellow at the Vincentian Center for Church and Society at St. John’s University in New York says:

"How do we help people get out of poverty? First, promote full employment and healthy job market.”

This goes right along with Ben’s idea of “…leading or driving them out of poverty.”
This is a softer statement than Ben’s statement. Ben was contrasting his suggestion of “leading or driving them out of poverty” as opposed to “public provisions for the poor”. Ben might look at today’s public works programs that provided jobs for the poor in building infrastructure projects as more “public provisions for the poor” than “leading them out of poverty”. It seems Ben’s suggestion is to “not make them easy in poverty” more than it is to actively provide opportunities for the poor to get out of poverty. I think what Ben was really suggesting (with reference to his own time and place of course) is to lead the poor out of poverty by simply stopping public assisting and telling them there will be no more and they will just have to do for themselves. That might have made more sense in Ben’s day when land could be claimed by anyone willing to work it. But today all the land is spoken for. Unless you have big $ you are not simply grabbing a piece of it.
Ah…I see the misunderstanding. Benevolence can consist of material things as well as time and effort. One can be charitable (benevolent) and give alms to the poor. One can also be benevolent with time and effort…and actually do better by helping or assisting the poor to find work.
Right, and I think Ben might have been against both of them, if the “helping or assisting” amounted to inventing a job that did not exist just so they could have a job.
Words of advice can, in many ways, be assistance. Education is nothing more than words of advice. Technical training is words of advice (in a hands-on sort of way). These things lead to helping (or “driving”…as Ben would say) the poor out of poverty.
In Ben’s day, the nearest thing to that would have been taking someone on as an apprentice. Would Ben have suggested that all tradesmen take on an apprentice whether they needed one or not? I don’t think so.
Yes, it is assumed that anyone can fish (excluding physically disabled or those allergic to fish) And …yes it is assumed that the “old fishing hole” does not have a NO FISHING sign on it.
So to take Maimonides’ quote and make it more contemporary, let’s say:
You can provide welfare but those receiving welfare tend remain in poverty. You can provide opportunity (jobs) and those who are capable can work their way toward prosperity.
The only reason I am complicating the saying is to point out the reason it does not apply to today. I will state it now without any analogies or sayings: Teaching or advising someone who is needy is only useful to them if they have the means to apply that teaching or advice. In today’s world, what advice are the poor being given that they have the means to actually use to lift themselves out of poverty?
 
In today’s world, what advice are the poor being given that they have the means to actually use to lift themselves out of poverty?
None!

In today’s world it seems that the poor are encouraged to remain poor and dependent on government for survival. Far too many capable people are comfortable with this.

Unemployed people remain unemployed as long as “unemployment benefits” are available.

Ben was right…"I observed…(While traveling in Europe) in that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”
 
None!

In today’s world it seems that the poor are encouraged to remain poor and dependent on government for survival. Far too many capable people are comfortable with this.

Unemployed people remain unemployed as long as “unemployment benefits” are available.
Let me re-phrase that question: In today’s world, what advice **could **the poor be given, and that they have the means to actually use to lift themselves out of poverty?

I’m sure you have heard the argument, that it is not** advice** that they lack. It is means to apply that advice.
 
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