The Welfare State as Piggy Bank Information, Risk, Uncertainty, and the Role of the State

Of the many functions of the welfare state, two are particularly prominent: the 'Robin Hood' function - the provision of poverty relief, the redistribution of income and wealth, and the reduction of social exclusion; and the 'piggy bank' function - ensuring mechanisms for insurance and for redistribution over the life cycle. The piggy-bank function, unlike the redistributive purpose of the welfare state, has received relatively little attention, and is not widely understood. This book redresses the balance. Nicholas Barr's central contention is that---contrary to popular opinion---the welfare state exists for reasons additional to poverty relief. These reasons - encapsulated by the piggy-bank function - arise out of pervasive problems of imperfect information, risk, and uncertainty. Even if all poverty and social exclusion could be eradicated, people would still need to insure themselves and to redistribute over the life cycle. As a result, Barr argues, the welfare state is here to stay, since twenty-first century developments do nothing to undermine these reasons. He also explores ways in which the welfare state can and will adapt to economic and social change, including specific, and sometimes novel, solutions. The analysis in "The Welfare State as Piggy Bank" is international, applying to advanced industrial countries, as well as addressing post-communist countries, and touching upon middle-income developing countries. Barr's approach is contemporary and forward-thinking. His discussion ranges over a number of topics of central relevance to life in the twenty-first century, including genetic screening and its impact on insurance; the convergence of private and social insurance; how to finance long-term care; pension reform in the light of fluid family structures and a mobile workforce; loans for financing investment in human capital; and new ways of involving private finance in tertiary education.

1: Introduction, Part 1 Economic theory, 2: Theory, Part 2 Insurance, 3: The mirage of private unemployment insurance, 4: Problems with medical insurance, 5: Twenty-first century insurance issues, Part 3 Pensions, 6: The economics of pensions, 7: Misleading guides to pension design, 8: Pension design: the options, 9: Twenty-first century pensions issues, Part 4 Education, 10: Core issues in the economics of education, 11: Information problems, 12: Designing student loans, 13: Financing higher education: the options, 14: Twenty-first century education issues, Part 5 The welfare state in a changing world, 15: The welfare state in post-communist countries, 16: The welfare state in a changing world

Nicholas Barr has a BSc and MSc from the London School of Economics and a PhD from the University of California, Berkeley, where he was a Fulbright Scholar. He is Reader in Economics at the LSE, the author of numerous books and articles on the economics of the welfare state and the finance of higher education including "The Economics of the Welfare State" (OUP, 3rd edn, 1998) and "Labor Markets and Social Policy in Central and Eastern Europe" (OUP, 1994), and a member of the editorial board of the "International Social Security Review".