The Economics of Social Policy, by Peter G. Rosner

Edward Elgar, 2003, xv + 356 pp., hb, 1 84064 496 6, Hard Back £69.95. Paper Back £25.00 Order this book

This is going to be a most useful book, mainly because its aim is realistic. It explores the ways in which (mainstream) economic theory relates to social policy generally and to policy on health, pensions, the labour market, families, children and gender in particular; but it also recognises that national and individual decisions in the welfare field (e.g., whether a nation should pay for health care through general taxation or through insurance schemes, or whether an individual should buy an annuity) are made on the basis of a wide variety of factors which economic theory does not necessarily explain.

Chapter 1 contains an overview of social policy, and chooses to limit the field to health care, pensions, help for the unemployed, policies related to the family, and poverty. The author recognises that this diversity means that no unified theory is possible, and so he sets out a variety of presuppositions (for instance, that, on the whole, people make rational choices), and then in chapters 1 and 2 he offers a good, accessible summary of what would normally be taught as ‘welfare economics’: economic theory which might be applied to social policy. Chapter 3 looks in the other direction by asking first about the nature of social policy, and then how economic theory might apply to it. This two-directional approach provides a good basis for the detailed chapters on particular areas of social policy.

The author recognises that there are gaps: for instance, that the book is about developed countries, not poor ones: because, as he correctly argues, the problems faced are so different. He also recognises that amongst developed countries most of his material relates to Europe and the USA. He apologises for this. He doesn’t need to: to include the USA and as many European countries as he does gives him plenty of diversity in terms of types of welfare state. But what is interesting is the location of ‘poverty’, and here two paragraphs from the preface are worth quoting:

“I am sure that in any survey about the foremost purpose of social policy, fighting poverty will be mentioned most frequently. Any attempt to curtail social policy programmes will be challenged by warning of the danger of increasing poverty, whereas extensions of programmes are argued by pointing at existing poverty. Nevertheless poverty is not at the heart of existing social policy programmes, particularly in Europe. The biggest programmes – measured by the amount of spending – apply to large segments of the population, if not the whole population: health provisions, pension systems, family allowances. Of course, all these systems are important for reducing poverty, but the rationale for their existence cannot be reduced to that aspect, not even in the USA, in Australia or in New Zealand, where European style social security programmes are of less importance.

I choose to present the material along the lines of the demarcation of the programmes – health services, pension systems, dealing with unemployment, supporting families. Fighting poverty as a separate programme is left for the last chapter, because in most countries poverty is reduced decisively by the aforementioned programmes, although they comprise (nearly) the whole population. Programmes which are aimed specifically at relieving poverty are nearly everywhere of small scale” (pp. xivf).

This suggests that yet another final chapter is needed on the connections between health provision, pensions, etc. and the required alleviation of poverty, but there isn’t one. Such a chapter would have revealed the importance of educational provision (missing from the author’s definition of social policy), and it would have caused important connections to be drawn between policy on means-tested benefits, pensions, and unemployment benefit. It might also have led to consideration of the kind of policy which might address poverty across the boundaries set up in the book. Neither ‘basic income’ nor ‘citizen’s income’ appears in the index, though they should have done, for there is a single line on p.319 which recognises that “some want to replace [means-tested benefits] with a basic income.”

The book is as it is because it has grown out of the author’s teaching experience. It is sensible, informed, well-argued, and clear, and there is a good balance between theory and the results of empirical research. It will prove to be a useful tool on undergraduate courses, and beyond, for it has good up-to-date bibliographies (though I couldn’t find any reference to A. B. Atkinson’s Public Economics: The Basic Income and Flat Tax Proposal: a book highly relevant to at least two of the chapters). For both teachers and students this will prove to be a valuable text-book; and for politicians, commentators, and others, it will be a helpful resource, showing how useful economic theory can be when social policy is discussed, and also what its proper limits are. But unfortunately it will only become a really useful book if a paperback edition is published at a rather lower price.