Just as welfare reform is a controversial topic today,
so is it debated by the classical economists.
So let's go back and look at the Poor Law reforms of 1834
and the debates leading up to that.
The Poor Laws in England date from a series of experiments under
the Tudor monarchs and eventually they are finalized
under the rule of Queen Elizabeth in 1601.
What the Poor Laws did overall is switch relief from
being the responsibility of the church to a responsibility of the state.
But note this is happening in England, not in Scotland.
In Scotland during these centuries, relief tends to stay within the church
and the parish responsibility.
Over the next two centuries, there's a great deal of experimentation
with different ideas for helping the poor often at the parish level.
These ideas include:
subsidized food, what is called "outdoor relief", and that means aid
without requiring that the recipient enter a kind of poorhouse;
direct transfers, wage subsidies, public employment,
and also what is called "Indoor relief" which means giving aid
but requiring that the poor enter some kind of parish poorhouse.
By the time we get to about 1803, however, there's a common understanding that
poor relief in England isn't working very well.
So by that time about 11% of the population
or about one million individuals, they are receiving poor relief.
It's also the case that very early in the 19th century,
per capita poor relief costs are rising.
Part of the problem was simply that the English economy was becoming
more volatile in the late 18th century.
Now, perhaps the Poor Laws were not to blame for this
but in any case, there was a common understanding that
some kind of reform would be required.
It also happens, by the late 18th century,
that wage subsidies become an especially prominent way of helping the poor.
And this blurs the categories of who is actually a poor person,
who deserves to receive relief,
and who is simply someone who's a worker.
Since back then, virtually everyone was poor by modern standards,
it's difficult to use our modern intuitions for who deserved aid
to analyze policy back in, say, the late 18th century.
In any case, economists were also extremely critical of the Poor Laws
during that point in time, and leading the charge was Malthus.
It was a common critique of the Poor Laws that they fell victim
to the Malthusian argument.
For more background on this, see our videos on Malthus,
but to sum it up quickly,
the fear was that if you pay people to be poor,
you will in the longer run support more poor people,
you will encourage people to be more poor and, most of all,
you will encourage poor people to have more children
that will expand the supply of labor, wages will go back down for the poor,
and it was believed by the Malthusians, that for these reasons,
poor relief would be self-defeating,
and it actually could make the lot of the poor worse rather than better.
As you can see from our videos on Malthus and also population,
it's not clear this argument was actually true,
but at the time it was extremely influential.
In any case, the government eventually created a commission
and this later gave rise to a report called the
which is a very famous document reflecting how classical economics,
and indeed the Victorians thought about welfare reform.
If you read this report, keep in mind,
there were few formal economic statistics back then.
So for the most part, the reform was based on a mix of going around,
and seeing what was happening, and sending out questionnaires.
Perhaps the most influential figure behind the writing of the report
was Nassau Senior.
He was a leading classical economist.
For the most part, he was a defender of laissez-faire,
and he was the individual who wrote most of the report,
and caused the report to be a kind of channel
for how classical economists were thinking about welfare reform.
Another important individual behind the report was Edwin Chadwick
who later became famous as a public health reformer
and for helping build the public sewers of London.
He was very much a believer in administrative centralization
and arguably because of his later efforts in the field of public health,
he was one of the most important individuals in all of 19th century England.
In any case, the Poor Law Report was pretty brutal and pretty negative
about how Poor Laws were operating during the early 19th century.
It blamed the Poor Laws for what it called a "Malady of pauperism",
and it argued that benefits were so generous
that even the middle class often started applying for aid.
The report spent a lot of time detailing what seemed to be
fraudulent claims or feigned illnesses.
Again, for the purposes of obtaining money from the government.
Obviously, you can see echoes of this kind of argument
in today's critiques of some welfare programs.
It was also very much a criticism of the Poor Laws by the report,
that they broke down bonds of friends and family
and substituted state intervention into areas
where local communities should be supporting poor individuals.
There is, of course, an ongoing debate to this day as to how much
the resources of centralized government are needed to help out the poor.
The Poor Law Report also had a very sophisticated understanding
of wage subsidies and the more general idea of tax incidence.
So recall that, by the late 18th century, a lot of relief for the poor
is taking the form of wage subsidies,
but arguably, these subsidies are often captured by the employer,
not the employee.
For instance, let's say that a worker is being paid 100 to take a job
and then policy comes along and says to that worker,
"You will receive an extra 20 for your work."
Well, you might think naively that means the worker will get 120,
but, under the theory of tax incidence, that doesn't have to be the case.
Sometimes, what can happen is, for instance,
now the worker is getting only 80 from the employer.
The worker is still receiving a total of 100
because that's 80 plus 20,
but the actual value of the 20 is being captured by the employer
and not by the worker.
It seems a lot of that was going on before the time
when the Poor Law Report came out.
As analyzed in the report, the Poor Laws at that time,
they required a lot of local oversight,
and there was a group of individuals called overseers
responsible for enforcing the law,
and it was widely believed that they became corrupt and abusive,
and the report details this at great length.
There's also considerable worry in the report,
and at the time, more generally,
that the Poor Laws were encouraging illegitimate children,
or as they were then called, "Bastards."
Most of all, there was a great worry that the Poor Laws at the time
were extremely expensive.
Keep in mind that back then, most people did not live
in houses which looked like this.
Revenue was hard to come by, the share of government
as a percentage of GDP seems to have been very small,
and in general, what might appear to us to have been a trifling expenditure,
was at the time, actually fairly burdensome.
So what were the proposals of the Poor Law Report of 1834?
Well, most of all, the authors of the report recommended that,
in order to receive aid, that workhouses be required.
That is, these individuals would have to actually take on some kind of job,
and this meant the abolition of what was then called "outdoor relief."
It was understood that this meant getting quite tough with the poor,
but as the report wrote, I quote,
"...it is a hardship to which the good of society requires the applicant to submit."
That is, it was believed that if the receipt of welfare
was linked to work,
individuals would have a smaller incentive
to defraud the system or to try to collect benefits,
when benefits were not, to them, rightly due.
The report also wanted to make it much harder to collect benefits
by a process called "settlement" which, at the time meant that
if you changed your residence and could establish residence in a new parish,
you might claim poor relief there.
It was believed by the authors of the report that this led to excess fraud,
and there was very much a call for tightening up, or even eliminating,
this way of getting funds.
This sounds mean and maybe it was mean, but I would stress a general point that,
when you go back to the early 19th century,
there basically isn't any good way of running a welfare state
or a welfare program.
Look at it this way, again to stress: Most people were extremely poor.
So if you take what we would consider as modern
a decent level of support for the poor,
that will virtually, by definition, have a negative impact
on the work incentives of the so-called middle class.
Finally, and this seems to have been due to the influence of Edwin Chadwick,
the Poor Law Report called for the centralizing of administration
of the Poor Laws.
You will note that the report was extremely influential
and a version of these recommendations
was, in fact, voted into law shortly thereafter.
The happy ending to this tale is that English growth,
especially for the working class, really did pick up starting in the 1840s.
So in this sense, we never got a clear test
of how the new Poor Laws might have performed relative to the old.
To read more on this topic, first I can recommend
a very useful short survey piece by Joseph Persky called
Classical Family Values
A very useful short and single book treatment is by Anthony Brundage,
and that's just called
It's very illuminating to read the actual Poor Law Report of 1834
and that is available online and free from the Library of Liberty,
run by Liberty Fund.
It's extremely readable and it gives you a very clear sense of how
some of the classical economists thought about issues involving the poor.
There's a very good book by Raymond Cowherd
and that covers the influence of economists,
in particular, on the Poor Law debates.
That's called,
And there is more.
There are 2 essential articles by Mark Blaug,
and these articles argue that the Poor Law Report of 1834
very much overstated problems with the Poor Laws of this time.
These articles are absolutely classic reading on the topic.
There's a piece by Donald McCloskey called,
New Perspectives on the Old Poor Law
claiming the poor laws did not work well in every regard.
And finally, there's a very good book by George Boyer called,
An Economic History of the English Poor Law 1750-1850
and he has several papers related to this book
which you can find through scholar.google.com
and you can think of Boyer as in some ways pushing back
against Blaug and arguing that there were indeed some truths
in the Poor Law Report of 1834.