Safety Nets and Entrepreneurs

| Thu Dec. 16, 2010 12:59 PM EST

David Leonhardt on the social safety net:

Guaranteeing people a decent retirement and decent health care does more than smooth out the rough edges of capitalism. Those guarantees give people the freedom to take risks. If you know that professional failure won’t leave you penniless and won’t prevent your child from receiving needed medical care, you can leave the comfort of a large corporation and take a chance on your own idea. You can take a shot at becoming the next great American entrepreneur.

This contrasts with the conservative view that government coddling corrodes individual initiative and makes people weak. Needless to say, I find the Leonhardt view more congenial. At the same time, the conservative view actually has some resonance too. It does make some intuitive sense, after all, that being bathed in public support since birth might dull one's desire for risk.1

This is why I rarely use the Leonhardt argument to support the cause of universal healthcare, though I suppose I might have slipped once or twice. Rather, I support it on efficiency grounds — national healthcare systems around the world tend to be cheaper than ours — and on basic humanitarian grounds — in a rich country I just don't think it's right for anyone to have to go without decent healthcare.

Still, I remain curious about the Leonhardt argument, which is a common one in the liberal community. Is it true? Does knowing that you have a safety net make you more likely to get up on the trapeze and try something risky and new? The analogy is wonderful, but that doesn't make it true. Surely, though, this is a testable hypothesis? Not a provable one, of course, but one where evidence can be amassed on different fronts based on measurements of social safety nets in different times and places vs. risk-taking behavior in different times and places. Has anyone ever done this? It seems like a pretty obvious thing to try to study.

1My own view, if I had to take a guess, is that neither of these is right. I suspect that risk takers are risk takers, and they pretty much do their thing based on (a) their own temperament and (b) features of society that make it more or less likely they'll make a lot of money. Fear (or lack of fear) of failure doesn't enter into it much because they don't think they're going to fail. That's the difference between risk takers and the rest of us.