Volume 9, Issue 2

It is first shown that the potential of the market mechanism to solve pressing problems of resource allocation is not being used to its full extent, and three examples from the field of social policy are given. Secondly, it is argued that the public often ignores the advice of economists because they do not have a convincing concept of the term “social” in the Social Market Economy. Existing proposals by economists are examined and found wanting. Finally, it is proposed to equate the term “social” with the goal of equality of opportunity, and again three examples are given in which this goal is insufficiently achieved in Germany.

We present a proposal for reforming unemployment assistance in Germany through the introduction of unemployment accounts (UAs). Instead of paying taxes that finance the unemployment assistance, employed people make ongoing contributions to their UAs and can make withdrawals from these accounts during periods of unemployment. The aim of this policy proposal is to improve employment incentives without significant changes in the current redistribution scheme. We provide a detailed account of how such a system of UAs can be designed and implemented in Germany. To make the influence of UAs as transparent as possible and to avoid introducing other reforms that may make significant bodies of people worse off, we assume that UAs are integrated within the existing unemployment support system, keeping all institutional rules regarding conditions, duration and size of entitlements as well as interpersonal redistribution unchanged.

German Basic Law sees „marriage“ and „family“ as core elements of society - assuming that families are those units that by bearing and raising children provide a society’s future and that marriages are fundamental for families. Accordingly, all social policy measures should support (or at least not disadvantage) marriages and families. This article shows that supporting marriages and supporting families are conflicting aims. It shows that measures which are intended to support families in raising children induce adaptive behaviour of (potential) parents that erodes marriage as an institution. In consequence, female incentives to bear children might be reduced by measures that were intended to augment them.

The capital-funded health insurance system in Germany (the PKV) is afflicted with a lack of competition because insurants lose their ageing provisions if they switch their insurer. Therefore the transfer of “individual ageing provisions” has been discussed for many years, but it is mostly regarded as impracticable due to information and incentive problems. In this article a transfer mechanism based consequently on the risk allocation in the PKV is derived. This mechanism can solve the information and incentive problems linked with the transfer of ageing provisions. The result is that the PKV can be extended to a very attractive model to organize health insurance markets.

This article discusses the smallness of subsidiary jurisdictions as a third dimension of centrality, besides vertical centrality and fragmentation (horizontal centrality). A panel analysis concerning all 26 Swiss cantons (from 1990 to 2003) shows that public expenditure per capita increases with the number of inhabitants of a canton. This holds for the aggregate expenditure level and for six expenditure categories of the Government Finance Statistics. The positive elasticity of per capita expenditure with respect to population size can be understood as an indicator for increasing government failure in jurisdictions with bigger population size.

Rankings of countries have become of great interest to the business community, governments and academics. They provide single and composite indicators on the competitiveness and growth prospects of countries. This article presents the rankings of the World Economic Forum, the International Institute for Management Development, the Fraser Institute, the Heritage Foundation and the Bertelsmann Foundation.We conclude that although the rankings provide useful information their methodology is in general rudimentary and calls for further improvement. Government policy should be cautious when drawing conclusions from such rankings