Support for nudge as a transitory measure

Liberty Scott, an objectivist libertarian that I am yet to have the pleasure of meeting, has written at the Backbencher about welfare reform and the Phillpotts. His idea for transitioning to a better system almost reads like a simpler restatement of my own:

Convert national insurance into individual account based social insurance, with a choice of provider, covering income protection in the event of redundancy, sickness, disability or death for individuals and their dependents, including housing. This can also form the basis for a personal pension fund (that can be inherited). Let everyone default into one scheme at a minimum level, but let people opt out into alternatives if they wish. Have a subsidy for those on lowest incomes who can’t afford a basic level of coverage.

The bit where I have added emphasis represents a slight difference. I focused on how to set up a set of circumstances in which fundamentally different ideas about how to run welfare services were put into practice quickly. The key policy feature, inspired by Hannan and Carswell’s The Plan, is that there should be a multitude of ultra-local providers that you are defaulted (or “nudged”) into based on your home or office postcode.

These postcode-areas would be setup to be slightly below the minimum sustainable size. They would be kept running, if necessary, with a tapering subsidy or loan while local managers and contributors decide the best solution for them locally. The subsidy would also ensure that each new institution, formed from existing ones, has experience of operating independently before the central funds dry up. Many would rapidly consolidate based on locally generated plans, others would innovate and build value added services. The objective for each would be to do whatever it took to solve local problems – be they poverty, drugs, crime or whatever – or go bust trying.

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