The tolerance premium as a constitutional element of the protective welfare state

Indeed it is the case that "[e]very possible general answer has already been given to the question of how much should be transferred to the poor" (Olson, 1986). The underlying motive for this multiplicity of answers can mostly be located in the range of exogenously taken views on the trade-off between equity and efficiency which is supposed to arise every specific set of social policy measures. If however the welfare state is analyzed endogenously, that is from a constitutional economic standpoint, three clear-cut motives for its existence are to be evoked: the insurance motive, the self-protection motive, and the interpretation of charity as a public good. Yet, even if these motives escape the orthodox trade-off, they do not entirely embrace the reciprocal conditionality of the productive and the protective state. A remedy to this can be the tolerance premium (Homann/Pies, 1996), representing the collective measures and payments attributable to the productive state which at all enable the consent of every individual to the productive state. Traces of arrangements resembling a tolerance premium in the mentioned sense can also be found in the work of James Buchanan. They however all essentially remain trapped in an apology of the status quo and thus in practice re-enter the orthodox dualism of efficiency and equity of welfare measures. Only a thoroughly conflict-economic setup accounts for the dynamics initiated by the tolerance premium, but this at the price of overcoming Buchanan's two-stage theory: protective and productive states are so interdependent that they cannot be separated and steadily have to arise from simultaneously taken decisions. This approach in practice relates to other approaches like the "power resource theory" which interprets the welfare state as ultimately being the reflection of power relations in e.g. collective bargaining.