Economic systems that rely on private behavior and competitive markets are more efficient than those with extensive government control. However, the effects of a free-market system on self-reliance, initiative, and other virtues may be of even greater importance in the long run.

That's why economists and many other defenders of a free-market system in the 19th century often emphasized the system's effect on values rather than on efficiency. Alexis de Tocqueville, after a long visit to the U.S., observed in his remarkable study Democracy in America that "the principle of self-interest...disciplines a number of persons in habits of regularity, temperance, moderation, foresight, self-command; and if it does not lead men straight to virtue by the will, it gradually draws them in that direction by their habits."

These insights on the relationship between self-reliance and good habits should help guide the reform of public programs that corrupt the values of their participants. The welfare system is a good example, because leaders of both political parties agree it is not working well and needs to be changed. Although many families on welfare get off the rolls within a year, about 40% continue to receive benefits for longer than two years, becoming more and more dependent on government support.

People generally become thriftier and more self-reliant and develop other good habits when they are forced to make decisions and provide for themselves. But they lose the habits necessary to function well on their own--habits as simple as getting to work on time--when the government continues to support them. The importance of habits is revealed by the difficulties older workers in the formerly communist nations have encountered in adjusting to the different behavior needed to function in a free-market system.

TOO MUCH TIME? Many families appear to recognize the harmful consequences of becoming part of the welfare system: Several studies show that one of every four families eligible for welfare doesn't participate in the system. I believe the recently passed House welfare bill should have more sharply limited the length of time families can collect benefits. The present bill allows a family to be on the rolls for up to five years. Fortunately, many states will use the block grants this bill provides to impose lower time limits.

President Clinton has threatened to veto the House bill because it will follow the example set by a few states of denying additional cash benefits to mothers already receiving welfare when they have children born out of wedlock. The President and other critics claim that such provisions punish children in poor and broken families for their parents' mistakes since the parents would not have enough resources without government assistance to provide adequately for their children.

CORRUPTION. The effect of welfare reform on children should have the highest priority, but these critics fail to appreciate how the present system corrupts the values transmitted to children. Changing the system to increase the responsibility and initiative of poor parents will help their children--even if the parents receive much less financial support from the government. Children use their parents as role models and absorb their parents' values. The values acquired by children have a much larger effect on their employment, education, and other achievements as adults than the amount of money their parents have.

Although I have used welfare to illustrate the harmful effects of government programs on the values of participants, programs that do not cater to the poor often also sap the sense of responsibility and other good values of participants. Examples include affirmative-action initiatives that help individuals get ahead not through their own accomplishments but because they belong to favored groups, aid to small and large businesses that subsidizes their profits and insures them against losses, and regulations that protect companies against competition. Social Security is another example, because it encourages many families to count on the government to provide their retirement income rather than saving for their old age while they are working--hence discouraging private savings, some studies show.

Voter pressure is forcing state legislatures as well as Congress to require evidence that the benefits of government programs and regulations tend to exceed their costs. Those calculations must take into account their effects on initiative, responsibility, and other essential values of a good society.

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