The Welfare State has in recent years been rediscovered by economists. When I first began work on the economics of social security in the 1960s, the subject scarcely appeared in the economics literature. The study of poverty was regarded as a matter for social administration, social policy or other disciplines. Even with the War on Poverty and the negative income tax experiments in the United States, the subject still tended to remain outside the mainstream of economics.

The situation has altered dramatically. The economics of the Welfare State is now centre stage, entering debates about the macro-economy and about the wealth of nations. Reform of the Welfare State is seen as one of the key policy issues of the 1990s. In OECD countries there have been calls for cuts in social security spending in order to solve the fiscal problems of national governments. In the European Union, social protection is being reviewed with regard to its impact on international competitiveness. In the world at large, the World Bank is calling for rethinking of the role of pensions under the title of ‘Averting the Old Age Crisis’ (World Bank, 1994).

The present collection of essays may be seen as contributing to an active policy debate on the future of the Welfare State, with particular reference to social security. There are, however, two important differences from much of the recent economic writing.