‘Til lack of tax incentives do us part

Milton Friedman once said that the problem with government is that it thinks it can do good with other people’s money. In line with this conception the government identifies a problem, intervenes and creates more problems than it ever solves due to problems of incentives and imperfect information where individual market actors acting in their own best interests would achieve a more socially optimal outcome.

There are two key questions: is marriage of one individual to another similarly a realm in which government can do more good than harm? Secondly, is a couples’ choice to get married a realm in which government has legitimate reason to intervene at all?

Government when it sets out policies on marriage deals in aggregates, it may be perfectly demonstrable that children on average, who grow up with married parents are less likely to cause social problems. But it is an inference too far to say that therefore if more couples were married then the outcome would be less social problems. It’s a bit like saying “Homosexual men are less likely to commit violent crime therefore government should encourage more men to choose homosexual relationships.”

The problem with this statement, like the problem with “recognising marriage in the tax system”, is that it ascribes to individuals the characteristics of the average. Although marriage may be suitable for some individuals as the best solution, everyone knows that many children are glad when their parents separate because its ends the arguments and trauma which were part of that marriage and their family relationship. A happy marriage may be the best environment, but an unhappy marriage is often worse than separation.

The government using the blunt instrument of a tax allowance for married couples cannot effectively create more socially optimal outcomes where it is so ill informed as to individual’s circumstances. This policy in having an implicit ideal of family life has thus put to a lower status other forms of children’s environment. All this measure would create is more problems: those of more stigma on single parents, and a black hole in the budget at a time when the Conservatives are attempting to seem fiscally responsible vis-a-vis Labour. The institute for fiscal studies has shown that child family tax credit is a far more effective way of fighting child poverty. What kind of marriage is one maintained for the sake of financial incentives going to be like for children anyway? The best that could be hoped for this policy is that it would have no effect.

David Cameron said that the problem with Labour is that it “pathologically” cannot recognise marriage is a good thing. He has completely missed the point; society recognises extra-marital affairs as a bad thing but has not felt the need to recognise this in the tax system. Marriage is probably the best position for those for whom it works, but the state need not use financial encouragement and implicit moral condemnation to bring about this state of affairs for good conservative reasons: that individuals are best at making their own decisions for the most part and the state, an ill informed intrusive actor, should not interfere without good reason. Parents are quite capable of looking after the best interests of their children and if they think a marriage is the best environment they may stay married if not they will get divorced.

The days are gone when parents would stick out a marriage of argument and sometimes violence for the sake of keeping up appearances. Not so long ago, “bastard” children were put into secretly put up for adoption. We should rejoice that the time has passed when parents didn’t do what was in the best interests of their children so as to avoid the shame and stigma foisted upon them from a society stuck in a nineteenth-century morality.

Marriage is a decision for individuals without moral judgement, intervention or incentives from the state. Far better provide poor parents with the financial means to be able to raise their children as best as they can as they are far better informed than the government to know what the best environment to raise children within their own individual circumstances. Talk about Nanny State.