Welfare states are state-run insurance providers. The libertarian case for ending welfare rested on two foundations. We can say there are two types (drawn from a compact set for those technically inclined!) that claim welfare. The unlucky and the scroungers. We neglect the latter in our analysis.
The libertarian case for ending welfare for bad luck always rested on two premises:
1. Philanthropy is crowded-out. Yet this is also a statement on allocation. Bad luck events in Western economies are simply not a priority.
2. Private insurers would step in. Yet we disagree whether many AI scenarios are even insurable. If this is the case, then many SWFs imply that the state should step in. Indeed this is standard in the HANK literature. Inequality aversion is based into pretty much all realistic social preferences (even libertarians care about philanthropy, which is another expression of inequality aversion).
Therefore, throughout the AI transition, ending the welfare state is off the table. Too many people are at risk of unemployment via no fault of their own. You can't "just get a job" in many of these scenarios, as two seconds reading search theory would tell you. Indeed (pun intended), the junior and entry-level markets already seem to be struggling.
As I stated in my last article, I place less weight than standard on lags and bottlenecks. Yet they exist. This gives us time to respond to the data in-real time and for economists and policymakers to react appropriately. Therefore, I am confident we will muddle this transition on the employment side, at least with a solution acceptable to most.
Yet I no longer see the old fashioned, dogmatic doctrine of minarchism as optimal for the years ahead. In fact, it updates me that it was never optimal - the Industrial Revolution was also a transition of comparable magnitude, and the 20th century already saw disemployment effects associated with automation, albeit not on net with the distribution highly unequal. So classical liberalism, yes! Libertarianism, no.