It’s a libertarian fantasy that the problem of welfare dependence can be addressed without using the power of the state to compel responsible personal behaviour.
State compulsion, for example, is essential to enforce mutual obligation requirements and force the unemployed to actively seek a job, instead of continuing to loaf on the dole.
Demonstrating that welfare recipients were better off getting cash than, say, food stamps used to be a stock standard exam question in second year microeconomics. So the notion of cashless welfare does jar at the ideological libertarian level and at the being an economist level.
So while it does make me very uncomfortable – I suspect Jeremy is right, but perhaps for different reasons.
We make two assumptions in the standard analysis that require more thought. We assume that people best understand their own self-interest and that they make good decisions in pursuing their self-interest. But we also know that many people (not all) on welfare make bad decisions. That does suggest some role for paternalism, but it isn’t clear to me how much paternalism is justified, and at which margins it should applied. Further to whom should it be applied?
So we should keep an open mind on the cashless welfare card, but more importantly refine our thinking and understanding as to how best it can operate.