PRAGUE -- Supporters of Europe's social model claim that what distinguishes it is the importance placed on "social cohesion." And, of course, it is as difficult to be against cohesion as it is to be against friendship. But the real question is which policies work best.

Existing policies to achieve social cohesion are based on the belief that, if uncorrected, the free play of market forces will lead to wide disparities in income and thus intensify social conflict. But studies tend to show that the majority of income transfers by government occur within the middle class, while only a relatively small proportion are from rich to poor. In fact, some transfers flow the other way. For example, many pension systems transfer money from the poor to the middle class, simply because richer people usually live longer.

What most European countries get for their social expenditure is a lot of state provision of services, and not much reduction in social inequality. So lower levels of social expenditure could involve only a relatively small increase in inequality and social conflict. Moreover, if Europeans target social expenditure better, they might achieve a greater reduction in inequality with a lower level of social transfers.