Does the welfare state work? What does the answer to this question say about the effectiveness of political reform? This study of the political economy of the welfare state develops a framework for the analysis of public policy within the theory of rational action, analyzing public policy in terms of legitimacy, governability, poverty, equality, efficiency, and activity. Looking anew at the basic concepts of poverty and economic efficiency and the methodology of income redistribution research, Ringen concludes that the welfare state has indeed worked well and that there is therefore considerable power in political reform.