Mary Jo Bane and David T. Ellwood examine the welfare system - its recipients, its providers and the many policy ideas surrounding it. Focusing on the AFDC Programme (Aid to Families with Dependent Children), they identify three models that have been used to explain "welfare dependency" and test them against an accumulating body of evidence, offering suggestions for identifying potential long-term recipients so that resources can be targeted to encourage self-sufficiency. Finally, they review policy options.