Why the Legal System is Not Necessarily Less Efficient than the Income Tax in Redistributing Income
28 Pages Posted: 8 Jul 2009 Last revised: 6 Oct 2009
Date Written: September 1, 2009
A common, though by no means universally-accepted doctrine among practitioners of law and economics is that redistribution is no business of the law. This efficiency-only doctrine is not that redistribution is unworthy as a social objective, but that any given benefit to the poor is attainable at a lower cost to the rich through taxation than through the choice of legal rules. The rationale for the efficiency-only doctrine is that redistributive law creates a double distortion: an initial distortion arising from redistribution per se, through taxation or through law, and an additional distortion all its own. The efficiency-only doctrine is sometimes valid, but is far narrower than its advocates would seem to suggest, and is inapplicable to most of what is commonly thought of as redistributive law. Redistribution is best supplied by a balance of law and taxation.
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