The Distributive Deficit in Law and Economics
100 Minnesota Law Review 1051 (2016)
University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 713
77 Pages Posted: 3 Jan 2015 Last revised: 2 Feb 2016
Date Written: January 1, 2015
Abstract
Welfarist law and economics ignores the distributive consequences of legal rules to focus solely on efficiency, even though distribution unambiguously affects welfare, the normative maximand. The now-conventional justification for disregarding distribution is the claim of tax superiority: that the best means of influencing or correcting distribution is via tax-and-transfer. Critics have observed that optimal redistribution through tax may be politically infeasible, but have generally overlooked the rejoinder that the same political impediments to redistribution through tax will block redistribution through legal rules. This “invariance hypothesis,” as we label it, holds that there is only one distributive equilibrium and that Congress will offset through tax any deviations from it. We highlight the centrality of invariance to the conventional economic wisdom and assert that it is just as relevantly false as the zero transaction cost assumption. In contexts where political impediments to tax-based redistribution exceed the impediments to doctrinal redistribution, it may be possible to increase welfare by redistributing outside of tax. Welfarists should, therefore, devote as much scholarly attention to the “political action costs” of redistribution as they do to transaction costs.
Keywords: redistribution, tax-and-transfer, legal rules, law and economics, welfare economics
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Optimal Tradeoff between the Probability and Magnitude of Fines
-
Optimal Law Enforcement with Self-Reporting of Behavior
By Louis Kaplow and Steven Shavell
-
The Optimal Use of Fines and Imprisonment When Wealth is Unobservable
-
The Optimal Use of Fines and Imprisonment When Wealth is Unobservable