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Why the Legal System is Not Necessarily Less Efficient than the Income Tax In Redistributing Income

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  • Usher, Dan

Abstract

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 pre 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 combination of law and taxation.

Suggested Citation

  • Usher, Dan, 2011. "Why the Legal System is Not Necessarily Less Efficient than the Income Tax In Redistributing Income," Queen's Economics Department Working Papers 273696, Queen's University - Department of Economics.
    • Handle: RePEc:ags:quedwp:273696
    DOI: 10.22004/ag.econ.273696
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    References listed on IDEAS

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    1. Hartwick, John M., 2000. "Labor supply under wage uncertainty," Economics Letters, Elsevier, vol. 68(3), pages 319-325, September.
    2. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
    3. Sanchirico, Chris William, 2000. "Taxes versus Legal Rules as Instruments for Equity: A More Equitable View," The Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 797-820, June.
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    More about this item

    Keywords

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    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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