Income distribution is an overwhelming part of the program of all governments. Too often, however, the rationalisations used to explain these transfer programs do not accord with our observable behaviour. In this survey of a variety of aspects of income redistribution, Gordon Tullock asks not that we should necessarily change our behaviour, but that we should at least speak the truth about what we are doing.
Exctract
It should be pointed out that the income transfers within the wealthier states actually lower real incomes in the poorer states, albeit not by very much. Income transfers within any group will lower the total measured income of that group (albeit they might increase total utility) because it makes the marginal return on labor lower while the wealth effects tend to cancel out. Poor people are made wealthier and the wealthy people are made poorer. Empirical measures of this are relatively difficult but the negative income tax experiments seem to indicate that a not very aggressive income redistribution scheme would reduce production by about 10 per cent.
Since there is a world market in many things, this would mean that the surplus value generated in the poorer countries by greater production in wealthier countries is reduced because of the income transfer schemes in the wealthy countries. Put differently, the things that the poorer countries buy from the wealthy countries will be somewhat more expensive and the things that they sell to wealthy countries will be sold for somewhat lower prices than they would without this program.
It should be said by the way, that there is at least a possibility that direct large-scale transfers f rom the wealthy countries to the poor countries would actually increase measured production. The marginal utility of labor would of course go down in both countries, but in the wealthy countries the reduced real income of each individual might partially, or on the whole, cancel that effect out with the result that the amount of work done was about the same. In the poor countries, malnutrition, physical weakness, etc., caused by poverty lowers the amount of work that a man can do. It might be that these transfers by getting around these physical limits would produce more work there. But this is merely a possibility. I would hate to argue strongly for its reality.
So far I have been primarily arguing that the standard rationalisation for income redistribution policies does not fit. Why then do we engage in income transfers? Surely they are by any measure an extremely important function of most modern states. Further, historically, they have normally been important, albeit not as important as now.
The motives for redistribution
There are, I think, a number of motives which lead to income redistribution. The first, and by all odds most important, is simply a desire on the part of the potential recipients of the redistribution to receive it. Since the donors normally do not wish to give money to people who simply want it, this leads to fairly complicated political difficulties. Nevertheless, I think it cannot be doubted this is the largest single explanation for income transfers in the modern state. The fact that so little of the income transferred goes to the poor is of course the obvious evidence for this. I presume you are familiar with the innumerable demonstrations that if our income transfers were concentrated on the poor, the poor would be wealthy even by American standards whereas, as a matter of fact, in spite of all the income transfers they are still very far from that enviable state.
