Redistribution Mechanisms
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Jacob Nussim
Many legal scholars believe that equity should be considered in designing legal rules. Kaplow and Shavell (1994) seriously challenged this approach. They proved that the tax transfer system is superior to legal rules in redistributing wealth. This paper reexamines their 'double distortion' claim, presenting two main arguments. The first shows that the 'double distortion' claim is not necessarily valid under welfarism. In particular, under an ex post approach to welfarism, which generally implies that society pays attention to the ex post (actual) rather than expected redistribution, the proof of the tax superiority breaks down. Secondly, and more importantly, it is proven that, in principle, tort rules can easily be designed to circumvent 'double distortion' effects. Thus, the tort system is not inherently more inefficient than the tax-transfer system in accomplishing redistribution. The paper generally concludes that although there are often no good reasons for redistribution within the legal system, theoretically and a priori it is not an inferior redistribution mechanism.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Article
- The Law and Economics of Cedar-Apple Rust: State Action and Just Compensation in Miller v. Schoene
- Does Punishment Matter? A Refinement of the Inspection Game
- Optimal Law Enforcement when the Offender can Dispose of his Wealth
- Rationalizing Drennan: On Irrevocable Offers, Bid Shopping and Binding Range
- Searching for Efficient Enforcement: Officer Characteristics and Racially Biased Policing
- Redistribution Mechanisms
- Using the Event Study Methodology to Measure the Social Costs of Litigation - A Re-Examination Using Cases from the Automobile Industry
- Comparative Causation and Economic Efficiency: When Activity Levels are Constant
- Less Crime, More (Vulnerable) Victims: Game Theory and the Distributional Effects of Criminal Sanctions
- Property Rights to Radio Spectrum in Guatemala and El Salvador: An Experiment in Liberalization
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