Redistribution from a constitutional perspective

Abstract

In its traditional form, Paretian welfare economics has little to say about policies of redistribution. I argue that by adopting a constitutional perspective, elements of a theory of redistribution can be developed without recourse to interpersonal utility comparisons. Individuals who find themselves under an imperfect veil of uncertainty at a constitutional stage face a tradeoff between the costs and benefits of redistribution. The benefits consist of a reduction in the variance of a risk-averse agent's income distribution. The costs are represented by deadweight losses caused either by bureaucracy or by disincentive effects associated with the transfer scheme. My simple formal analysis shows that individuals may, even under an imperfect veil of uncertainty, be able to agree unanimously on a certain transfer policy if their personal characteristics are not too different from each other.

A Tullock Index for assessing the effectiveness of redistribution

“…Economic justifications for redistribution are rooted in one of several alternative (although not mutually exclusive) rationales: (1) other-regarding preferences and neighborhood effects (Friedman, 1962;Hochman & Rogers, 1969;Tullock, 1983a), (2) externalities in production (Marglin 1963;Thompson, 1974;Hendrickson et al, 2018;Petach & Tavani, 2019), and (3) constitutional considerations (Buchanan, 1976;Buchanan & Tullock, 1962;Wessels, 1993). 2 Beginning with Hochman and Rogers (1969), several scholars contend that "Pareto optimal redistribution" is consistent with other-regarding preferences.…”

Redistribution and constitutional political economy

“…This suggests that the first step down the slippery slope toward the minimal welfare state increases the risk of Leviathan. Wessels (1993) attempts to provide a motivation for redistribution within the realm of methodological individualism. In this approach, government action is regarded as legitimate if and only if it is based on a unanimous consensus of all members of society.…”

“…Hartmut Kliemt (1993) argues that redistribution can be institutionalized at the constitutional level to attain a "minimal welfare state" without violating basic principles or incurring risks beyond those that are present in the minimal state itself. Joachim Wessels (1993) depicts a situation in which individuals may unanimously agree to transfer income at the constitutional stage on the grounds that redistribution provides income insurance.…”