Abstract
The last two chapters, although undeniably very important in the discussion of real-world transfers, were rather depressing. In this chapter we turn to a more cheerful subject. Basically, the chapter is about government income transfers, but we begin with a few words about purely voluntary transfers in which the government does not intervene. We then turn to reasons that charitably inclined people might choose to use the government as a technique for transfers.
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References
See Gordon Tullock, “Revealing the Demand for Transfers,” in Richard D. Auster (ed.), American Revolution, Papers and Proceedings, (Tucson: University of Arizona, Department of Economics, 1977): 107–123; and Gordon Tullock, “The Demand-Revealing Process as a Welfare Indicator,” Public Choice 29(2) (Supplement to Spring 1977): 51-63. These two papers deal only with the demand for transfers without including envy, but extension of the reasoning to include envy is fairly routine.
See Barry P. Keating and Maryann O. Keating, Not for Profit, (Glen Ridge, NJ: Horton, 1978), for a survey of what we currently know in this field. It is no criticism of the book to say that we should know more.
Milton Friedman, Capitalism and Freedom (Chicago: University of Chicage Press, 1962). It seems to me that Friedman’s argument is, although ingenious, not entirely free from criticism, and, indeed, in an unpublished paper I have raised dome questions. See my “Elaborations on a Theme by Friedman,” Center for Study of Public Choice, Working Paper No. CE80-12-2. For our purposes here, however, there is no need to consider these rather detailed doubts, and we can simply accept his general position.
In the following discussion we ignore any gain in utility from the act of giving. We assume the gain in utility of the donor comes from making the recipient better off.
Note this is an incomplete society. It is a demand for the gift of A and B, not the demand by C. The elaboration in which C is introduced comes later.
Since many readers may not be aware of the Lindahl tax scheme, a brief note explaining it should be offered. What happens is that each individual is charged what the marginal value of the public good to him at the amount which is to be spent. Asssuming you can do this, and that is a strong assumption, the outcome should be unanimous support for whatever expenditure with whatever set of taxes turn out to be Lindahl. So far as I know, no one has ever done this in the real world, but the scheme is used a good deal in theoretical analysis.
See Benjamin Ward, “Majority Rule and Allocation,” Journal of Conflict Resolution, (1961): 379–389.
See James M. Buchanan, “What Kind of Redistribution Do We Want?,” Economica, 35 (May 1968): 185–190, for a discussion of this point.
Guido Calabresi and Philip Bobbit, Tragic Choices (New York: Norton, 1978).
In some ways, it is easier to understand the problem I am now raising not by reading the book but by reading my review of it, “Avoiding Difficult Choices,” New York University Law Review 54(1) (April 1979): 267–279. I know that this review is acceptable to Calabresi because he has made some favorable remarks about it to me.
This, by the way, seems to have sharply retarded technology in the area. There are, for some cases, special home kidney machines, and these are normally privately purchased. They, unfortunately, cannot treat everyone. Granted the provision of full financing for everyone else, the development of these small home machines seems to have been less rapid than it otherwise would have been.
The cash would not necessarily have had to be complete income support. It could have been simply special payments to anyone who required any one of a number of very expensive but life-sustaining procedures.
I have a former college friend who was ambassador in an African country and suddenly discovered himself persona non grata, with the local dictator making loud noises about how he, as a spy of the CIA, had been trying to overturn the local government. What he had actually done was suggest that the government accounting system be revised in a way that would have made it somewhat more difficult for the dictator and his friends to build up their Swiss bank accounts.
It may, of course, be true that the steel mill would not be built there because it is not a very good place to put the steel mill. Under these circumstances, the $100 million spent on building the steel mill is the equivalent not to $2.25 per head for the country but perhaps $1.75 per head.
I first discussed this in an article, “Information Without Profit,” Papers on Non-Market Decision Making 1 (1966): 141–159, which dealt with private charity.
James M. Buchanan, “The Samaritan’s Dilema,” in E.S. Phelps (ed.). Altruism, Morality and Economic Theory, (New York: Russell Sage Foundation, 1975): 71–85.
They never admit this, but it is nevertheless true.
In government charity it is unlikely that many of the voter donors approve of the exact amount transferred. They think of themselves as giving a little too much, or perhaps a little too little, to charity, but the dissatisfaction obtained from that is presumably much less than the satisfaction obtained from making the gift as a whole, together with the knowledge that you are buying your charity in a cheap market because of the collectivization technique mentioned above.
Alfred Telia, Dorothy Telia, and Christopher Green, The Hours of Work and Family Income Response to Negative Income Tax Plans: The Impact on the Working Poor (W.E. Upjohn Institute for Employment Research, Kalamazoo, MI 1971). The negative income tax experiments also indicated that this kind of insurance program sharply increases the divorce rate. Whether this is a genuine discovery or an artifact, I do not know.
The actual origin of American immigration controls was essentially the desire of laborers organized in the unions to prevent the arrival of large numbers of poor foreigners whose presence would lead to a fall in the marginal product of labor wages. It is probable that this is still a stronger motive than the desire to prevent foreigners from taking up the various benefits of the welfare state, but the benefits of the welfare state are large enough now so that preventing people from taking them is an additional strong reason for restricting immigration.
See Gordon Tullock, “The Rhetoric and Reality of Redistribution,” Southern Economic Journal, 47(4) (April 1981): 895–907.
Work is particularity apt to be bad if we consider the type of work that the less productive members of our society are required to do. An architect may get a real pleasure out of his daily work, but the garbage man may not.
In making calculations on the subject of this particular topic, one should take into account that relief payments are not subject to tax and that income of people who are working is normally taxed. These payments should always be compared with after-tax income not before-tax income if you want to make a sensibe policy decision.
I am sometimes referred to as an ironbound reactionary by soppy liberals.
It would appear that in Washington, DC, a sizable portion of the females who are receiving aid for dependant children are, in fact, employed full time as prostitutes. The aid for dependant children income provides them with a base, but for the more attractive of them it is a minor part of their income.
I have been interested enough in the problem so I have made some minor improvements on the Alchian version. What we will get here is my improved version of Alchian’s improved version of Bentham’s procedure.
Except for the $5,000. He offered $1,000, and, of course, the necessary tax was lower.
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Tullock, G. (1997). Charitable Gifts. In: Economics of Income Redistribution. Studies in Public Choice, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5378-2_4
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