In general, the art of government consists in taking as much money as possible from one class of citizens to give to the other. While Voltaire's assertion is an overstatement, it is true that virtually every important political issue involves the distribution of income. Even when they are not explicit, questions of who will gain and who will lose lurk in the background of public policy debates. This chapter presents a framework for thinking about the normative and positive aspects of government programs for maintaining the incomes of the poor.
Before proceeding, we must discuss whether economists should consider distributional issues at all. Not everyone thinks so. Notions concerning the right income distribution are value judgments, and there is on scientific way to resolve differences on ethical matters. Therefore, some argue that discussing distributional issues is detrimental to objectivity in economics and economists should restrict themselves to analyzing only the efficiency aspects of social issues.
This view has two problems. First, as emphasized in chapter 3, the theory of welfare economics indicates that efficiency by itself is an inadequate normative standard. Criteria other than efficiency must be considered when comparing alternative allocations of resources. Of course, one can assert that only efficiency matters, but this in itself is a value judgment.
Second, decision makers care about the distributional implications of policy. If economists ignore distribution, then policymakers will ignore economists. Policymakers may then end up focusing only on distributional issues and pay no attention at all to efficency. The economist who systematically takes distribution into account can keep policymakers aware of both efficiency and distributional issues. Although training in economics certainly does not confer a superior ability to make ethica judgments, economists are skilled at drawing out the implications of alternative sets of values and measuring the costs of achieving various ethical goals.
A related question is whether government ought to be involved in changing the income distribution. As noted in chapter 1, some important traditions of political philosophy suggest that government should play no redistributive role. However, even the most minimal government conceivable influences the income distribution. For example, when the government purchases materials for public goods, some firms receive contracts and others do not; presumably the owners of the firms receiving the contracts enjoy increases in their relative incomes. More generally the government's taxing and spending activities are bound to change the distribution of real income.