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Government Redistribution II
Most people who argue for government
transfers see them as a way of increasing fairness, even
if it may decrease economic efficiency. However, the
economic theory of government of the public choice school
suggests that transfers may be a way in which the
politically powerful use government to enrich themselves at
the expense of the politically weak. One implication of the
economic theory is that the poor will not be especially
successful in obtaining money from government transfers. In
a democracy, transfers will tend to go to those who are
organized, vote, and are articulate. The poor are none of
these.
When government becomes involved in redistribution,
organized interests will be at an advantage for obtaining
the fruits of that redistribution. They will be able to
develop a reason why they need funds, present that case to
the government and the public, and keep their members
informed about how the government treats their proposals.
However, not all interest groups organize. Individuals who
share an interest may not be able to pull together and
organize because they can face a free rider problem. For
each individual, the costs of joining a group are
noticeable, whereas his effect on the success or failure of
the group is not because each is such a small part of the
entire group. These unorganized people who share an interest
will be less effective in persuading elected officials to
aid them.
This organization problem can be overcome if someone
finds a good or service to offer that makes membership
attractive. For some occupational and business groups, a key
to organization is information that will be useful for
increasing profits. Other groups form around special
marketing services or insurance. Once these groups get
established, they often find that their members will benefit
if they also engage in political action. The United States
has hundreds of special interest groups that lobby the
congress for tax breaks and programs to funnel government
spending and grants to them. Except for groups with small
memberships that are sometimes easy to organize, few of
these special interest groups began with lobbying as their
major purpose.
Government tends to give money to those who vote and are
articulate. For example, consider the large amount of
support that governments give colleges and universities in
the United States. State governments often fund more than
three-fourths of the cost of tuition at state schools, and
the federal government also spends substantial amounts in
support of higher education. Only about one-fourth of young
people receive a college degree, and they will form the bulk
of those who in the future will earn high incomes. Further,
most of these young people come from families that presently
have incomes that are above average. In rich suburbs
virtually all students finish high school and often about
90% continue on to college. In poor inner-city areas,
sometimes only half of the students finish high school and
only a small percent go on to college. College education
represents a case in which those who benefit from state
subsidies are, on the average, richer than the taxpayer who
funds that activity. State support of higher education takes
from the poor and gives to the rich.
Proposals to cut state support of higher education are
politically unpopular and not often enacted. Parents of
college students and parents who expect their children to be
college students are much more likely to vote than parents
of children who will never go to college are. College
teachers make up one of the most articulate groups in the
country and can present persuasive reasons why government
should increase support for higher education and make cuts
somewhere else.1
Finally, the private interest view of government suggests
that societies with considerable social mobility will be
rare. In a society with a lot of social mobility, poor and
unknown people can rise up the social ladder and become rich
and famous, whereas the rich and famous can fall down the
ladder and become poor and forgotten. Social mobility looks
good for those on the bottom, and it is desirable from the
equal opportunity view of income distribution discussed in
the previous section.
Social mobility does not look so attractive for those who
are at the top of the social ladder. A rich and famous
person wants to stay that way, and he wants his children to
be rich and famous too. This desire creates an incentive to
try to prevent social mobility. Though this desire most
easily results in action in nondemocratic societies, it may
also limit what one can expect from redistribution policies
in democratic societies.
Aristocratic societies, which divide people into
commoners and aristocrats, have been historically common and
severely limit social mobility. The caste system of India
and the apartheid system of South Africa are other
structures that have developed to protect those at the top.
The Soviet Union, which had equality as its official
doctrine, gradually formed class divisions, and these
divisions seemed to be getting more rigid before the
collapse of communism. Those who held power, the
nomenklatura, were identifiable by the privileges
that they had, such as the opportunity to shop in special
stores that were off-limits to ordinary citizens. The desire
of the nomenklatura for their children to stay at the
top made moving up increasingly difficult for ordinary
citizens.
It is hard to make a case that a market system
distributes income so that only the most worthy goals and
needs are met. The market mostly distributes income on the
basis of people's contributions to production, and people
have widely varying abilities to contribute. There is little
reason to believe that ability is related to need. On the
other hand, there is not much reason to believe that the
government will redistribute on the basis of need. It is
naive to view the government as a benevolent dictator that
always works in the interests of its citizens. The
incentives that guide government actions are as real and as
important as the incentives that guide business and consumer
actions.
1 Because the reader of the
previous paragraphs is probably a college student who
believes that the government should support his efforts to
get a college education, a couple of reminders are in order.
First, people who receive subsidies are almost never able to
take an objective view of them. Second, it is possible to
get too much of a good thing. One can look at subsidized
education in the same framework as subsidized bread. Third,
the argument that tuition should be kept low so that poor
students can afford to go to college does not stand up under
scrutiny. A more efficient way to help the poor (who are
taxpayers as well as college students) is to charge high
tuitions but have a generous scholarship program based on
need. Finally, one can argue that there are "external
benefits" that can justify large subsidies to education.
This argument maintains that a society with a large number
of college-educated people is a better place to live in,
even for those who do not go to college, than one with only
a small number of college-educated people. Some people
believe this argument and others do not. However, this
argument is built on economic efficiency, not on
fairness.
Copyright
Robert Schenk
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