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In Defense of Redistribution Through Private Law

By Daphna Lewinsohn-Zamir. Full text here.

Most people agree that enhancing individuals’ well-being and promoting equality among them are important goals of the state. Much more controversial, however, is the question of which means should be used to redistribute welfare. An ongoing debate centers on whether redistribution should be attained solely through taxes and transfer payments, or also via legal rules, particularly the private law. The most powerful argument against redistribution through private law is grounded on economic considerations. Some scholars forcefully argue that legal rules are more costly and less effective at redistributing welfare than the tax-and-transfer alternative.

This Article offers a general and principled defense of redistribution through private law rules. The economic argument against such rules is based on a simplistic consequentialist theory—one that confines welfare promotion to the satisfaction of people’s actual preferences, and disregards the positive or negative effects of the method which generates the redistributive outcome. The Article develops a more plausible consequentialist theory, which adopts an objective approach to welfare and considers the impact of different distribution methods on the goodness of the resulting outcomes. Through the lens of the alternative theory, private law rules fare very well and enjoy advantages that taxes and transfer payments lack.

The Article demonstrates the greater desirability of redistributive private law rules under the alternative consequentialist theory in a few particular contexts, including landlord and tenant law and family property. It also illustrates the advantages of private law as a mechanism of distribution in comparison to “intermediate” schemes, in which only one side of the redistribution (the taking or the giving) is executed through legal rules, while the other is attained via taxes or transfer payments: a voucher system, and rules of compensation for property takings.