Need-Based Justice and Social Utility: A Preference Approach

This chapter examines the economic incentives of need-based income redistribution. We ask whether the outcome obtained in a redistribution system that assigns transfers according to needs leads to efficient resource production and whether the past-transfer outcomes is generally acceptable for the involved parties. In turn, settings with unacceptable distribution procedures are institutionally unfit and cause at the extreme migration to other, more attractive systems. Redistribution does not incur implicit costs, that is, the resource production is not negatively influenced by the subsequent distribution. Oversupply and undersupply of resources required to satisfy the recognized needs do not lead to transfers beyond or short off the needs. Rather decision makers send the required amount to satisfy the need or they send nothing at all. Thus need-based redistribution creates a flexibility regarding the applied fairness norm. If transfers are too high for a society to satisfy all currently accepted need standards, a reevaluation of needs follows leading to lower standards.