Raskolnikov Presents Equality Plus Equity: Law And Redistribution In A Capitalist Democracy Today At Cornell

Alex Raskolnikov (Columbia) presents Equality Plus Equity: Law and Redistribution in a Capitalist Democracy at Cornell today as part of its Faculty Workshop Series:

If the law of capitalism is rigged in favor of the wealthy, why is the rigging so shoddy? If majority rule offers an easy path to soaking the rich, why are the rich still not soaked? Clearly, there are real constraints on the distributional effects of legal rules in modern Western societies. These constraints are binding, long-standing, and consequential—but what are they, exactly, and why do they exist?

This paper offers an answer. Formal equality—same rules for the rich and the poor, the strong and the weak—is essential to a modern capitalist democracy. Political theories ranging from libertarianism to liberalism and Marxism all hold this view. A widely shared commitment to the rule of law reflects it as well. Even theories that reject formal equality reveal its strong influence. But the commitment to formal equality cannot be absolute. A legal system that fully reflects formal equality would allow deprivation. Not only is deprivation inequitable, it undermines, even destroys, the fundamental values underlying every political theory just mentioned. 

Modern liberal democracies resolve this tension between equality and equity by combining the two in a very particular way. The equality-plus-equity solution is to create a legal lacuna where distributional equity trumps equality while formal equality prevails in the rest of the legal system. The chosen lacuna is not random; rather, it is the part of the legal regime that is the least law-like—the transfer system. Tax law occupies an intermediate space between transfers and (non-tax) legal rules, which explains existing but limited redistribution through taxes. With distributional equity addressed through transfers and (to a lesser extent) taxes, all other legal rules reflect the commitment to formal equality of the law.

In addition to explaining the overall architecture of law and redistribution in modern capitalist democracies, the equality-plus-equity account explains some of its key features that have remained unexplained until now. Many existing legal rules favor the rich, some benefit the poor, but all do so only implicitly. Special taxes on the rich are rare and unpopular. Top marginal tax rates have remained flat despite growing inequality. Societies that redistribute the most do so through proportional taxes and progressive transfers. The equality-plus-equity framework reveals the logic behind all these features while offering predictions as well. In particular, leading redistributive policies currently advocated by the left will continue to garner only limited support. At the same time, an alternative emphasis on predistribution rather than redistribution is likely to succeed both in the short and the long run.