Efficiency, Distribution, and the Role of Government in a Market Economy

Abstract

To evaluate government programs, it is necessary to say what individuals are "entitled" to in regard to wealth distribution. This paper explores the normative implications for government action of the presumption that factors are"entitled" to their marginal product. The conclusions are that imperfections in knowledge, mobility, and competition should be removed by court action as a matter of distributive justice, and that collective goods, including income redistribution, should be paid for by those who demand the goods. Compensation is appropriate when government changes the rules it has itself imposed or when it recognizes new property rights where they did not formerly exist.