Question

In a recently lecture, Professor Quax stated, “The redistribution of income is an effective way to enhance overall social utility.” Discuss.

Answer 1

Inequality is increasing immense these days. There is a need to look at all models of wealth generation.

Redistribution of income means transfer of wealth from one group to another through taxation, public welfare etc.Social utility means Service that benefits majority of population. Progressive taxes such as income and corporation taxes help state in generating funds. Money generated through these and also through public corporation profits is used for welfare schemes and also to support poor. Hence wealth is transferred but still those with advantage get much ahead than others. This mainly happens because poor hardly get access to quality education and hence have less paid jobs or no jobs and get stuck in a poverty cycle. Redistribution through schema like universal basic income offer to close income inequality immediately as it puts money in the hands of poor and gives opportunity to come out of poverty cycle.

However, it should be noted the free money disincentives work, may make people lazy and wealth creators may migrate due to this heavy taxation. It is also clear that rather than redistribution there should be proper circulation of money and supply side policies like education, creating infrastructure is better in the long term.