Public Finance, 2nd Edition

Once again the facts are quite diVerent. Andreoni reported that econo-

metric estimates of the degree of crowding out of private giving by public

assistance in the United States ranged from $.05 and $.28 per dollar of

public assistance. A more recent estimate by Donald Cox and George

Jakubson is also within this range. They found the crowding-out eVect of

public transfers on private transfers to be around $.12 on the dollar.

10

Andreoni speculates that other motives besides altruism drive donations

to private charity, such as envy, sympathy, a sense of fairness, and a perceived

duty to give. His preferred explanation for the large amount of private giving

in the United States is what he calls a ``warm glow'' eVect: People simply feel

good about the act of giving to private charities, and the presence of public

assistance cannot entirely undo this eVect.

In conclusion, the public choice model of pareto-optimal redistribution

motivated by altruism cannot be a complete model of the optimal distribu-

tion of income, either in theory or in practice. It does not remove the need for

a social welfare function to answer the end-results equity question of dis-

tributive justice, and it cannot provide an explanation of the patterns of

private or public charity in the United States. Nonetheless, the concept of a

pareto-optimal redistribution is an important contribution to Wrst-best dis-

tributional analysis. Charitable impulses that occur independently of any

political process or social welfare function are an important phenomenon,

and they do have the properties of a consumer externality.

OTHER MOTIVATIONS FOR REDISTRIBUTIVE TRANSFERS

We conclude the chapter with brief discussions of some other motivations for

redistributive transfers that appear in the literature.

Public Insurance

Redistributive transfers motivated by a desire for income insurance are

consistent with the public choice perspective. Buchanan argued in his

Nobel address that the framers of a nation's constitution might permit

redistributive public insurance programs such as unemployment insurance

and public assistance if they choose to view the future behind a veil of

ignorance in which the future is truly uncertain.

11

This vantage point raises

the possibility that some of the framers or their descendants may become

10

J. Andreoni, ``Warm Glow vs. Cold Prickly: The EVects of Positive and Negative

Framing on Cooperation in Experiments,'' Quarterly Journal of Economics, February 1995, D.

Cox and G. Jakubson, ``The Connection Between Public Transfers and Private Interfamily

Transfers,'' Journal of Public Economics, May 1995.

11

J. Buchanan, ``The Constitution of Economic Policy,'' American Economic Review, June

1987.

326 OTHER MOTIVATIONS FOR REDISTRIBUTIVE TRANSFERS