“The Hardest of All the Problems”

Abstract

This paper provides a history of the development of Harold Hochman and James Rodgers’ (1969) theory of Pareto optimal redistribution, which modeled income transfers as a public good. Pareto optimal redistribution provided an economic efficiency case for redistribution policy. After reviewing the emergence of Pareto optimal redistribution at the University of Virginia and its elaboration at the Urban Institute in the early 1970s, the paper describes James M. Buchanan’s efforts to grapple with his colleague’s ideas in the context of public choice theory. Initially, Buchanan provided an even more expansive argument for redistribution than Hochman and Rodgers (1969). By the mid-1970s, though, Buchanan largely rejected his earlier approach to redistribution and theorized new criteria for redistribution that were narrower in scope.