Law and Economic Analysis on the Relationship of Transparency and Voluntary Redistribution of Wealth: Pursuing Both Efficiency and Equity at Once


Woo-Jong Jon


Charitable works can be analyzed as public goods or externalities. Eradication of extreme poverty and hunger, basic science research, and support for art and religion are public goods. These have non-excludability and non-rivalry, which are the defining characteristics of public goods, making philanthropist’s honor spread over more beneficiaries. And to achieve universal primary education is an externality because educations for the unlearned peolpe benefits both themselves and society at large. And in this knowledge and information era education is more and more important, thus society has to support the students who desire to escape from poverty helping them to receive high-technology educations which raise the productivity of high value-added industries of the 21st century. The philanthropic help for young students who are trying to learn are displaying one of the most valuable benefits of a social sense of noblesse oblige. Enlarging these kinds of public goods and externalities is a good way to improve the efficiency as well as equity.

The more transparent is a society, the more charitable works are appeared. In the transparent society the good behavior of the philanthropist is easily known to the public, so the philanthropy is more praised by the people than in the opaque society. It functions as strong motivation to do the charitable works, because image marketing is more and more important in this mass media era. Therefore we can encourage the individual charitable works giving them the incentives to do charity by way of publicizing and complementing philanthropists’ charitable deeds. For example, in advanced countries, enterprises have contributed over many years, constantly and consistently owing to the system which encourages them economically through advertisements of their generosity by way of mass media.

To foster the voluntary sharing redistribution of wealth we can reduce the opportunity cost for charitable works as a result of the relative decrease of the marginal utility of money by way of making society transparent and enlarging the capacity of people to get information. Organizations have the problem of agency cost. The moral hazard of agency intensifies in conditions of asymmetric information. The problem of agency occurs when principals do not provide strict supervision, and this creates a space where agency behaves freely. The greater is the space, the more can the agency use it for his own benefit. Thus the utility of money is greater in a more corrupted society, indeed where the agencies have relative freedom than in a more transparent society. Transparent opening up of information enable the principals to look over the actions of agencies and prevent moral hazard conveniently. Consequently in a transparent society bribery is easily regulated, and the rich are persuaded to do charitable works to the poor rather than to put money to use in bribery. Therefore the more transparent and cleaner is a nation, the more voluntary redistribution of wealth is realized.


Constitutional Law

Date of this Version

October 2005