Measuring the efficiency costs of redistribution is an important
area of economic research. One result from this research is
that some methods of redistribution are more efficient than
others. For example, most economists agree that programs
that directly redistribute income are more efficient (per dollar of
resources made available to a given income group) than
programs that subsidize the prices of specific goods. One
reason for this is that price subsidies apply even when high-
income households purchase the goods in question. These
high-income households therefore benefit from the subsidy—
an unintended (and perhaps undesirable) consequence of the
program.
Though redistribution often reduces overall efficiency, this
does not imply that such programs should not be undertaken.
(That buckets leak surely does not imply that they should not
be used to transport water, given that we want to transport
water and that the buckets we have are the best available
tools.) Whatever the social policy regarding redistribution of
income, economics has an important role to play in measuring
the efficiency costs and distributional consequences of
different programs of redistribution. Put another way, it has
useful things to say about the design and deployment of
buckets.