The Baldy Center Podcast

The Baldy Center for Law and Social Policy at the University at Buffalo

Episode 53

Podcast recording date: 10/7/2025

Host-producer: Tarun Gangadhar Vadaparthi

Speaker: Matthew Dimick

Contact information: BaldyCenter@buffalo.edu

Transcription begins.

Tarun:
Hello and welcome to The Baldy Center for Law and Social Policy Podcast produced by the University at Buffalo. I'm your podcast host and producer, Tarun Gangadhar. In today's episode, I'm joined by Professor Matthew Dimick, director of The Baldy Center and professor of law at the University at Buffalo School of Law. We talk about his new book, Ending Income Inequality, and explore how legal rules shape economic outcomes and society at large. Here is Professor Dimick. Hi Matt. Can you tell us who you are, what brought you to UB, and how long have you been here?

Matthew:
Yeah. My name is Matthew Dimick. I am professor of law at the University at Buffalo School of Law and director of The Baldy Center for Law and Social Policy. I came to UB in 2011 where I started as a professor. I have a law degree from Cornell University. After that, I practiced for a little bit and then I went to get a PhD in sociology at the University of Wisconsin Madison and then spent a couple of years at University of Georgetown Law Center doing a postdoc.

Tarun:
That's a fascinating journey from practicing law to sociology and teaching at UB. Speaking of teaching, let's talk about what you focus on in the classroom and in your research.

Matthew:
I teach in contracts, labor law, employment law, employment discrimination law, and I also teach a seminar in Law and Society, which is part of The Baldy Center's mission. Law and Society, it’s an interdisciplinary focus on the way law and society, conceived as broadly as you can imagine, interact with each other.

Tarun:
That sounds like a great mix of courses and topics connecting law and society. I'm curious, how does that connect to your work at The Baldy Center?

Matthew:
At The Baldy Center, I am director and I've been there for about a little bit more than a year, and it's really one of the best things about being at the law school. I didn't know about it before I came here, but it's really a gem. There are not that many law, similar law and society centers in the United States. Institutions that are really focused on the intersection of law and other social sciences and humanities, and so it's a real privilege to be here and to take part in its mission and role and help foster interdisciplinary research.

Tarun:
It really does sound like a special place for interdisciplinary work. Since you mentioned that mission, how does your own research tie into what The Baldy Center stands for?

Matthew:
Yeah, the book that we'll talk about more, that just came out, looks at the relationship between law and income distribution, and that fits really well with the whole Baldy Center's Mission. Law and Society as a discipline, as it was conceived 40, maybe 50, 60 years ago, and it has roots before that too. It was meant to help people understand why law is important for everybody, not just lawyers and judges. I think the impression that a lot of people have, perhaps mostly lawyers and judges, but even law professors, is that the law is really just for lawyers and judges, and it shouldn't really speak to anyone beyond that.

You see an example of this from the current Chief Justice of the Supreme Court, John Roberts. Several years ago, he made a comment about legal scholarship and how he didn't think it was very worthwhile, and he came up with, it was a made up example, but for him, it's illustrated what was typical if he opened up a law review. And he said, you open up a law review and it'll be an article, something like Kant’s Theory of Evidence in 16^th Century Romania. Right? Not something that sounds like it would be relevant to anybody. But I think what his issue is, is that he as a judge didn't see the value of the research.

Law and Society research is meant to speak to everybody. So the idea behind Law and Society when it was first started was that if law is to have any legitimacy, it needs to demonstrate why it's important. So if the minimum wage has an impact on society, does it increase wages? Does it actually help them meet the people it's meant to help? Or does it really just cause unemployment by making wages in low wage jobs more expensive? Does it actually help to reduce poverty? Does it have an effect on the income distribution? Those are questions that lawyers and judges are not particularly well equipped to answer. Right? They might be able to interpret a statute, say why a statute should be enforced, give an argument for why the law should be enforced, in this particular case.

But lawyers and judges are not particularly well equipped to understand how the law impacts society more broadly. That's something an economist can do though, right? An economist can measure and gauge the impact of the minimum wage on the labor market as a whole and its effects on society. Sociologists can look at whether it reduces poverty, whether it helps family cohesion, things like that. And so that's the core mission of Law and Society is understanding law, how it has these broader effects and that gives people information. Are they in a position to say, this is something we should support, or this is something we should not support once we understand law's broader impact on society.

And so my research, the book that we'll talk about fits into this because I'm interested in the relationship between law and income inequality. That's a social question. A lawyer and judge may not be in a place to particularly affect those things, but it nevertheless has those effects, and we should consider them.

Tarun:
That's a great explanation of why law and society matter beyond the courtroom. Let's bring that into your new book, Ending Income Inequality. What led you to write it?

Matthew:
The book Ending Income Inequality, kind of an ambitious title. I think the publisher came up with that. I hope maybe it can contribute to a small part to that goal, but it's certainly not the answer to everything. As the title suggests, it has to do with income inequality, and this has been a growing concern. Journalists say that we're living in a new gilded age that income inequality is higher than it's been in a hundred years or more, and that this is having major impacts on society. Whether you think it's wrong is a question the book doesn't answer, but I think for a lot of people, income inequality does raise a lot of issue.

An example that just came out in the New York Times very recently was just how an experience like going to Disneyland can be so different now depending on a person's income. If you're willing to pay, you can basically literally jump to the front of the line and spend more time on rides at Disneyland than standing in lines, which makes for a very different experience for people based on their income. And that's just the tip of the iceberg. There are all kinds of other perks and amenities and privileges that you can have at Disneyland if you're willing to pay for them.

When I was growing up, I remember there was really only one nice restaurant in town, and it was one that most people could go to. And you think today about all the different options that are available and some only available if you have the income where you can afford it. Income inequality is contributing to very fractured society in that way where people have very different experiences, upbringings just depending on the amount of income that they have. Political scientists, economists also worry about other forms of instability that income inequality can have. Income inequality means that some people can affect the political process in ways that others can't, right?

We believe in one person, one vote. Everyone should have an equal say in the political process. This is undermined if people can tilt the playing field with campaign contributions or other forms of influence that come with when you only have wealth. People worry about an economic system that's vastly unequal. It can contribute to financialization and financial instability. So there are lots of reasons to be concerned about income inequality. My book is more about what do we do about income inequality, if you think it's a problem. I leave the issue of whether it's a problem to other researchers and to public opinion, but I look at the question of what to do about it.

Tarun:
That's a powerful way to frame inequality and its impact on society. What is the difference between redistribution and predistribution? What are the examples of predistribution?

Matthew:
Yeah, so this is a phrase, predistribution is a phrase coined by, I think, Jacob Hacker, who is a political scientist at Yale. Redistribution is commonly understood as changing the income distribution with taxes and transfers, right? The income tax, government takes money and then gives it to those maybe who are less fortunate. It redistributes income. Predistribution is a way to capture the idea that legal rules shape the distribution of income before it happens, so to speak, right? So a minimum wage can affect the amount of money you get in your paycheck before taxes even have a chance to affect that amount.

And there are lots of examples of predistribution. The minimum wage could be one, collective bargaining legislation, legislation that makes it easier, for example, unions to bargain and change the distribution of income that way. Antitrust has, antitrust law protects the competitive marketplace and also affects the distribution of income. Intellectual property, when people can own patents or inventions, the longer they own them, the more the gains from those inventions will be concentrated among fewer people. And so yeah, predistribution is just a nice way to talk about how legal rules can shape how markets distribute income even before taxes and transfers redistribute income.

Tarun:
Got it. That helps clarify how laws shape income, even before taxes. What is the double distortion argument? Can you give an example?

Matthew:
Yeah. So in many ways, this is what the book really is taking aim at, is this argument called the double distortion argument. So let me give you a little bit of background. Economists typically tend to favor redistribution over predistribution. Oftentimes they don't have a very strong or clear reason. I think it comes from economists’ appreciation of the market, and it's not necessarily a wrong appreciation of the market. I mean, we've known since Adam Smith that markets have this property of being able to generate collective wealth or income without ever really intending that, right? Each person engages in the market for their own benefit, but the unintended beneficial impact is that it raises the wealth for everybody through things like division of labor and the incentives it provides to work hard and the opportunities it gives for people to change professions or jobs if they're not happy or productive in one rather than another.

And so economists have this very strong appreciation for the way the market works to produce wealth, or sometimes what economists call its efficiency aspect, markets can create a big economic pie. And so I think their intuition is if the market works well at creating wealth, let's not interfere with that. Let's let it run its course and not worry about the distribution of income as it's created through the market. Let's just choose rules, legal rules, institutions that create a big economic pie. And if we don't like the way the pie is divided up, if somebody's slice seems unfairly bigger than someone else's, then after the fact, after the market has worked its magic, we can use taxes and transfers to change the size of the pie that you get. So there is kind of this intuition that we shouldn't use legal rules to gum up the market, just reserve redistribution for taxation. But it was really two authors in an article in 1994, Louis Kaplow and Steven Shavell, that came up with this idea of a double distortion and why we should only use the income tax to redistribute income and not use legal rules for that same goal.

The argument is that when you try to redistribute income through legal rules or through predistribution, you have two economic distortions. Distortion is the idea that an intervention is wasteful or causes a loss of wealth, while taxes only have one distortion. So two distortions is worse than one. Let's just stick with the method that has the least distorting impact, the income tax, and not worry about predistribution that has these other negative effects. And therefore, we will save resources overall, and by saving resources, we can actually help the poor better that way. So an example that they give is in tort. So they think of two rules in tort. One is this efficient rule that's neutral with respect to income distribution where, and this is the one that courts tend to favor or something close like it, which is that if you cause an accident, then you're obligated to pay damages that is equal to the harm caused no more, no less. So if you're in an automobile accident and you cause a fender bender, then you are responsible for the repairs that's required to make the car like it was before, no more and no less than that. So they compare that rule with another rule, where the damages that you pay depend on your wealth. So say you're a wealthy person and you get in a car accident with a poorer person, then you would pay, not just damages for the harm you caused, but an extra amount just because you are wealthy and because those damages will go to a poor person, it'll affect the distribution of income. And so they say, we shouldn't do this because of the double distortion argument. On the one hand, any policy that redistributes income is going to influence your labor supply. So if you earn a certain amount of income, depending on what job you work in, how many hours you work, if you get less than that, the idea is you're going to be less productive. You're going to supply less labor to the labor market, and that'll be one kind of distortion. And that happens whether it's through taxes or a kind of rule, like we talked about this wealth dependent damages rule where if you cause an accident and you're wealthy, then you have to pay more. Your expected income will now be lower because in case of an accident, your damages will be higher. And so the idea is that you will supply less labor to the market.

But there's another distortion with the wealth dependent damages rule, which is that it's going to cause people, especially the wealthy, to engage in excessive precaution because they know that they're going to have to pay higher damages if they cause an accident. They're going to spend resources to avoid that. They might buy a car with additional costly safety features, and they wouldn't have bought that car, but for this wealth dependent damages rule, and that's a waste of resources because they would've spent less on a car and used that money elsewhere. And so that's a distortion in the market according to Kaplow and Shavell. Likewise, if you're poor and if you get into accident and you injure a rich person, your damages will be less than the harm caused.

The idea is that you'll be less, you'll take fewer precautions and maybe cause more accidents that way. So either way, there's a distortion in a loss of wealth that comes from the legal rule itself in addition to the effects that it has on labor supply through changing the distribution of income. So they say, look, we can do just as much redistribution with the taxes, with the income tax. Let's just adjust the income tax to get the same redistribution we would have with this wealth dependent legal rule. But let's go back to the efficient legal rule. And if we do that, they show fairly ingeniously, you'd have to read the paper, the savings would show up in the government budget, in a government budget surplus, and those can be used to reduce everybody's taxes or increase transfers to the poor. And so that's the reason why we should not use predistribution but just use redistribution to change the distribution of income.

Tarun:
That's a really interesting economic perspective. Why can predistribution sometimes be better than redistribution? Can you give an example?

Matthew:
Yeah. So yeah, most of my book, I just focus on areas, especially areas where the legal rules seem to matter for the income distribution and show why Kaplow and Shavell’s argument doesn't always follow through. In a nutshell, they always assume that this double distortion is going to be compounding or additive, and they never consider the possibility that yes, there might be two distortions with the legal rule, but they might be offsetting or subtractive. And if that's the case, then we'll actually save resources, save more resources than the income tax. And so it can actually be better than redistribution.

Predistribution can be better than redistribution in that case. An example I like to use is the minimum wage. So the minimum wage has a double distortion, just like Kaplow and Shavell would predict because it changes the distribution of income. It lowers or rather raises income for those at the low end of the income distribution and presumably has negative effects on those higher up. It'll change labor supply in the way that I illustrated earlier. So it'll have that distortion. It'll have a second distortion because as every economist will tell you by making low wage work more expensive, it'll also affect labor demand. So the idea is that if you raise the minimum wage, McDonald's who employs lots of minimum wage workers is going to reduce the number of people that they hire. So that's the second distortion. So the minimum wage influences labor supply, that's the first distortion, also influences labor demand.

That's the second distortion. And if that's the case, then Kaplow and Shavell are right. Those are two negative distortions they add up, there's an additional effect with the minimum wage that wouldn't happen through the income tax, and we should go back to the income tax, but we can think that there's a third effect as well. In the book I don't demonstrate this empirically. I mainly focus on the theory, but I think there are good reasons to accept this theory.

As I talk about in the book, I focus on theory because a famous economist, Paul Samuelson said that facts don't change the mind of an economic theorist. They may dent his hide, but to defeat a theory, you need another theory, right? Facts don't do that. You need to fight theory with theory. So the book kind of focuses on that sort of strategy and looks at Kaplow and Shavell’s theory to illustrate where their theory goes wrong. So in the case of the minimum wage, there could be a third effect, right? I've talked about two, but there could be a third. Economists talk about how a minimum wage can reduce turnover. It can increase productivity on the job because workers who have a higher wage have a stronger incentive to stay with that job. It's a more valuable job, so they'll work harder to keep it. That might also reduce supervision costs because workers are working harder for a job that pays better. So kind of intuitive reasons, but those are all positive productivity reasons why the minimum wage can have additional benefits.

So if you add those up, right, so that positive effect, if it's large enough, it's going to offset those two negative effects in a way that may actually make it cheaper than tax redistribution and make it a better distributive tool.

Tarun:
That example really helps connect the theory to real world policy. So beyond academia, who do you think could benefit most from reading your book?

Matthew:
Yes. I mean, obviously the first target is academic readers. I think, especially people who are in law and economic scholarship, or familiar with it in law schools, they're going to know about this debate that Kaplow and Shavell started, and they'll be interested in it. And I think especially law professors teaching a seminar could use the book in a seminar. It's divided up in a way that would be easy to teach over the course of a semester. But yeah, I really want this to go beyond the legal academy too, and I think it'll be to anyone who's concerned about income inequality.

This book will be relevant to them because I’m saying, here's what we can do about income inequality. So I'm thinking in particular of people that work in government, politicians who want to do something about this, who want to address income inequality, people in think tanks that are working to sort of test and popularize different policy proposals or possibilities. And then just anyone, the average citizen who's concerned about income inequality, if they want to know what we can do about this, I hope the book has something to say to them as well.

Tarun:
That's great. It sounds like the book offers something for anyone concerned about inequality. Before we wrap up, is there anything else you'd like to share with our listeners?

Matthew:
No, I think that's it. Thank you.

Tarun:
Thank you for your time, Matt.

Matthew:
Yeah.

Tarun:
That was Professor Dimick, and this has been The Baldy Center for Law on Social Policy Podcast produced by the University at Buffalo. Let us know what you think by visiting our X, formerly Twitter @baldycenter, or emailing us at baldycenter@buffalo.edu. To learn more about the Center, visit our website, buffalo.edu/baldycenter. My name is Tarun, and on behalf of The Baldy Center, thank you for listening.

Transcription ends.