Defining Predistribution

Guest Blogger

For the Balkinization Symposium on the Global Political Economy of Artificial Intelligence.

Ava Liu

There is a problem with the concept of “predistribution”, which is that the idea is ill-defined. At the broadest level, predistribution is defined as what is not tax-and-transfer redistribution. Predistribution is associated with what "can shape the distribution of income and opportunity in a society that are distinct from simply taxing and providing benefits" or that “instead of equalizing unfair market outcomes through tax-and-spend or tax-and-transfer (redistribution), we instead engineer markets to create fairer outcomes from the beginning”.

These definitions are helpful, but they are residual. Predistribution is located as what remains outside of tax-and-transfer redistribution. We know that predistribution advocates are concerned about making markets more fair and equal. We know it is about structuring the market—"the means by which primary market distributions of income and wealth are determined”—or that it is what shapes primary inequality rather than after-tax income.

We know, too, that predistribution is generally understood as operating before redistribution; if redistribution happens with outcomes at a time (T2), then there was a time (T1) before this point. But as legal scholar Alex Raskolnikov recently summarized of the field, “the line between redistribution and predistribution, it turns out, is not well-defined and possibly nonexistent.” Philosopher Martin O’Neill has argued that there is no line between predistribution and redistribution in the substance of their policies.

This is a problem if we care about predistribution as a domain of the economy we want to understand or a set of policies related to inequality we aim to organize around. The term “predistribution” has been around in the political vocabulary for fifteen years yet the idea remains somewhat murky, and advocates self-efface with how blurred it is as a concept. This is limiting if predistribution is to gain traction as a field rather than remain a slogan for policies we intuitively care about but cannot precisely identify.

Fleshing out a positive definition would go a long way. I offer one here.

I present a positive definition of predistribution based on power over production. This I locate through a critique of tax-and-transfer redistribution and what it cannot do, which points to what predistribution does. I also start from the premise that there is a T2 of realized outcomes which is the point we are redistributing pre-tax income from, and before that therefore some T1 in which those outcomes were structured and produced.

In my own work on artificial intelligence and technology governance, I first encountered this problem through the labor automation debate, which was originally dominated by calls for universal basic income (UBI). UBI has been heralded as the answer to technology-driven displacement: if workers lose their jobs to automation, the state can tax and transfer the proceeds to provide workers an income floor. In a welfare capitalist market economy, UBI is a classic tax-and-transfer policy that aims to redress income inequality.

What does UBI not allow us to do, though? It does not allow us to govern over technology. It distributes post-facto, after initial primary market distributions of income and wealth are determined. This is not a contingent failure of UBI as policy design. Rather, it’s a structural feature of tax-and-transfer redistribution as a category and welfare transfer payments as a class. Tax-and-transfer operates at T2 after outcomes have been produced in the market. An income tax redistributes purchasing power in the realm of consumption. UBI cannot address the problem of what to do about labor automation because it is not about what to do about technology, a problem of production. In this sense, UBI’s position in the labor automation discourse is a misattribution of a policy about income inequality to a different problem of how to govern over technology. Its predominance in the AI discourse is a symptom of the lack of collective imagination around questions of economic production: what gets made, how, and under what conditions. Nonetheless, examining that misattribution allows us to see more clearly how redistribution is limited and what “predistribution” is.

We know that power to set the agenda over economic outcomes is important. This could achieve fairer outcomes than just post-facto redistribution as it concerns the realm of production. In the labor automation debate, I’ve identified this as a technology innovation and governance question: what we should do about AI is a set of decisions that could be broadened beyond a small subset of management and shareholders who are legally delegated to hold that power. Distributing agenda-setting power and distributing voice democratize the process. So what are the levers that distribute that power?

The argument defining the contents of predistribution runs as follows. I then identify four categories of predistribution.

Redistribution operates at T2; tax-and-transfer operates at a point at which the market has results to redistribute from. Its defining features are that it takes market outcomes as given and adjusts them. It is post-facto and downstream. 

We know that prior to those outcomes, there exists upstream governance. This carries agenda-setting power and the capacity to shape the conditions under which outcomes are produced. This is precisely what redistribution cannot do. These outcomes were structured at T1, which was the realm of production.

Predistribution and redistribution are related and defined against one another, with redistribution happening at T2 and upstream governance occurring before this at T1. Redistribution is structurally incapable of setting the agenda or structuring outcomes. What redistribution cannot do, let us name as what predistribution does. Therefore, predistribution is the distribution of power over outcomes.

Predistributive institutions distribute power over outcomes. Predistribution advocates concerned with equality aim at moving the power up to exercise control over mechanisms that can shape outcomes before the redistribution of market outcomes.

Much of the work on predistribution has reflected this logic. Public investment and government expenditure, such as through K-12 education and infrastructure, are cited as examples of predistribution. The state can directly produce and provision goods and services. Power has been exercised and the outcome set. The direct provision of goods and services, depending on execution and the extent to which it removes market dependence, can have a decommodifying effect: decommodification occurs when access to a good is no longer conditioned on market participation. These outcomes are directly provided without one needing to enter market exchange to receive them. The distance of the outcome as mediated through the market has collapsed.

Another set of policies grouped under predistribution involve redistributing bargaining power. One can change the rules of a market, or what Steven Vogel calls marketcraft. Antitrust rules are the paradigmatic example. Changing the legal rules that underlie a market shapes the engine of the market. Now a market is structured differently with different rules and incentives, therefore producing different outcomes. Even a redistributive program can have a predistributive effect that changes bargaining power and the incentive structure of the market: consider UBI's possible effect on raising workers’ exit options through increasing their reservation wages, thereby raising the bargaining power workers bring to market exchange.

Another type of predistribution is distributing ownership and entitlements to assets.  Land reform is the paradigm case: in U.S. occupied Japan and revolutionary Communist China, land was compulsorily transferred from landlords to tenant farmers and peasant populations.  In the domestic U.S. context, a similar mechanism appears as eminent domain, the state's authority to compulsorily acquire private property. Public ownership is another instance of this power. An interesting case is the social dividend: a return distributed to citizens as co-owners of productive assets, as in Alaska's Permanent Fund or a state sovereign wealth fund. This is a “predistributive” form of UBI, distinct from a market-liberal basic income funded through tax-and-transfer; the entitlement derives from ownership, not from downstream redistribution of market outcomes. In the United States or other Western industrial democracies, where we are steeped in the tradition of welfare capitalism, our understanding of redistribution is tax-and-transfer, rather than directly changing entitlements as in radical forms of land redistribution. However, this general class is also quite simply redistribution. This discussion connects to Rawls’ idea of property-owning democracy (POD). I elaborate on this form of predistribution—or redistribution of ownership—and its relationship to Rawlsian POD in my forthcoming work on “predistributive UBI”. Determining who owns productive assets establishes who is entitled to property and returns, and allocates residual control, at least nominally, although this is distinct from the next class of redistributing control and governance rights.

Another type of predistribution—more fundamental to the element of control and more undertheorized as a field—is the distribution of governance power over outcomes. Change who governs and in whose interests, and the outcomes are structured differently. This distributes the power to determine the agenda before redistribution of market outcomes. These means include collective bargaining mechanisms, labor unionization, and industrial policy, which have all been identified with predistribution. These mechanisms change who decides and thus what is decided. Governance power can be exercised through directly distributing voice, such as through union representation in the firm. Notably, ownership and governance are often bundled: worker cooperatives combine both, as does land reform to smallholders, but they are analytically separable forms.

Scholars have observed there are limits to how much one can reduce inequality with the help of tax mechanisms. I am highlighting those limits as structural rather than practical features. What is “predistribution” is actually the primary determinant of economic life, particularly the realm of production, whereas post-facto tax-and-transfer in the market is actually the residual ambit of welfare capitalism (the historical intellectual moment we are steeped in), and its understanding of redistribution. Tax-and-transfer redistribution does not allow for governance over market outcomes, and yet it is commonly identified as the imaginary limit of what we think of as policy solutions, whether it be climate change (through carbon tax) or labor automation (through early calls for UBI). Tax-and-transfer redistribution cannot change who the decision-maker is. That is predistribution, which occurs at T1 and directly sets the agenda. In forthcoming work on technology governance and artificial intelligence, I elaborate on these themes and present a framework for predistribution and governance over the economy, focusing specifically on the ownership and governance categories of predistribution.

Near the end of his life, Rawls wrote that “welfare-state capitalism permits very large inequalities in the ownership of real property (productive assets and natural resources) so that the control of the economy and much of political life rests in a few hands.” Rawls, the defining theorist of liberalism, writing about welfare-state capitalism which relies on redistributive tax-and-transfer, points out there is no control in it. This points to where control over the means of production lies: in predistribution.

 Ava Liu is Academic Fellow in Law, Technology and Labor, Harvard Law School. You can reach her by e-mail at avliu@law.harvard.edu.