The ELIE scheme of Kolm taxes labour capacities instead of labour income in order to circumvent the distortive effect of taxation on labour supply. Still, Kolm does not study the impact of ELIE on human capital formation and investment. In this paper, we build an overlapping generations (OLG) model with heterogenous agents and endogenous growth driven by investment in human capital. We study the effect of ELIE on education investment and other aggregate economic variables. Calibrating the model to French data, we highlight a trade-off between growth and redistribution. With a perfect credit market, ELIE is successful in reducing inequalities and poverty, but it is at the expense of lower investment in education and slower growth. In an economy with an imperfect credit market where individuals cannot borrow to educate, the trade-off between growth and redistribution is not overturned but is less severe. However, it is possible to overturn completely that trade-off simply by changing the base of taxation for the young generation which is equivalent to subsidising education.

[Simula and Trannoy, 2011] have shown that ELIE is confronted with implementation issues when the policymaker cannot observe the time worked by every individual. This paper tries to fix this problem. To this aim, we characterise the second-best allocations which are the closest to ELIE first in terms of welfare and then in terms of transfers. In the former perspective, we consider a welfarist setting in which the social weights are those required by ELIE to be generated as a first-best allocation. These weights are defined by the tangent hyperplane to the first-best Pareto set at the ELIE allocation. We show that, in the absence of income effect on labour supply, the closest solution to ELIE is the laissez-faire. In addition, simulations for a Cobb–Douglas economy show that the second-best transfers may then be substantially different from ELIE. This is why, in the latter perspective, we construct second-best allocations which are both incentive-compatible and generate net transfers coinciding with the first-best ELIE transfers. We show that the unique solution is Pareto-efficient in the constraint set.

In this introductory chapter, we give a subjective account of the content of Kolm’s book Macrojustice (2005) that gave rise to the idea of organising in 2006 a round table where this book was discussed by different authors coming from a large variety of horizons: philosophers, economists, econometricians. We leave Serge-Christophe Kolm the task of presenting his theory in the first part of this book. Macrojustice is concerned about social justice proposing a comprehensive redistributive scheme. Of course, any distributive proposal always raises questions at the ethical, theoretical and practical levels. These questions are at the core of the discussions that are presented in this book, which is designed as a forum for multidisciplinary exchange.