Thursday, November 17, 2011

The Opportunity Costs of War

Over on the Ron Paul forums a member had this to say about pragmatarianism...
If we applied "pragmatarianism" back in National-Socialist Germany, your proposed system would support the continued funding of death camps.
So I looked up the economy of Nazi Germany and found this passage that Hitler wrote in 1936...
However well balanced the general pattern of a nation's life ought to be, there must at particular times be certain disturbances of the balance at the expense of other less vital tasks. If we do not succeed in bringing the German army as rapidly as possible to the rank of premier army in the world...then Germany will be lost!
In a pragmatarian system taxpayers would be able to directly allocate their individual taxes. would have been up to each and every German taxpayer to decide for themselves which tasks were less vital. Here's what might have gone through their heads when they were considering how to allocate their taxes...
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron...Is there no other way the world may live? - Dwight D. Eisenhower, 1953
Eisenhower, in that passage, was considering the opportunity cost of war. Should taxpayers be allowed to consider the opportunity cost of war? Do you trust the invisible hand to allocate taxes?

In 1922 the influential economist Ludwig von Mises wrote that there was no third was either capitalism or socialism. What if his tunnel vision hadn't prevented him from seeing pragmatarianism? What if he had offered pragmatarianism as a third solution?

Is there historical precedent for transferring control of taxes?
To guard against despotic royal rule, parliament sought to limit the kings’ powers to impose taxes so as to curtail their ability to maintain a standing army beyond times of war and immediate external threat - The evolution of parliament's power of the purse.
What will the consequences be if we do not now make a genuine effort to consider pragmatarianism as a possible solution? What are the opportunity costs of preventing taxpayers from considering the opportunity costs of their tax allocation decisions?


  1. "Donations to Government Organizations Should Be 100% Tax Deductible"

    Saw you over at and was intrigued by this post and even more so once I saw your tagline.

    Question: in using the word "donation" I assume you mean that taxes would be voluntary - or is it that some level of compulsory taxation (sorry to repeat myself) would accompany further donations for additional services and those would be tax deductible?

    If it is the former, and all money given to government was voluntary, why would we even need a government, as markets essentially perform the same function? And indeed, wouldn't the institution known as the state cease to exist?

  2. Yeah, my tagline is kind of confusing. The tax rate would be exactly the same but people would be able to directly allocate their taxes among the various government organizations. Or they could just give their taxes to the IRS.

    Forcing taxpayers to consider the opportunity costs of their tax allocation decisions would produce an efficient allocation of public goods and reveal the actual extent of the free-rider problem.