Monday, November 28, 2011

Other People's Values

I've seen things you people wouldn't believe. Attack ships on fire off the shoulder of Orion. I watched C-beams glitter in the dark near the Tannhauser gate. All those moments will be lost in time... like tears in rain... Time to die. - Roy Batty, Bladerunner
Nobody wants to have their moments lost in time like tears in rain.  That's why we should always make back up copies of our photos...and discussions?

Here's a discussion that I'm making a back up copy of...just in case.  It's a discussion that I had with Linda Beale, the tax expert liberal professor.  The discussion, which took place on Beale's entry on Repatriation Holiday Lobbying -- Money Speaks, came to mind when Seth decided to play devil's advocate over at his blog...Two Ways of Saying the Same Thing.  His argument was that liberals would not be happy spending their own money..."most of government will be at the whim of the wealthy unless we somehow collectively allocate the wealthy’s taxes for them."

The logical problem with this type of argument is that it is a hasty generalization.  We all engage in hasty generalizations to some extent...but liberals would be up in arms if you generalized welfare recipients as being lazy...yet liberals see no problem generalizing the wealthy as being selfish and evil.

But would liberals reevaluate their generalization if all the billionaires gave 90% of their wealth to non-profit organizations?  Or would liberals still consider the wealthy to be selfish because nobody was given the opportunity to "vote" on which public goods the billionaires spent their money on?

The question is...how accurately do votes convey value?  How accurately do votes convey all the moments we've experienced in our lifetimes?  Don't get me wrong...we need democracy to settle certain social conflicts (ie whether marijuana should be legal)...but when it comes to the efficient allocation of public goods...nothing beats incorporating people's true values by forcing them to consider the opportunity costs of their tax allocation decisions.

We are all just blind men touching different parts of a elephant.  We all have access to a limited amount of truth.  What truth do we have access to?  We all have access to our own unique individual values...which reflect all the unique moments that we've experienced in our lifetimes.  You can't generalize or average values and hope to discover the actual scope of government.  Reality is not the average of moments experienced.  The only result of trying to impose your values onto other people will be a situation exactly akin to blind men arguing over the scope of government.

How can we end this gridlock?  How can finally resolve this battle of values?  All it takes is to recognize, respect...or at least tolerate other people's values...even if they are diametrically opposed to our own.

Here's the bottom line for the discussion between Linda Beale and myself...
Why would I assume that your experiences and values are any less valuable than my own? If I'm not going to make that assumption about you...then I'm certainly not going to make that assumption about taxpayers as a whole.
That's what I wrote to Beale early on in the discussion.  And here's what she wrote at the end of the discussion...
sure, values are ultimately at stake in the decisions that are made by government and by people. But that's not the discussion we've been having. We've been talking about facts like feasibility of mechanisms, empirical evidence about public and private sector activities, etc. 

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"The conservative world view vs. the liberal world view has been the source of political disputes for many millennia."

You should've quite while only moderately behind.

The modern conservative ideology, as espoused by the contemporary American far right, is between a half and one and a half centuries old (depending on how you count and what policy ares you look at). Modern liberalism is maybe half a century old in its current form, with precursors going back two and a half centuries or so. Social democracy is around one and a quarter century old. These are all comparatively young as ideologies go.

Now, even if you had been right about the age of the bullshit you espouse, it would still not have been a valid argument. People practised bleeding cures for millennia. People thought the Sun went around the Earth for millennia.

"It isn't as simple as saying one view is right and the other is wrong."

If you had said "I have mine, and screw the rest," then we would have had a policy disagreement, and people may disagree on this without being provably wrong. But when you say "less regulation benefits everybody," then you are making an objectively false statement. When you say "balanced budgets enhance growth," then you are objectively in error. When you say "the US government is broke," then you're lying (the US federal government has been definitionally solvent since it pulled out of Bretton Woods - that was the main reason it pulled out). When you say that lower taxes create jobs, then you're objectively wrong.

I don't see any reason to respect bullshit, or compromise on matters of fact. "For successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Feynman

"The argument that smaller government (not zero government) is better for society as a whole is a subjective one"

But that is not the argument you made. "Better for society," depends on your subjective assessment of the value of the people government protects from the predations of oligarchs, and on your subjective valuation of economic stability relative to the power and prestige of banksters. What you claimed was that deregulation is "better for everyone." Which is quite clearly bullshit for all commonly accepted definitions of "improvement" and "everyone."

"Progressives tend to have more faith in government bureaucrats and conservatives tend to have more faith in the private sector."

The private sector cannot satisfactorily provide for - healthcare, unemployment insurance, pensions, disability insurance, education, infrastructure, macroeconomic stability, etc. That's just simple empirical reality. You may argue that these areas are unimportant, or that they are less importance than your right to not pay taxes. But you cannot, if you wish to interact with the reality-based community, argue that the private sector does them better than the public.

Macroeconomic stability, in particular, is just flat out impossible for the private sector to provide, since it requires an investor of last resort who is definitionally solvent. The public sector will always, no matter how corrupt, inefficient and incompetent, do that better than the private sector, because the private sector cannot do it at all.

That you have "faith" in the private sector is neither here nor there. Economic policy should not be a faith-based initiative.

- Jake

Posted by: JakeS | October 05, 2011 at 01:41 AM
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Jake, Peter is certainly more right than you are when it comes to the age of these fundamental concepts.

From around 55 BC..."Gaius gracchus proposed a grain law. The people were delighted with it because it provided an abundance of food without work. The good men, however, fought against it because they thought the masses would be attracted away from hard work and toward idleness, and they saw the state treasury would be exhausted."

According to the charity laws of Judaism...the highest form of giving is to help the recipient become self-reliant.

I like the part where you said "simple empirical reality". That's really great!!! You're definitely the kind of person that I'm certain will completely embrace pragmatarianism.

All pragmatarianism does is allow taxpayers to directly allocate their individual taxes among the various government organizations at anytime throughout the year.

Of course the allocation decisions of taxpayers will reflect your "simple empirical reality". How could they not? Why in the world would taxpayers allocate their taxes according to some ridiculous faith-based fantasy? Taxpayers all want the most bang for their buck...not surreal antiquated obfuscation.

Taxpayers are in the perfect position to substantiate your claim. Actually...they are the only ones that can substantiate your claim. Their cumulative opportunity-cost decisions will reveal to everybody the reality that you've been trying to share all along.

Isn't pragmatarianism the best? I'm sure you'll fully support it. Now you'll have the perfect opportunity to let your actions speak louder than your words...you'll be able to put your money where your mouth is!

Posted by: Xerographica | October 05, 2011 at 06:09 AM
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Xerographica

such allocation schemes sound halfway plausible on paper but are utterly unworkable. How would you be able to fund long-term cancer research through NIH if you didn't know how many dollars you would have from year to year? The same thing applies to all long term planning. One big problem that we have right now is that too much is short-term--due to Congress's response to moneyed lobbying. We need more long-term thinking, not less.

The taxpayer allocation scheme is problematic for another reason. It assumes informed taxpayers. The biggest lesson one can derive from voting results from populations that have huge majorities in favor of INCREASED rights to unionization, INCREASED taxes on the rich/progressivity of taxation, and INCREASED protection of the environment is that people don't understand the sometimes complex interrelationships of agencies and regulations and businesses and particular votes cast by lawmakers. Of course, that is why we have a representative government to set policies--to allow those representatives to become more expert than the people themselves. But we need a certain threshold of education to ensure that voters keep politicians in line--if those experts are captured by Big Business they will allow the oligarchs to dictate the policy in their favor. We have been moving in that direction since Reagan's election and are now moving at an accelerated clip due to the consolidation of power in the ranks of the uberrich and their corporations.

Posted by: Linda Beale | October 05, 2011 at 02:08 PM
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Linda, how unworkable would it be if donors to PETA and donors to the NRA had to pool their donations together and elect representatives to decide how to split the money between the two organizations?

It shouldn't be too hard to imagine the results...it would be the same thing as you and Peter arguing over whose experiences and values are more valuable.

My mother endured a very long and terribly agonizing death from throat cancer. I basically watched her slowly starve to death because gnawing hunger was less painful than trying to swallow. What more information do I need?

It's fine that you want to reduce military spending but having served in Afghanistan for a year I would gladly help fund our efforts over there to support the same basic freedoms that so many Americans take for granted. What more information do I need?

Having graduated from UCLA with a degree in International Development Studies...I certainly do not take public education for granted. What more information do I need?

Why would I assume that your experiences and values are any less valuable than my own? If I'm not going to make that assumption about you...then I'm certainly not going to make that assumption about taxpayers as a whole.

The amount of public goods information that congress has access to is minuscule in comparison to the amount of public goods information that taxpayers as a whole have access to.

Posted by: Xerographica | October 05, 2011 at 03:03 PM
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Xerographica.
Your response is an illustration of the problem. You use anecdote and individual preferences on a small number of items to suggest you would fund cancer research (I assume), and the military--specifically apparently the war in Afghanistan and therefore you think it would be relatively easy to have direct democracy decisionmaking on government expenditures. To what extent? How much to each? How would you determine what is reasonable? Which budgets would you review, which development projects, which future forecasts? Why would you not support basic physics research or the performing arts? What if basic physics research was ultimately important to complex cancer research? Is it because you don't know enough about them or because you are anti-them that you don't support the things that you don't choose to support?

How would cancer research take place if it is funded for several years by three people at $100 each and another year by 2 million at $1000 each, when it needs long-term commitments for lab spaces, researchers (and research assistants), and all that research entails?

You are talking in pipe dreams that might at best work for relatively small cooperatives of people with fairly close values and objectives, but would be utter chaos for any modern society with its hundreds of millions of denizens and almost uncountable number of problems needing to be addressed and prioritized from global warming to food-borne infections. That is of course one of the reasons that programs tend to go on auto-pilot, except for those on which considerable attention is focused. But there is some value in that approach--if enough attention gets focused, the program will be reviewed more deeply. Else it should probably go along at base-budget funding

A statement such as yours that "the amount of public goods information that Congress has access to is miniscule compared to the amount that taxpayers as a whole have access to" reveals a lack of understanding of process. Taxpayers as a whole actually do not have as much access as congress. Everyone has everything that is in the public domain, though that "potential access" is much much larger than actual access potential. The point of committees is to have expert staffers (as well as the congressional research service, the JCT, the CBO and similar groups) to develop studies to answer questions that congressional reps in the course of assessing the right course. The problem, of course, that I raise in my post is the concern about the degree of lobbying by special interests that warps that review. But look at the misinformation that most taxpayers have about everything from 9/11, civil rights, economics, taxation to war. A huge proportion of Americans that are not in the top 20% think they are in the top 20% of the income distribution. A huge majority of Americans thinks that income in America is distributed almost evenly, with a little bit more going to the top than to the bottom. That couldn't be further from the truth--which is that the very top garners significantly more than anybody else. Those facts are "out there" but people are either too ignorant to understand them, or too fixed on a particular dogmatic position to be able to distinguish fact from fiction. And of course there is an awful lot of money being spent to mislead Americans on these issues in order to get them to vote against interest. It would be even worse with "direct democracy" voting on what the government would spend money on (even assuming away the other huge problems, like the question of how you do long-term planning with short term volatile funding).

YOur response to Jake reveals considerable naivete about how decisionmaking can work in dynamic group settings--20 people sitting in a room and agreeing to develop a plan by consensus is not the same as 300 million living together in a country where all want clean water, clean air, jobs, food, shelter, a decent life, protection from crime, protection from natural disasters, etc. but have 300 million opinions about what it takes to accomplish that and mostly wrong information about how it is being accomplished (or not) today.

I am involved in my law school's budget advisory committee and it requires me to delve into considerable detail, just for our small budget of under $15 million. Imagine considering what is worthy, and why, and how much when there are so many things on which it can be spent. That is why Congress has worked out a system of committees, with those who represent us developing expertise. It worked pretty well up until about 1980 when the right-wing machine became so adept at obstructionism that most of the decisions now are made reflecting the minority's views.

Anyway, enough said. You appear to be on a libertarian hobbyhorse of remaking the institutional structure along the lines of the anarcho-libertarian concept that taxation is theft. That view treats the status quo property distribution as some kind of god-given natural state, and then treats the state as an usurper taking that away through taxation. Nuts. The state is there before or at least simultaneously with the markets, and thus what any of us "has" is partly predetermined by what the state offers and subtracts. You might want to read the "Myth of Ownership" for some backgrounding on these issues.

Posted by: Linda Beale | October 05, 2011 at 06:36 PM
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Linda, never mentioned anything about taxes being theft so not quite sure where you got the impression that I'm an anarcho-libertarian. Perhaps you noticed on your blog traffic statistics where I linked to this entry from Kent's blog?

If that's the case then you should try and read through my comments on his entry a bit more carefully. Kent is an anarcho-capitalist...he believes that the private sector can produce everything better than the public sector can. So I tailored my arguments accordingly.

If Kent had been a socialist then I would have tried the exact opposite approach. If you don't believe me take a look at my relatively short entry on the joy of writing checks to the government.

See, I'm a new breed...I'm a pragmatarian. I take my cue from Deng Xiaoping...that guy was so cool. He went around saying that he didn't care if a cat was black or white...what mattered was whether it caught mice.

I'm not dogmatically attached to any particular ideology like you, Jake, Kent and Peter are. I could care less whether an organization is public or private...all I care about is results.

All pragmatarianism says is that taxpayers, like you, will, given a choice, look at results and allocate their taxes accordingly. For example, it doesn't matter to most taxpayers whether the public or private sector comes up with a cure for cancer. But the public will certainly benefit by increased competition between the two sectors.

"How would cancer research take place if it is funded for several years by three people at $100 each and another year by 2 million at $1000 each"

This kind of funding fluctuation occurs because the government leadership is replaced every few years by the opposite faction...but it certainly wouldn't happen with a pragmatarian system. Funding would be relatively steady because demand for cancer research is relatively constant.

Obviously, just because I allocated my taxes to a GO in no way implies that I would have a say how they spent the money. Just because somebody donates to PETA in no way implies that they get to run PETA. So it will be completely up to the organization leadership to decide whether physics research is relevant to cancer research.

Committees are perfectly fine. I'm not saying that we should get rid of any committees. If taxpayers are happy with how congress is spending their money then they would have the option to allocate 100% of their taxes to congress.

Given that you mentioned obstructionism...it would seem logical that you would appreciate the ability to bypass any obstructions and put your taxes directly into the organizations that need it the most.

If we had a pragmatarian system then the whole national healthcare debate would be a moot point. The amount of funding that national healthcare received would determine the percentage of the population that would qualify for coverage.

The top 1% of taxpayers pay for 40% of total taxes while the bottom 99% of taxpayers pay for 60% of total taxes. So...what? There are no public goods that the rich can exclusively benefit from. And not sure if it would be of any benefit trying to generalize how the rich would allocate their taxes.

Yeah, there's certainly a lot of misinformation out there. The thing is...there's a strong correlation between education and income. People who are better educated tend to make more money and pay more taxes. These people, like you, have the necessary critical thinking skills to effectively separate fact from fiction.

Plus, to find any relevant facts they'll just need to visit a GO's website. Each GO website will have a fundraising progress bar and some relevant information demonstrating merit and effectiveness.

Just like the website Charity Navigator analyses the financial health and effectiveness of various non-profit organizations so too will there be several independent organizations set up to do the same thing for GOs. Or maybe Charity Navigator will just expand to include GOs as well.

Posted by: Xerographica | October 05, 2011 at 08:46 PM
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X--
I'm not going to reargue your arguments. I've addressed them and you haven't really responded. Saying that better educated people make more money and pay more in taxes so will make better decisions in this allotment process is about as naive as the rest. This is not a matter of education but a matter of the inability of each and every taxpayer to be sufficiently informed about all the issues and interrelationships to allot his or her tax dollars in any way that would make sense or for any resulting aggregate allotments to make any sense.

Posted by: Linda Beale | October 05, 2011 at 09:27 PM
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Linda, up until relatively recently quite a few people applied your same logic to the allocation of private goods. Here are some of the countries that still have planned economies...Cuba, Libya, North Korea, Saudi Arabia, Belarus, and Myanmar.

It seems pretty straightforward that markets are incredibly more efficient at allocating private goods.

There is only one difference between public and private goods. With public goods people can free-ride off the contributions that others make to public goods...which decreases the financial incentive for companies to provide public goods.

This problem can be corrected simply by forcing people to pay taxes. Once people are forced to pay taxes then the market can be used to decide how to efficiently allocate public goods.

Again...
1. Planners fail at efficiently allocating private goods.
2. Public goods are not significantly different than private goods.
3. Therefore, planners fail at efficiently allocating public goods.

I'm not making any judgments regarding the tax rate or which goods should be considered public or private. All I'm saying is that markets have long since been proven to be better at efficiently allocating goods.

What's naive is you thinking that a relatively small group of planners could ever allocate public resources as efficiently as 150 million taxpayers could. It demonstrates that you are completely clueless as to how private goods are allocated. Thank goodness that you do not need to know how the invisible hand works for it to work.

Unfortunately, it seems pretty obvious that you need to know how the invisible hand works in order to support pragmatarianism.

Posted by: Xerographica | October 06, 2011 at 04:14 AM
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X
there you go again. Equating discussion of private sector, money-making, "risk it but maybe win it" activities with activities in which the government provides needed intervention because the private sector won't/can't do it, and the question of how to make the decisions about which of those areas to invest resources.

Posted by: Linda Beale | October 06, 2011 at 08:33 AM
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X (cont'd)
Public goods are clearly quite different from private goods--if you can't see that, our discussion is useless.

Markets have NOT "long since been proven" adept at the kind of decisionmaking we are discussing. That is anti-empirical thinking. As I have said, there is no such thing as a "market" without government. The concept of "government free markets" is an absurdity.

The kind of arguments you engage in are unsupportable by the facts. But you just continue to assert your assumptions as though they were facts.

Moreover, the "invisible hand" is one of the most overused and wrongly used metaphors in economic discussion--and used in ways that Adam smith himself would find unsuitable, since he thought that there was a genuine problem when the propertied upper class overtook decisionmaking.

Nuff said.

Posted by: Linda Beale | October 06, 2011 at 08:37 AM
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Linda, you aren't going to get any argument from me that the government provides needed intervention because the private sector won't/can't do it. Again, I'm a pragmatarian...not a libertarian.

The problem is that the government has no idea how to prioritize its interventions.

"When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money?" - Patricia Kennett

Pragmatarianism forces taxpayers to consider the opportunity costs of their allocation decisions. This would allow the interventions of government to accurately reflect the values of taxpayers.

Taxpayers can say that they want this and that and some other thing but their allocation decisions will speak louder than their words.

Posted by: Xerographica | October 06, 2011 at 09:19 AM
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X
No, your "pragmatarianism" does not give the goverment an idea how to prioritize its interventions, nor does it "force" anyone to consider opportunity costs. There is nothing that can require taxpayers to make considered judgements, anymore than there is anything to require voters to do so.

You haven't addressed obvious flaws in an idea that has enormous transaction costs and transition costs to get off the ground, is likely to lead to even more dominance by the wealthy in the decisionmaking apparaturs (those with more money pay more taxes--though not enough--and have more control of how that tax money is used, so will likely use it to benefit themselves) or the many other obstacles I have mentioned.

Posted by: Linda Beale | October 06, 2011 at 10:21 AM
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Linda, obviously there are enough voters that want marijuana to be illegal. But how much of the other public goods that they value (defense, infrastructure, border security, etc.) would they be willing to forgo in order to help finance the war against drugs? That is the question that millions of taxpayers would be forced to consider when deciding how to allocate their taxes.

The amount of money that the drug war received would determine how much the government intervened in this area.

Obviously, if somebody is in the ridiculously small minority of people that only care about one public good then they won't be forced to consider the opportunity costs of their allocation decisions. But the rest of us will be forced to make hard choices that we are not currently forced to make.

What's interesting to consider is that, when taxpayers are forced to be directly responsible for funding the public goods that they value...what percentage of taxpayers will be happy to pay more than their fair share of taxes?

What are the transaction costs?

Yes, the wealthy will "purchase" more public goods just like they can purchase more private goods. The difference is that...unlike with private goods...we would all benefit when they "purchase" public goods. Public goods are, by their very definition, non-excludable.

There are no serious obstacles to overcome because this system already works for the non-profit sector. The only difference will be that people will be forced to allocate a percentage of their income (as determined by the tax rate) among the various public organizations.

One "obstacle" that is sometimes mentioned is the cost of fundraising. But with good fundraising practices it is standard for non-profits to receive $5 for every $1 they spend on fundraising...which is a ridiculously high return on investment.

Look, this probably won't happen in our lifetime but it's as a progressive concept as they come. Just like we can look back and realize how was absurd for one king to control all the taxes...so too will people eventually look back and realize how absurd it was for 535 people to control all the taxes.

Just like there were plenty of people who thought that the king had some kind of "divine" wisdom so too are there plenty of people who think that just because congresspeople are elected it imparts some sort of special wisdom when it comes to deciding how taxes should be allocated. It shouldn't take more than an hour of watching C-Span to realize that this is far from the case.

If you're genuinely interested in finding out if this concept would work then just propose it to your friends and ask them to predict which public goods would be underfunded. Compile a list of their responses and see if you don't notice a pattern emerging. At the very minimum it's an interesting intellectual exercise.

Posted by: Xerographica | October 06, 2011 at 04:19 PM
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Jake--re organizational decisionmaking versus individual decisionmaking--yes, clearly the difficulty individuals have in assessing information and making decisions in real time is a key aspect of the problems with X-type "solutions" to tax policy. Of course, even organizational decisionmaking can face some of these same problems, with the usual result then being a tendency to favor the status quo. There are other types of organizational decision-making problems, such as the ones the US now faces with the obstructionism of the right, which is willing to sacrifice the organization in order to satisfy dogmatic, ideological objectives.

Posted by: Linda Beale | October 08, 2011 at 04:18 PM
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X--no, there would be no reasonable way for individuals to make decisions about prioritizing the myriad functions of government, because their individual decisions would be compromised or reinforced by others' decisions. And worse, those with the most would carry the most weight (which those with the least would be all to aware of from the outset).

Posted by: Linda Beale | October 08, 2011 at 04:37 PM
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If you think the government has a myriad of functions...then how many functions do you think the private sector has? If the market truly couldn't handle efficiently allocating the relatively small percentage of public functions...then it certainly would have long ago failed at efficiently allocating all of the private functions.

The primary failure of the market is that because of the free-rider problem there is little financial incentive to produce public goods. The primary failure of the government is that planners only have access to a microscopic percentage of the information available to society as a whole.

The solution is simple...donations to government organizations should be 100% tax deductible.

What's interesting is that even though you're a liberal and Peter's a conservative...both of you agree that a market system wouldn't be able to handle efficiently allocating the relatively small percentage of public goods.

Posted by: Xerographica | October 13, 2011 at 07:37 AM
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X

(1) It isn't just the number of functions, but also the type.
(2) The private sector clearly fails at allocating monies appropriately, even among areas that we consider most appropriately handled by the private sector. To take just one example, that's why the US car companies quite innovating with the 'easy money' of newly opened markets in South America (only remedying the problem in connection with the financial crisis) and why CEOs make much more than they should based on their value-added to the enterprise, while workers make less than their value-added to the enterprise (etc.)
(3) The private sector simply, inherently, can't handle appropriately inherently government functions like forcing itself to take account of "externalities".
(4) You are wrong on primary failures but you are even more wrong on your socalled pragmatarianism solution--i've exposed the numerous flaws in your logic on several posts. I won't do it again here but other readers should look at the comments for exchanges between X and me on these issues.
(5) Pappas' contributions to the comments at ataxingmatter are revealing because he sometimes acknowledges what the facts show but then goes on to espouse his "beliefs" in conservative ideology anyway.

Posted by: Linda Beale | October 13, 2011 at 01:39 PM
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Linda, people's values are "wrong" when they pay CEOs the big bucks but congress's values are "right" when they bail out the auto industry? Yet congress's values are "wrong" when they block national healthcare?

Let me guess...my values are wrong while your's are right? That's why I started off this discussion with my personal anecdotes...to help you consider the possibility of other people's values having value even if they are not the same as your own.

How is it that I can respect your values while you cannot respect my own?

There's nothing wrong with me valuing the EPA more than I value bailing out the auto-industry. There's nothing wrong with you valuing public healthcare more than you value national defense.

Our values as a whole are the only thing that can objectively and "correctly" determine the allocation of public resources. Votes do not accurately reflect values. Forcing taxpayers to consider the opportunity costs of their individual taxes is the only way we can ensure that limited public resources are used as efficiently as possible.

O how they cling and wrangle, some who claim
For preacher and monk the honored name!
For, quarreling, each to his view they cling.
Such folk see only one side of a thing.

Posted by: Xerographica | October 13, 2011 at 05:44 PM
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X
You're playing the old 'bait and switch' trick. We aren't having a values discussion. We're having a facts discussion. Your solution doesn't work, for the various reasons I've outlined. Your responses don't address most of the flaws, or continue to assume away the exposed flaws.

Posted by: Linda Beale | October 13, 2011 at 06:37 PM
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Linda, no bait and switch here...it's always been about values. How could the topic of the allocation of public resources be about anything but? The information that congress will never have access to is how much of one public good you would be willing to forgo for another public good.

This concept is known as opportunity cost...it's the only way to accurately determine values...and it's the only way to ensure that limited public resources are allocated as efficiently as possible.

You don't seem to be a fan of obstructionism...yet you definitely don't approve of allowing me to directly support the government organizations that I value. I'm not quite sure how that's any different than hyperpartisan obstructionism. You seem to be only happy when my dollars support your values.

Posted by: Xerographica | October 13, 2011 at 07:51 PM
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X
sure, values are ultimately at stake in the decisions that are made by government and by people. But that's not the discussion we've been having. We've been talking about facts like feasibility of mechanisms, empirical evidence about public and private sector activities, etc.

Posted by: Linda Beale | October 13, 2011 at 11:05 PM

Saturday, November 26, 2011

Economic Fairytales?

The liberals over at the Crooked Timber blog published an entry on the efficient use of scarce resources... Dives and Lazarus: An Economic Fairytale

Here's my comment on their entry...that they decided not to publish.  Why didn't they publish it?  Well...perhaps they wanted to stick with the whole "fairytale" theme by critiquing the efficient use of scarce resources without even once mentioning opportunity costs.

Here's my last comment...The Psychology of Political Change...which they hesitated publishing and here's the first comment of mine...Crooked Timber Liberals...which they did not publish.

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Anybody ever read Dogshit Food by Liu Heng? It's a story that was set during China's Great Leap Forward when 20-30 million died as a result of state induced famine. In my blog entry on The Dialectic of Unintended Consequences I juxtapose Mao Zedong and Deng Xiaoping in order to highlight the stark disparity between the consequences of giving people less, and then more, choices.

We all intuitively understand that we have to choose between having our cake and eating our cake. Therefore, we all intuitively understand the "opportunity cost" concept...which is essential to ensure the efficient allocation of scarce resources.

The problem is that there are numerous goods that people can benefit from without having to contribute to...aka...the free-rider problem. Therefore...it's very well possible that the private sector would fail at producing adequate levels of these goods...aka public goods.

Libertarians believe that the free-rider problem only applies to very few goods...national defense, the courts and the police. Yet, here's an exceptional libertarian..."The same reasoning applies in the context of poverty. Almost everyone would be happier knowing that fewer people are starving to death. Some people might help the poor out of altruism, but many others will free-ride. Purely private provision might therefore be insufficient relative to most people’s optimum. That is, alleviation of poverty is also a public good." - Jeffrey Miron, Libertarianism and Anti-Poverty Programs.

Is it progressive for a libertarian to entertain the possibility that the free-rider problem might apply to welfare programs? Of course! Would it be progressive for liberals to recognize the value of efficiently allocating public funds? Of course! Nobody would willingly give a kidney to somebody that truly didn't need it.

In order to guarantee the efficient allocation of public funds we should allow taxpayers to directly allocate their taxes. This would force them to consider the opportunity costs of their tax allocation decisions.

So yes, Elizabeth Warren was correct that taxpayers have an obligation to "pay it forward". However, in order to maximize the benefit to society, taxpayers should be able to directly choose which government organizations they give their taxes to. For more information check out my blog entry on the opportunity costs of public transportation.

Thursday, November 24, 2011

The Psychology of Political Change

[Update 25 Nov 2011] The Crooked Timber liberals finally decided to publish this comment.  They published plenty of later comments before publishing my comment so now I'm even more curious what their hesitation was.

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Those cheeky Crooked Timber liberals.  They are "cheeky" because they are over in the UK and because they deem it necessary to block a few of my comments.  Here's the first comment of mine that they blocked...Crooked Timber Liberals and now they've gone and blocked another comment of mine.  Here's my comment which I tried to post on their entry on Fatalism, Polling Data and Experimental Philosophy.

It's really no big deal that they block some of my comments...but I can't help but be curious how they rationalize their decisions to do so.

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Locus of control, which has already been mentioned, is the first thing that comes to mind...but Self-efficacy and Maslow's Hierarchy of Needs are two relevant psychological concepts that haven't been mentioned yet. Well...then the debate probably just boils down to nature versus nurture.

Obama promised everybody "change" but certainly the OWS protesters don't seem to feel like any real change was delivered. Does anybody feel like Obama followed through with his promise of real change? What would qualify as real change?

In the Bible "miracles" were possible if people had enough faith... "Jesus answered and said unto them, Verily I say unto you, If ye have faith, and doubt not, ye shall not only do this which is done to the fig tree, but also if ye shall say unto this mountain, Be thou removed, and be thou cast into the sea; it shall be done." Mathew 21:21

How many people have lost faith in the current political system? How pervasive is political alienation? Who has the real power?

In ancient times people believed that the king had "divine authority". Then some Barons lost faith in the king and took the power of the purse away from the king. Did that qualify as real change? Since then we've learned how scarce resources are efficiently allocated. Yet...parliament still maintains the power of the purse.

If we truly want real change...if we truly want to empower people...then we should allow taxpayers to directly allocate their taxes...aka pragmatarianism. Your ability to genuinely consider the validity of this idea reflects the degree to which your thinking has conformed to traditions. Conforming your thinking to traditions restricts your ability to think outside of the box.

Contrary to the bible...real change is not the result of faith...it is the result of doubt.

Tradition, thou art for suckling children,
Thou art the enlivening milk for babes;
But no meat for men is in thee.
Then --
But, alas, we all are babes. - Stephen Crane

There is no logical or rational basis for 535 congresspeople allocating people's taxes. The only way to ensure the efficient allocation of taxes is to allow taxpayers to directly allocate their taxes. This would force taxpayers to consider the opportunity costs of their taxes. Millions and millions of taxpayers deciding whether they wanted to have their cake OR eat their cake would reveal their true values and guarantee the best possible use of limited public funds.

Tuesday, November 22, 2011

The Opportunity Costs of Public Transportation


Tickets are the worst.  On the plus side though...my online traffic school shared a plethora of statistics on public transportation.  Based on these statistics, we can clearly see that public transportation truly is a public good.  Therefore, Elizabeth Warren was correct when she said that business owners have an obligation to "pay it forward".

That being said, Warren was incorrect for failing to mention that no two public goods provide the exact same benefit to society as a whole.  This disparity in benefits was the point of my entry on the Opportunity Cost of War and my entry on the Opportunity Costs of Public Goods and my entry on the Ostrich Response to Pragmatarianism.

You might not be familiar with the term "opportunity cost" but everybody intuitively understands this concept.  This concept is embodied in the common saying that you can't have your cake and eat it too.  Your decision to either have or eat your cake reflects your values.  The problem with the current system is that congress has no idea what our values are.  Without knowing society's true values it's impossible for planners to accurately determine the best possible use of public funds.

The only way to guarantee the best possible use of public funds would be to allow each and every taxpayer to directly allocate their individual taxes.  This would force them to consider the opportunity costs of their tax allocation decisions.  Each and every taxpayer would intuitively understand that the money they spent on one public good could not be spent on other public goods.  This intuitive realization would force them to prioritize which public goods they valued most.  This process of millions and millions of taxpayers prioritizing their tax spending decisions is known in economic terms as the "Invisible Hand".

Elizabeth Warren was right that business owners should "pay it forward"...but she neglected to share an equally important point.  Each and every taxpayer should have the freedom to directly allocate their taxes among the various government organizations.  This would allow the demand for public goods to determine the supply of public goods.

Here are the statistics on public transportation.  It might seem like a huge responsibility for taxpayers to have to consider all the statistics of the various public goods...but in reality taxpayers would allocate their taxes to try and address shortages of the public goods that they valued the most.  Just like there's a donor division of labor in the non-profit sector so too would there be a taxpayer division of labor in the public sector.  The huge tax allocation responsibility that congress currently shoulders would be distributed among millions and millions of taxpayers.  Of course, in a pragmatarian system any taxpayers that weren't interested in directly allocating their taxes could still just give all their taxes to congress.

Public Transportation Statistics

According to National Highway Traffic Safety Administration...

Public transportation is a $35 billion industry that employs more than 350,000 people.

Public Support

Three-quarter of Americans support the use of public funds for the expansion and improvement of public transportation.

Costs

New urban expressways cost up to $100 million per mile while rail and bike facilities cost on average $15 million and $.1 million, respectively.

Federal transportation grants for State and local governments totaled $4.4 billion for transit or 14% of all transportation grants in 2000.

Economic Benefits

Business output is positively affected by transit investment.

Almost half of all Fortune 500 companies, representing over $2 trillion in annual revenue, are headquartered in America’s transit-intensive metropolitan areas.

A $10 million investment in public transportation results in a $30 million gain in sales for local businesses.

For every passenger mile traveled, public transportation is twice as fuel-efficient as private automobiles, sport-utility vehicles, and light trucks.

In Los Angeles alone, $0.80 of every $1.00 spent on public transport gets re-circulated in the local area, translating into $3.80 in goods and services.

A study on U.S. government spending and its impact on worker productivity estimated that a 10 year $100 billion increase in public transport spending would boost worker output by $521 billion, compared with $237 billion for the same spending on highways.

In a recent study conducted it was found that 40 hours are spent in traffic that is NOT moving in 1/3 of the United States cities

22 billion dollars are saved each year by Americans using public transportation if they live in transit-intensive areas.

Every dollar a taxpayer invests in public transportation can potentially have a return of $6 dollars or more regarding an economic return.

For every passenger mile traveled, public transportation is twice as fuel-efficient as private automobiles, sport-utility vehicles, and light trucks.

Demographics

$50,000 is the average annual income of a rail commuter who owns at least 2 automobiles.

Approximately 94% of people on welfare are choosing to use public transportation when trying to find employment in the workforce.

The poorest quintile of American households spend 36% of their budgets on transportation, while the richest fifth spend only 14%.

Safety

37,261 highway fatalities were recorded in the year 2008.

In 2008 13,846 people were killed in accidents involving alcohol.

Public transportation helps to keep dangerous drivers off the road by providing a needed transportation choice.

The National Safety Council estimates that riding the bus is over 170 times safer than automobile travel.

Environment

If one in five Americans used public transportation daily, carbon monoxide pollution would decrease by more than all the emissions from the entire chemical manufacturing industry and all metal processing plants in the U.S.

In comparison with private vehicles, public transportation generates 95% less carbon monoxide, 92% less in volatile organic compounds, and about half as much carbon dioxide and nitrogen oxide per passenger mile.

Trends

Public transportation rider-ship increased 22% in the last 6 years.

In the last 5 years, public transit use has increased faster than any other mode of transportation.

From 1985 to 2001, the percentage of people driving to work alone increased by 5.8% to represent 78.2% of all means of commuting.

During 1985 to 2001 carpooling declined by 4.4%, public transportation by 0.4% and the percentage of people working at home declined by 0.2%

In 2000, Americans took 9.4 billion trips using public transportation, an increase of 3.5% from the previous year the equivalent of more than one million new trips each day.

In the year 2000, ridership grew twice as fast as the U.S. population and outpaced growth in other travel modes.

Approximately 14 million people in the U.S. choose to use public transportation on weekdays. In addition, 25 million choose to use public transportation less frequently but on a regular basis.


Monday, November 21, 2011

The Blind Men and the Scope of Government

We all want adequate levels of the goods that we value...right? The problem is that there are some goods, known as "public goods", that people can benefit from without paying for. This problem is known as the free-rider problem.

In order to deal with the free-rider problem we force people to pay taxes and allow the government to produce these public goods. The challenge is that we do not value all public goods equally. What might be a public good for one person might not be a public good for another person. In order to try and decrease the tax rate many people are inclined to argue that the free-rider problem does not apply to public goods that they do not value.

The main political ideologies can be roughly organized based on their perceptions of how pervasive the free-rider problem actually is...


How can we figure out who is correct? How can we determine what goods, if any, the government should be responsible for providing? If the private sector can produce adequate levels of a public good then wouldn't it be redundant/wasteful for the public sector to also produce that same good? Redundancy, or the misdirection, of public funds can also be thought of as the inefficient allocation of public funds.

In order to discern the actual scope of government we should allow taxpayers to directly allocate their taxes to "essential" government organizations. An "essential" government organization is one that provides important public goods that the private sector either partially or completely fails, because of the free-rider problem, to provide. Allowing taxpayers to directly allocate their taxes is known as pragmatarianism.

The biggest challenge to pragmatarianism is that people do not understand how the invisible hand works. People instinctively get the feeling that "important" public goods would be underfunded and "less important" public goods would be overfunded. The thing is...in a pragmatarian system taxpayers would still have the option to give all their taxes to congress. If congress was efficiently allocating taxes...then why would any taxpayers choose to directly allocate their taxes themselves?

The fundamental concept to try and understand is that the only way we can accurately determine the "importance" or "value" of a public good is by seeing how much funding it would receive relative to other public goods. This is known as the "opportunity cost" concept. This concept is simply the idea that you can't have your cake and eat it too. Deciding whether you eat or have your cake reflects your true values. The problem with the current system is that voters can convey their opinions...but taxpayers are unable to convey their true values. In a pragmatarian system voters would determine the functions of government and taxpayers would determine which functions they funded. In essence...by allowing people to put their money where their mouths are...we can determine the best possible use of public funds.

What if you disagree with pragmatarianism? Then please explain what basis you have for believing that congress can efficiently allocate taxes. As far as I can tell...the current system is based on nothing but tradition. Nearly 1000 years ago some Barons were not happy with how the king was spending their money so they forced him to relinquish the "power of the purse". That's the cliff notes version but there is no logical or rational basis for believing that 535 people can efficiently allocate the taxes of millions and millions of taxpayers. Parliament did not have to interview for this position. They did not end up with this position because they were uniquely qualified. All they had to do to get this position was to take it by force from the king. That's it. Just because they stole control of taxes from a king does not make their control over taxes any more legitimate than the king's control of taxes was. Why did the king have control over taxes in the first place? Because people believed he had "divine authority". In the past 1000 years we've learned a bit more about how scarce resources are efficiently allocated.

Hayek's concept of partial knowledge ties into Bastiat's concept of opportunity cost which ties into Smith's concept of the invisible hand...which ties all the way back to Buddha's explanation of how we are all just blind men touching different parts of an elephant. The true scope of government can only be revealed by adding all our limited perspectives together.

It's great if you want to argue against pragmatarianism...but please help me understand why you believe that congress is better qualified to efficiently allocate taxes.

Thursday, November 17, 2011

A Fictitious Dialogue with a Ron Paul Supporter

fisharmor: It is completely unethical for the government to imprison, beat, torture, rape, and kill people for refusing to pay taxes!!
Xerographica: Would you want to be able to use your taxes to boycott the tax enforcement GOs?
fisharmor: No!!
Xerographica: No?
fisharmor: You don't get it...I find theft of my property to be unethical.
Xerographica: But...you wouldn't want to deprive the tax enforcement GOs of your taxes?
fisharmor: No! You're being unreasonable for not understanding how strongly I feel about taxes.
Xerographica: But in a pragmatarian system you'd be able to withhold your taxes from all but one GO...
fisharmor: Taxes are unethical and I could care less what my stolen money is used for
Xerographica: Even if your taxes paid for unnecessary wars?
fisharmor: Look, the problem here is that you've never heard of the self-ownership principle.
Xerographica: I'm pretty sure I understand and appreciate the concept...but I don't think you're grasping that pragmatarianism is a system that would allow you to allocate your taxes according to your moral principles
fisharmor: You don't truly understand the self-ownership concept if you support taxes
Xerographica: I'm not supporting taxes...I'm supporting freedom...
fisharmor: The only way to support freedom is by advocating for the total elimination of taxes
Xerographica: Even if advocating for the total elimination of taxes guaranteed that you wouldn't get any freedom?
fisharmor: Yes, that's what it means to be ethically principled...you never compromise your ethical principles even if doing so helps perpetuate the very thing that you're ethically opposed to.
Xerographica: But...I'm not asking that you compromise your ethical principles....
fisharmor: Are you advocating for the elimination of taxes?
Xerographica: Well...no...
fisharmor: Then you're asking me to compromise my ethical principles.

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. Therefore...it 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 solution...it 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?

Tuesday, November 15, 2011

The Pragmatarian Challenge to Stefan Molyneux

How many "natural rights" (deontological) oriented anarcho-capitalists are barking up the wrong tree?  That's a link to my challenge to Stefan Molyneux.

My challenge to Stefan is to explain whether the biggest obstacle to his World of Beautiful Freedom is people's "immorality" or their unfamiliarity with the concept of the invisible hand.  This challenge is in response to his video on Beautiful Freedom where he answers frequently asked questions on how a stateless society might work.  By far and large the video consists of him explaining how the invisible hand works.

As a pragmatarian I say nothing about whether "taxes are theft"...my only argument is that taxpayers should be allowed to directly allocate their taxes.  Even though the total amount of taxes would be exactly the same, the most common response to pragmatarianism is that some "important" public good would be underfunded.  For a mountain of evidence that supports this conclusion see my post on Unglamorous but Important Things.

It's clear that the biggest obstacle to a stateless society isn't that people are immoral...it's just that they have no idea how the invisible hand works.  Therefore, the revolution wasn't postponed because of immorality...it was postponed because it was outside of everybody's area of expertise.

My pragmatic recommendation is for everybody to bark up the right tree by focusing on helping people understand how the invisible hand works.  In my opinion...asking people to consider the outcome of allowing taxpayers to directly allocate their individual taxes...aka pragmatarianism...is a really good way to introduce them to the invisible hand concept.

Kent's Critique of Pragmatarianism

Kent "The Hooligan Libertarian"...recently dedicated an entire blog entry to his evaluation of pragmatarianism.  Lot's of good criticisms from a very strong "rights" based perspective.

Kent and I have had quite a few surprisingly reasonable exchanges.  Here's our first discussion...Abortion: This Libertarian/Anarchist's position.  The discussion started off addressing abortion from the perspective of property rights and then transitioned into a discussion on taxes.

My position was that abortion was unethical from a strict interpretation of property rights.  As soon as unique  DNA is created the individual has the right not to have their property violated in any way.  The concept of property is only meaningful when there is some way to differentiate what I own from what you own.  When a woman is pregnant it becomes a situation where the woman can do whatever she wants with her body right up until the point her actions harm the individual within her.

From a pragmatic perspective though I believe that abortion should be legal.

For a couple other exchanges between Kent and I you can check out these search results.

For a critique of pragmatarianism from a revolutionary communist's perspective check out A "Hard Times" Milestone.


Friday, November 11, 2011

Pragmatarian Questions

Let's play 20 pragmatarian questions...
  1. What would the outcome be if taxpayers could directly allocate their individual taxes to the government organizations of their choice?  Meaning...at anytime throughout the year you could go to the Environmental Protection Agency website and submit a payment. 
  2. If we consider Hayek's concept of partial knowledge...what is the total information disparity between 535 congresspeople and 150+ million taxpayers?
  3. With that answer in mind...how significant would the allocation disparity be between A) 535 congresspeople considering the opportunity costs of other people's money and B) millions and millions of taxpayers considering the opportunity costs of their own "hard earned" taxes?
  4. Would people need less of a nudge to support the public goods that they actually valued?  
  5. Would people feel a "warm glow" when they paid taxes? 
  6. Would this result in the best possible use of public funds?
  7. Are there any reasonable arguments against the efficient allocation of public resources?
  8. Which government organizations would be the biggest winners/losers? 
  9. Would the resulting division of labor between taxpayers eventually reveal the ideal scope of government?
  10. Would taxpayers demand greater accountability/results given they could see exactly where their taxes were going?
  11. Given the efficient allocation/production of public resources...how "socialist" could our country go? (this question is really slippery)
  12. Could this potentially result in anarcho-capitalism?
  13. Given that the tax allocation decisions of congress are in themselves a public good...what percentage of taxpayers would just choose to allocate their taxes to congress (aka their public goods personal shoppers)?
  14. Would this system maximize political tolerance?
  15. What would happen to political parties?
  16. What are some possible unintended consequences?
  17. What effect, if any, would this have on income inequality?
  18. Which could be considered a bigger transition...passing control of taxes from a king to parliament or passing control of taxes from parliament to taxpayers?
  19. People from which political ideology (liberalism, conservatism, libertarianism, etc) would be most inclined to support this?
  20. What are the chances of this happening within our lifetimes? 

Thursday, November 10, 2011

The Third Solution - Pragmatarianism


Here's what I posted for the anarcho-capitalists over on the Ron Paul Forums...Choice vs Coercion...

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In the thread on political labels CCTelander had this to say about pragmatarianism...
Being allowed to choose my rapist IN NO WAY renders the fact that I'm to be raped more tolerable. - CCTelander
Anarcho-capitalists hate coercion.  But what is coercion?  Coercion is the limitation of somebody's freedom.  And what is freedom?  Freedom is the ability to make choices for oneself.

Pragmatarianism advocates that taxpayers should be allowed to choose how their taxes are allocated.  Giving taxpayers a choice how their taxes are allocated would increase their freedom.  By increasing their freedom we would reduce the degree of coercion to which they are subjected.

So if anarcho-capitalists hate coercion...and pragmatarianism can reduce coercion...shouldn't anarcho-capitalists appreciate pragmatarianism?  Isn't reducing coercion a step in the right direction?

When I was stationed in Afghanistan I had to give capabilities briefings to various commanders.  The point of the briefings was to help the commanders understand how my team could help them accomplish their missions.  It was fairly easy to pick out the ineffective commanders because they did not demonstrate any interest in considering alternative approaches.  Of course, their lack of interest could have reflected my own ineffectiveness at conveying the value of my team's abilities.

In the fight against socialism Ludwig von Mises was an intellectual general.  But in 1922, when he launched his first major offensive, he wrote that there were no third solutions; the choices were either socialism or capitalism.  He steadfastly maintained this position in his later books.  The problem was that his dichotomy was false.

Let's get algebraic...

A = private ownership of the means of production
B = public ownership of the means of production
1 = market economy
2 = command economy

Capitalism: A1
Socialism: B2
Mixed economy: A1B2
Pragmatarianism: A1B1

Our current economy and that of most of the world's is A1B2.  Mises said that A1B2 was unfeasible because it would eventually collapse.  The current problems in Europe certainly seem to lend credence to his predictions.  But is it possible to consider that both A1 and B2 might have their respective flaws?
Extrapolating from these trends, either to the conclusion that "capitalism can't do anything right" (as it appeared in say, 1932) or that "government can't do anything right" (as it may appear today) is simply unwarranted.  The truth could lie somewhere in the middle; that is what makes the social-democratic order so difficult for simplistic forms of libertarianism to challenge effectively. - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)
Mises' tunnel vision prevented him from seeing possible alternatives.  He told the world...these are your choices...A1 or B2.  His failure to offer A1B1 as a possible choice reflected that he had inadvertently intellectually coerced himself...and the the rest of the world.
What, exactly, does it mean for action and thought [to] be individualistic?  Clearly it is possible for people to act collectively, whether through cooperation or coercion; and it is even possible for them to "think" collectively, by learning from, or being brainwashed by, each other and their predecessors.  - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)
What were the unintentional consequences of Mises' unintentional coercion?  What if in 1922 he had offered A1B1 as a possible choice?
When people were committed to the idea that in the field of religion only one plan must be adopted, bloody wars resulted.  With the acknowledgement of the principles of religious freedom these wars ceased.  The market economy safeguards peaceful economic co-operation because it does not use force upon the economic plans of the citizens.  If one master plan is to be substituted for the plans of each citizen, endless fighting must emerge.  Those who disagree with the dictator's plan have no other means to carry on than to defeat the despot by force of arms. - Ludwig von Mises, Socialism
Doesn't pragmatarianism allow for the greatest possible political freedom?  How many bloody wars would have been adverted if Mises hadn't coerced himself and others into believing that there were only two possible choices?  

When I was in a remote village in Afghanistan a very distraught lady told us that a couple days earlier the Taliban had beat her husband to death for refusing to give them his family's only food.  Is it moral for Americans to be thrown into jail for refusing to make small sacrifices towards preventing situations where people in other countries are killed for refusing to make big sacrifices?

Oversimplifying morality is self-coercion.  There will always be lesser evils and greater goods.  If you were given the choice, wouldn't it be wholly immoral if you allowed your taxes to support greater evils?

What is the value to society when each and every taxpayer is given the freedom to either maximize the benefit or minimize the harm of their taxes?  What is the value of forcing taxpayers to consider the opportunity costs of their tax allocation decisions?  What is the value of applying the invisible hand to the public sector?  Here are some additional pragmatarian questions.

When you tell people that their only choices are capitalism or socialism you are engaging in intellectual coercion.  You present a false dichotomy and intentionally limit people's choices.   I'm not asking that you tell people that pragmatarianism is a good choice...I'm just asking that you offer it to them as a possible choice.
The moment a libertarian leaves libertarianism behind, reality loses its threatening aspect; his intellectual marginality becomes a precious sources of fresh insight into every aspect of politics and culture.  It seems paradoxical but true that high seriousness can be enjoyable, and that political disengagement can produce genuine insights into politics.  The paradoxes may be dispelled, however, by realizing that disengagement is equivalent to alientation.  Alienation plants seeds of doubt, doubt nourishes serious thinking, and serious thought is the only alternative to an intellectual complacency that must always be shadowed by fear of its own simplifications. - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)


Here are the passages that I found where Mises directly references a "third solution"...

1922 - Production can either be directed by the prices fixed on the market by the buying and by the abstention from buying on the part of the public.  Or it can be directed by the government's central board of production management.  There is no third solution available.  There is no third social system feasible which would be neither market economy nor socialism.  Government control of only a part of prices must result in a state of affairs which - without any exception - everybody considers as absurd and contrary to purpose.  Its inevitable result is chaos and social unrest. -  Ludwig Von Mises, Socialism

1922 - The notion of fairness is nonsensical if not related to an established standard.  In practice, if the employers do not yield to the threats of the unions, arbitration is tantamount to the determination of wage rates by the government-appointed arbitrator.  Peremptory authoritarian decision is substituted for the market price.  The issue is always the same: the government or the market.  There is no third solution. - Ludwig Von Mises, Socialism

1940 - It is frequently asserted that a third form of social cooperation is feasible as a permanent form of economic organization, namely a system of private ownership of the means of production in which the government intervenes, by orders and prohibitions, in the exercise of ownership. This third system is called interventionism. All governments which do not openly profess socialism tend to be interventionist nowadays, and all political parties recommend at least some degree of interventionism. It is claimed that this system of interventionism is as far from socialism as it is from capitalism, that as a third solution to the social problem it stands midway between the two systems, and that while retaining the advantages of both it avoids the disadvantages inherent in both.  - Ludwig von Mises, Interventionism

1944 - The Führer, the vicar of the "German God," will become their Supreme Lord. If they do not acquiesce in such a state of affairs, they must fight desperately until the Nazi power is completely broken. There is no escape from this alternative; no third solution is available. A negotiated peace, the outcome of a stalemate, would not mean more than a temporary armistice. The Nazis will not abandon their plans for world hegemony. They will renew their assault. Nothing can stop these wars but the decisive victory or the final defeat of Nazism.  - Ludwig von Mises, Omnipotent Government

1944 - The alternative is humanity or bestiality, peaceful human coöperation or totalitarian despotism. All plans for a third solution are illusory. - Ludwig von Mises, Omnipotent Government

1945 - But the term planning is also used in a second sense. Lord Keynes, Sir William Beveridge, Professor Hansen, and many other eminent men assert that they do not want to substitute totalitarian slavery for freedom. They declare that they are planning for a free society. They recommend a third system, which, as they say, is as far from socialism as it is from capitalism, which, as a third solution of the problem of society's economic organization, stands midway between the two other systems, and while retaining the advantages of both, avoids the disadvantages inherent in each. - Ludwig von Mises, Planning as a Synonym for Socialism

1949 - Today it is no longer difficult for intelligent men to realize that the alternative is market economy or communism. Production can either be directed by buying and abstention from buying on the part of all people, or it can be directed by the orders of the supreme chief of state. Men must choose between these two systems of society's economic organization. There is no third solution, no middle way.  - Ludwig von Mises, Laissez Faire or Dictatorship

1949  - What alone matters is which system of social organization is better suited to attain those ends for which people are ready to expend toil and trouble.  The question is market economy, or socialism?  There is no third solution.  The notion of a market economy with nonmarket prices is absurd.  The very idea of cost prices is unrealizable. Even if the cost price formula is applied only to entrepreneurial profits, it paralyzes the market.  If commodities and services are to be sold below the price the market would have determined for them, supply always lags behind demand.  Then the market can neither determine what should or should not be produced, nor to whom the commodities and services should go.  Chaos results. - Ludwig von Mises, Human Action

1949 - It is difficult to find out how many of the supporters of interventionism are conscious of the fact that the policies they recommend directly lead to socialism, and how many hold fast to the illusion that what they are aiming at is a middle-of-the-road system that can last as a permanent system—a “third solution.” - Ludwig von Mises, Human Action

1951 - A third solution of the problem would be to confiscate all the profits earned by entrepreneurs for the benefit of the state.  A one hundred per cent tax on profits would accomplish this task.  It would transform the entrepreneurs into irresponsible administrators of all plants and workshops.  They would no longer be subject to the supremacy of the buying public.  They would just be people who have the power to deal with production as it pleases them.  - Ludwig von Mises,  Profit and Loss

1955 - People can consume only what has been produced. The great problem of our age is precisely this: Who should determine what is to be produced and consumed, the people or the state, the consumers themselves or a paternal government? If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution. The determination of the purpose for which each unit of the various factors of production is to be employed cannot be divided. - Ludwig Von Mises, Inequality of Wealth and Incomes

1957 - When people who aim at the substitution of socialism for the market economy advocate interventionist measures, they are consistent from the point of view of their aims. But those people are badly mistaken who consider interventionism as a third solution of the problem of society's economic organization, a system which, as they say, is as far from socialism as from capitalism, while combining what is "good" in each of these two systems and avoiding what is "bad" in them. Ludwig von Mises, Economic Freedom in the Present-Day World


Wednesday, November 9, 2011

Crooked Timber Liberals

Here is my response* to the liberals over at the Crooked Timber blog congratulating themselves for successfully attaining a small present good...
...for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil. - Frederic Bastiat, What Is Seen and What Is Not Seen
You liberals always fight for small present goods and then blame others for the great evils that we always have to deal with way down the road...when the "car ends up in the ditch". Is it good that people get paid higher wages? Yes...of course! The problem is that setting wages/benefits above market value will always eventually lead to inefficient allocation of labor. Is it a bad thing when labor is inefficiently allocated? Yes...of course!

Bastiat shared this basic economic truth in 1848 and liberals still haven't gotten around to reading his essay. The fatal conceit of liberals is that they think that a small group of planners can have enough information to make informed economic decisions. We all have some information but no planners have access to enough information to make informed economic decisions for the entire country. This is the basic economic truth that Hayek wrote about in his essay on partial knowledge.

We are all just blind men feeling different parts of the elephant. We all have bits of truth derived from our very limited perspectives. So how do we see the big picture truth? Certainly we shouldn't average everybody's perspectives...you don't average bits of truth. The blind men would never have been able to "see" the elephant if they had averaged their perspectives. We can only see big picture truth by adding everybody's truth together.

Wait! Don't you liberals write me off as some crazy Austrian economist groupie just yet! Because, how crazy could I be if I appreciate your basic truth that people would free-ride off the contributions that others make to the common good? Well...I guess I could still be pretty crazy...but...just how many Austrian economists acknowledge your basic liberal truth?

When we take the liberal bit of truth and add it to the libertarian bit of truth...what do we end up with? Pragmatarianism. We all want public funds to be efficiently allocated. We all want our taxes to be put to the best possible use. Therefore, we should allow each and every taxpayer to directly allocate their taxes. This would provide them with the opportunity to add their pieces of the puzzle to the picture. When each and every taxpayer maximizes the benefit they derive from their tax allocation decisions...then the benefit to society as a whole will be maximized.

Am I a troll? Naw, what kind of troll advocates political tolerance? Pragmatarianism is, if nothing else, a system that maximizes political tolerance. You allocate your taxes to the functions of government that you think are ethical and I'll allocate my taxes to the functions of government that I think are ethical. You don't think war is ethical? So be it! You don't think the war against drugs is ethical? Neither do I! Voters would determine the functions of government and taxpayers would determine which functions to fund.

According to Oliver Wendell Holmes Jr..."to have doubted one's own first principles is the mark of a civilized man." I'm not asking that you doubt your first principles. I'm not asking that you wisely acknowledge your ignorance like Socrates did, " ...it seems that I am wiser than he is to this small extent, that I do not think I know what I do not know". I'm not asking that you even consider the possibility that somebody might have access to truth that falls outside your limited perspective. What I'm simply asking is that you be tolerant of other people's first principles. If doubting one's first principles is the mark of a civilized man...then what is it a mark of to merely tolerate other people's first principles?

*My comment is still "awaiting moderation".  A couple other comments were posted after mine so I guess the moderator took issue with my comment.  I wonder how many other comments they took issue with besides mine?  After I submitted my comment a person wrote..."So, other than being wrong about basically everything, the conservatives here are doing just fine."  Well...

The Opportunity Costs of Public Goods

"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, "The Chance for Peace," April 16, 1953
What is the best way for the world to live?  The best way for the world to live is when each and every taxpayer is given the opportunity to allocate their taxes according to what they believe is the best way for the world to live.  In other words...the best way is for taxpayers to be given the opportunity to consider the opportunity costs of their tax allocation decisions.

Frederic Bastiat was the first to fully develop the concept of opportunity cost in his excellent and highly accessible essay...What is Seen and What is Not Seen.  From his essay we can easily understand that opportunity costs do not just apply to "bad" things like war...but they apply to even the "best" things.  For example...here's Rachel Maddow extolling the benefits of government spending...






Not every idea that is good for the country, is a profit making idea for some company somewhere.  It's never going to be a profitable venture for some company to come up with this idea and build it on spec.  That's not going to happen!  We need some government leadership, frankly, to get something done in common that's going to benefit the country as a whole. - Rachel Maddow, Lean Forward
Unlike Eisenhower...Maddow does not mention any of the other great things that we sacrificed in order to pay for these two public goods.  It's fundamentally essential to understand that no two public goods provide the exact same benefit to the country as a whole.

How can public funds be spent in order to maximize the benefit to the country as a whole?  Is it simply a matter of statistical analysis?  But how can you compare how many people will benefit from a new bridge to how many people will benefit from ten new schools?  If 10,000 people would benefit from a new bridge and 10,000 people would benefit from ten new schools...does it really matter then which public good the government spends our taxes on?
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." - Frederic Bastiat, What is Seen and What is Not Seen.
The White House has a NEW program called Paying for Success.  Which begs the question of what we've been paying for this entire time.  From the first paragraph...
For too long, the U.S. Government has funded programs based upon metrics that tell us how many people we are serving, but little about how we are improving their lives.  As part of this Administration’s commitment to using taxpayer dollars effectively, we are employing innovative new strategies to help ensure that the essential services of government produce their intended outcomes. Now more than ever, federal programs must be measurably effective and designed to do more with fewer resources.
Admittedly, we now have some really amazingly powerful economic functions that the government can use to decide how to spend taxpayer dollars.  Can these tools come close to providing the result that would be provided by allowing each and every taxpayer to consider the opportunity costs of their tax allocation decisions?  Is this disparity divine or delusional?
The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world.  Friedrich Hayek,  The Use of Knowledge in Society
At the end of the day though it's still 535 congresspeople considering the opportunity costs of their allocation decisions.  They've got access to plenty of statistical analysis but do their decisions reflect their desire to maximize the benefits to the country as a whole?  Or do their decisions reflect their desire to remain in office?

Even if congresspeople strongly desire to maximize the benefit to society...it's important to understand that they are a few puzzle pieces short of a completed puzzle.  How many puzzle pieces are they missing?  They are missing all the puzzle pieces that indicate exactly how much each of us truly values the public goods that we care most about.  The only way to objectively discern how much somebody truly values something is by how observing how much time/money they are willing to put where their mouths are.

Admittedly, not everybody has the same amount of time and money.  But if we want to use taxes to truly tackle the problem of inequality then the only way to effectively do so is if the people who are genuinely concerned about inequality are given the opportunity to allocate their own individual taxes according to what they consider to be the most awesome way of tackling the problem.  The point is that no two altruists would  tackle the exact same problem using the exact same approach.  For example, if they were given the opportunity, Bill Gates and George Soros would not allocate their taxes in exactly the same way.  This is because we all have partial knowledge.  It's an extremely good thing to have a system that incorporates billions and billions of disparate bits of knowledge.

Mainstream economists fully understand that private resources are efficiently allocated because consumers are forced to consider the opportunity costs of their spending decisions.  Forcing taxpayers to consider the opportunity costs of their tax allocation decisions would result in the efficient allocation of public resources.  Are there any rational reasons why we wouldn't want public resources to be efficiently allocated?  Can anybody make a reasonable argument for not maximizing the benefit to our country as a whole?  Thus far, the only response that Keynesian economists have offered to the pragmatarian challenge is the ostrich response.

Here's a passage that nicely summarizing the opportunity cost problem of public goods...
Nevertheless, the classic solution to the problem of underprovision of public goods has been government funding - through compulsory taxation - and government production of the good or service in question. Although this may substantially alleviate the problem of numerous free-riders that refuse to pay for the benefits they receive, it should be noted that the policy process does not provide any very plausible method for determining what the optimal or best level of provision of a public good actually is. When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money? There is a whole economic literature dealing with the willingness-to-pay methods and contingent valuation techniques to try and divine such preference in the absence of a market price doing so, but even the most optimistic proponets of such devices tend to concede that public goods will still most likley be underprovided or overprovided under government stewardship. - Patricia Kennett, Governance, globalization and public policy