Friday, January 27, 2012

John Holbo's Critique of Pragmatarianism

This is a continuation of my discussion with John Holbo...Crooked Timber Liberals do Not Advocate Selling Votes ...and here is his original article over at the Crooked Timber blog...Selling Votes

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John Holbo

“ok, you’re right that I should bear the burden of proof. Why should citizens be in the driver’s seat?”

No, the question is not why – the why is obvious. The question is how. The burden of proof on you concerns the how, not the why. How do you propose to put citizens in the driver’s seat? (An admirable place for them to be, we all agree.) Don’t say: by letting them sell their votes. The question is: how will letting them sell their votes help put them in the driver’s seat? Because, as I keep saying, it doesn’t look to me as though that will have the desired effect. Rather, it will result in the rich wielding disproportionate political power. And you’ve given me no reason to think 1) that it won’t do that; or 2) that, if it does, that won’t be a problem. Do not tell me I must be suffering the fatal conceit of faith in congress’s wisdom or any other thing that it’s not really very likely I am suffering from. And if it wasn’t clear before, it is now: I hereby formally disavow, abjure, and stamp into the dust belief in congress’ omniscience. Place is a mess. Now: why your plan is better?

“But if you can see citizens as consumers then you’ll understand that we don’t need representatives to adequately express our own interests and preferences.”

I can see citizens as consumers. And I get that somehow we’ve moved past the virtues of just selling votes at this point. But I don’t understand how it’s going to work. What are you imagining? That, in addition to having the right to sell your vote, everyone has the right to specify what portion of their taxes goes to every program? Can people then choose not to pay taxes at all? If so, won’t everyone choose not to pay anything. We’ll have anarchism as a straight function of what is basically a free-rider problem? On the other hand, if people are forced to pay taxes – which seems an arbitrary infringement of their rights as consumers, by the terms of this scheme – why will it go better if everyone allocates their tax money privately? We’ll have a huge coordination problem, no? You seem to be advocating not an efficient market but a giant pot luck dinner, with all the hazards of too much potato salad that entails. But with aircraft carriers instead of potato salad. What am I missing?

Shifting angles:

“the demand for public goods should determine the supply of public goods. It’s really as simple as that.”

This seems like a recipe for bloated government. If someone wants a Social Security check, they get it. If they want a bigger check, they get it. Who’s going to pay for this? I suspect you are going to say that the demand to PAY for public goods, to be distributed to other people, will determine the supply. But now we are back to everyone setting their own tax rate. And I take it people will settle on 0% and try to free ride on any suckers who put down for more than that. If this is not the plan, then what?

Your point about the Rolls Royce/private jet economy seems to me a fallacy for the following reason: the rich would have both means and motive to buy up enough votes to make it the case that they were disproportionately represented. The rich do not have means or motive to buy up every Honda Civic on the road, to prevent their falling into the hands of the poor (is that the idea?) If they tried, Honda would just make more. Supply and demand. Can’t do that with votes. Typically, although not always, there is no barrier to people selling stuff to the rich – as much as they want to buy – and also selling stuff to the poor. But there would be a barrier to the rich buying up all the votes they wanted, disproportionately, and the non-rich being represented, proportionately.

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Xerographica

John Holbo, here's a not so brief synopsis of my post on The Dialectic of Unintended Consequences.  At the height of the unions' power in the 50s and 60s it became economically feasible for manufacturing companies to move overseas.  Labor costs are one of the most important factors in determining a factory's location or relocation.  So the factories relocated to some countries with extremely low labor costs...such as Hong Kong, Singapore, South Korea and Taiwan.

At that time the large majority of people in those countries were primarily engaged in subsistence agriculture.  When they were given the option to work in the new factories...many chose to do so rather than continue to engage in subsistence agriculture.  They learned new skills and quite a few left to start their own factories.  The demand for labor increased...while the labor supply stayed constant...so wages started to rise.

When my hero, Deng Xiaoping, opened China up to foreign investment in the 80s...many factories from the four Asian Tigers relocated to China in order to take advantage of what seemed to be an endless supply of cheap labor.  The pattern repeated itself....people chose working in the new factories rather than continue to engage in subsistence agriculture...they learned new skills...many started their own factories...and wages very gradually started to rise.

The other day when Obama gave his state of the union address he said that it was becoming expensive to do business in China.  Just amazing.  Prior to Deng Xiaoping...Chairman Mao had attempted to impose on the entire country what he felt to be the most efficient allocation of resources.  The result?  Thirty million people starved to death as a direct result of state induced famine.  When Deng Xiaoping took over he gave people a choice between manufacturing and agriculture.  The result?  Millions and millions of people were lifted out of poverty within one generation.

You have trouble seeing how giving citizens a choice to sell their votes would put them in the driver's seat...and I have trouble seeing how it wouldn't.  We would be giving citizens a choice that they currently do not have.  Anytime we give people a choice that they currently do not have we are giving them that much more control over their lives.  Whether it's a good choice for them to sell their votes wouldn't be up to me to decide.  Along those same lines...it would be very presumptuous for me to tell people whether they should choose working in a sweatshop over subsistence agriculture.  Another example...even though I served in the military it would be very presumptuous for me to tell somebody whether it would be a good idea for them to sign up for the military.  In all three cases though I strongly advocate that people be given the choice.

That being said...regarding people directly allocating their taxes...because of the free-rider problem...people shouldn't be given a choice whether they paid taxes and individuals shouldn't be able to choose their tax rate.  Those debates are useless without first establishing the proper scope of government.  It would be like somebody asking me how much I'm going to pay them without first establishing what their skills are.  Regarding too much potato salad...people wouldn't generally allocate their taxes to a government organization that doesn't need more money...and it would be completely subjective to say whether somebody is spending too much money on infrastructure, public education/transportation/housing/healthcare, cancer research and various other public goods.  If you get a chance read my last response to Henri Vieuxtemps.  It offers an example of trying to establish whether the public or private sector should publish your book.

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Henri Vieuxtemps

I’d love to be able to allocate my taxes. Seriously, I would. It’d be difficult to organize this on a high granularity level, though; I imagine everything would get of whack, as I probably have no information on how other people allocated theirs. So, to start with, I would suggest just a couple of categories, like, say, ‘the military’ and ‘everything else’.

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Xerographica

Henri Vieuxtemps, how about a third category…say, ‘the war on drugs’?

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John Holbo

Well, at least now I understand what you are proposing, although I am very far from buying. Here’s something to think about.

“You have trouble seeing how giving citizens a choice to sell their votes would put them in the driver’s seat…and I have trouble seeing how it wouldn’t. We would be giving citizens a choice that they currently do not have. Anytime we give people a choice that they currently do not have we are giving them that much more control over their lives.”

The thing to realize is that this is false, strictly speaking. Take the most literal driver’s seat case of all: traffic lights. If you abolished rules about go-on-green/stop-on-red you would give citizens a choice they currently do not have. But you would not, thereby, in any meaningful way, be giving them more control over their lives. The opposite would be the case.

Basically your proposal sounds like that to me. A giant coordination problem. You now say that this stuff won’t work unless we first establish the proper scope of government, but earlier you said this stuff would help us establish the proper scope of government. I’m pretty sure that’s how it will go. Re: publishing my book. That’s not such an interesting case because there it’s clear how the market can do the job. What I want to know is how we can have a functioning market to determine the size of government people want. At first you said we could have one. Now you are retreating a bit in the face of coordination and free-rider problems. I think you have to retreat, so that’s good. But is there any point at which you can stop having to retreat? Probably. But I’m not seeing it.

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John Holbo

“Regarding too much potato salad…people wouldn’t generally allocate their taxes to a government organization that doesn’t need more money”

Why wouldn’t they? And how do you know? It seems obvious to me that the results would inevitably be extremely ill-assorted, in an ill-luck potluck sort of way. And it seems to me that you are obliged to say not that this wouldn’t happen (how could you know that?) but that any bizarre answer is, by definition, the right answer. We don’t second-guess the market. That’s the whole point: there is no right answer hidden beyond or behind what the market says. If we end up with 12 new nuclear aircraft carriers and some weird and painful shortfall in basic services – maybe not enough infrastructure to service so many carriers, long-term, so they all rust and sink; or so the spent nuclear fuel can’t be processed properly – then that’s what we ‘wanted’, odd though that sounds. No other answer is remotely consistent with your general line. So bite the bullet.

The general problem here is that the market, in the book case, only needs everyone to express what they want, individually. Their self-regarding preferences. Do I want the book or don’t I? People are the best judges of their own desires, in that regard. But people’s preferences about government aren’t like that. You have to make an intelligent judgment, not about what you want personally, but about what everyone wants and needs/should get. A new aircraft carrier? or more school lunches for poor kids? These judgments require everyone to take a vain stab at the knowledge problem. So what we get is not one aggregate, good answer but an enormous mountain of bad answers, not adding up, in the aggregate, to a good answer.

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Xerographica

John Holbo, as a reader of my blog, Lupis42, mentioned...selling votes is a completely voluntary transaction between two consenting adults.  Can you offer any other examples of completely voluntary transactions between two consenting individuals that do result...or would result...in traffic collisions?

Regarding allowing people to directly allocate their taxes.  You're far from buying it?  But you're the one that's selling it to me.  A while back I knew just enough about how the Invisible Hand worked to find this hypothetical question really interesting.  So I went around asking people what they thought would happen if taxpayers could directly allocate their taxes.  

Their concerns helped me see enough of the Invisible Hand to understand why taxpayers should be allowed to directly allocate their taxes.  If you get a chance you should take a look at this post...Unglamorous but Important Things.

4 comments:

  1. One other point in favor of allowing the sale of votes is that it offers a way taking money from rich people and distributing it among the poor that would remain entirely voluntary for both sides. So it would be a free-market check on inequality...

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  2. "Can you offer any other examples of completely voluntary transactions between two consenting individuals that do result...or would result...in traffic collisions?"

    Traffic collisions already seem like pretty good examples. And other things like that. Coordination problems. Cases in which my knowing what to do depending on knowing what you are going to do and vice versa. You seem to think there just won't be coordination problems because the invisible hand will take care of it. But I don't see how. And you don't say how. I have read - well, glanced through - the linked posts. You don't address the issue that I can see.

    But thanks for an interesting discussion.

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    Replies
    1. John,

      You got part of it bang on - the inherent assumption behind suggesting that people allocate their taxes directly is that no one person (or committee) has the ability to determine a right answer. The thing is, you're starting from the assumption that congresses' answer will be better than the aggregate of all taxpayers bad answers. I'm not at all convinced of that, after all we have plenty of examples of congress allocating funds for military equipment that goes unused because they don't understand what's needed.

      As far as taking care of co-ordination problems, I've got my concerns as well, which is why I've suggested that, if this were implemented, it would be very important to determine at what level allocation could happen, and what things were grouped together. You could also mitigate it by allowing taxes to be allocated in chunks, at any time during the year, so that taxpayers could take some coordination into account.

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    2. At a traffic signal it's in everybody's interest to obey the signal. Except when a more important signal comes along...like an ambulance, firetruck or police car...then it's in everybody's interest to ignore the traffic signal.

      Allowing people to sell their votes allows them to signal to society exactly how much they value their votes. It's important for people to be able to signal their interests on the road...and it's important for consumers to signal their interests via boycotts...yet you don't see the value of people being able to effectively signal their political interests by selling their votes or directly allocating their taxes.

      A taxpayer division of labor would take care of the coordination problems. Of course you understand the division of labor concept...so not sure where the disconnect is.

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