Monday, January 30, 2012

Unglamorous but Important Things

The title of this entry was mooched from a discussion over at the Language Goes on Holiday blog...

Xero: Should something even be in the public sector if it's not somebody's pet concern?
DR: I expect there are various unglamorous but important things.

Not quite sure why I like the phrase "unglamorous but important things".  Perhaps because it reminds me of Henri Cartier-Bresson's photograph of a mundane scene or Edward Weston's photograph of a bedpan.  There was nothing glamorous about either subject yet both photographs are widely regarded as works of art.  What's glamorous about self-interest?  Nothing...yet Adam Smith's Invisible Hand concept managed to reveal the extraordinary aspect of this very ordinary part of life.

What would happen if we applied the Invisible Hand concept to the public sector?  What would happen if taxpayers were allowed to directly allocate their taxes?  What would the distribution of public funds look like if taxpayers could shop for themselves in the public sector?  Would people forget to fund unglamorous but important things?

For some time now I've been asking people for their feedback on this topic so I figured it might be of some use to compile a collection of responses that all have something to do with the Invisible Hand.  This coordination problem response is the second most common type of response to pragmatarianism...
  1. The ostrich response (~ 85%)
  2. The coordination problem response (~ 9%)
  3. The taxes are theft response (~3%) 
  4. The rich people are evil response (~ 2%)
  5. Other (~1%)
How do you interpret this collection of Type II responses?  On one hand you can interpret this collection to represent an overwhelming amount of evidence against pragmatarianism.  This interpretation might also prove that I'm nuts.  On the other hand you can interpret this collection to represent an overwhelming amount of evidence that people from a wide spectrum of political beliefs do not understand how the Invisible Hand works.

The thing order to effectively evaluate the responses you'll have to understand how the Invisible Hand works.  If you're outside the field of economics...then what are the chances that you already truly understand how the Invisible Hand works?  What are the chances that a noneconomist will have firm grasp on decentralized knowledge, opportunity cost, rational ignoranceheterogeneous activity, concentrated benefits and dispersed costs?

The simple answer to the coordination problem is that an "incorrect" distribution of public funds is "logically impossible"...
The biggest objection is that important programs will be underfunded. But that consequence is actually logically impossible. If Americans don't think a program is important enough to provide more funding, then in a democracy, by definition it isn't a priority so doesn't deserve more funding. I also think you would be surprised at how much money Americans would choose to provide to entitlements. More Americans might want contribute money to Social Security and less to the wars in Iraq and Afghanistan, for example, because they might prefer to provide for the retirement of Americans instead of bombs in the Middle East. - Daniel Indiviglio, What If Taxpayers Could Decide How Their Money Is Spent?
Imagine you're about to have a BBQ with some friends.  You just returned from the store with steak, hot dogs, chicken, corn, potatoes, zucchini, portobello mushrooms, eggplant and various other BBQ items.  Only one forgot the charcoal.  Charcoal is certainly unglamorous...but it's a very important thing if you want to have a BBQ.  Therefore, you'll need to make another trip to the store...unless you also have a gas grill...or you have suitable wood laying around...and trust me...not all wood is suitable.

Like having BBQs and donating to non-profit organizations...people would be able to pay their taxes at anytime throughout the year.  What would happen if somebody paid their taxes but then realized that they forgot to help fund some unglamorous but important thing?  Would they be willing to pay additional taxes?  Would they try and convince their friends to run to the store to purchase the charcoal?

Continuing with the theme of food analogies...both John Holbo and Jake mentioned potlucks.  When you have a potluck it's important that participants coordinate with each other in order to ensure that everybody does not bring potato salad.  How in the world could 300 million people coordinate with each other to ensure that they didn't end up with too much or too little of any public good?

The answer is simply that we would have a taxpayer division of labor.  Taxpayers that loved potato salad would order more potato salad from the Dept of Potato Salad if they were concerned that the supply of potato salad was running low...and...taxpayers that loved tuna casserole would order more tuna casserole from the Dept of Tuna Casserole if they were concerned that the supply of tuna casserole was running low.

Just like with the BBQ...there potlucks involve plenty of unglamorous but important things such as paper towels, cups, plates and so on.  Would anybody love these things?  No...but we wouldn't be able to have a potluck without them...and based on people's responses to's clear that this fact is not lost upon the majority of people.

The bottom line.  Asking people what would happen if taxpayers were allowed to directly allocate their taxes reveals whether they understand how the Invisible Hand works and simultaneously helps you better understand how the Invisible Hand works.

Anarcho-capitalists: Barking Up the Wrong Tree

With that in mind...let's consider anarcho-capitalism.  Anarcho-capitalists want to abolish the government because they believe that taxes are theft and/or the private sector can do everything as good as...or better than... the public sector.  For a more formal definition see wikipedia's entry on anarcho-capitalism and for a fun definition check out Dale Everett's Top 10 Causes of Minarchism.  Here is cause number 8...

This comic strip argues that minarchists (the government should only provide police, military and courts) do not make the leap to anarcho-capitalism because they are concerned that other people would engage in aggression.  This strip is applicable to people's responses to pragmatarianism...except that people aren't particularly concerned with aggression.  Instead, they are just concerned whether other people would purchase the "correct" amount of potato salad, charcoal, cups, paper plates and so on.  The minarchist and anarcho-capitalist concern with aggression merely masks the real issue that people do not understand how the Invisible Hand works.

If you understand how the Invisible Hand works...and know that the private sector can do X, Y and Z better than the public sector can...then advocating for the abolition of the government organizations responsible for X, Y and Z does absolutely nothing but distract people from learning about how the Invisible Hand works.  Why shoot yourself in the foot with bells and whistles?

For a perfect example of this problem check out this video by Stefan Molyneux.  In his Frequently Asked Questions (FAQs) video he really helps illuminate how the Invisible Hand works but then he overshadows his insights with moral arguments.  What comes to mind is when Linus, by far the smartest of the Peanuts gang, lost the election for class president because he brought up the Great Pumpkin.

Advocating for the abolition of any government organization in no way, shape, or form helps people  understand how the Invisible Hand works.  If they don't understand how the Invisible Hand works then they'll never understand what advantage the Invisible Hand has over congress.

Pragmatarian Gadfly

In my post on a taxpayer division of labor I drew an analogy between Socrates and Ashton Kutcher in the show Punk'd.  John Holbo, in his book on Plato and Socrates, takes a more in depth look at the value that Socrates offered to society.  Here's a passage that Holbo shared from Plato's Apology...
I was attached to this city by the god - through it seems ridiculous thing to say - as upon a great and noble horse which was somewhat sluggish because of its bulk and needed to be roused up by a kind of gadfly.  It is to fulfill such a purpose that I believe the god has placed me in the city.  I never leave off rousing each and every one of you, persuading and reproaching you all day long and everywhere I find myself in your company.
Holbo wrote (with his own emphasis), "Gadfly bites hurt.  They draw blood.  Other things being equal, pain is bad.  (Do you agree?)  How can Socrates be so sure other things are not equal?"

Yeah's ridiculous to compare myself to Socrates...but some would certainly consider me to be a gadfly.  For example, as I mentioned on my post on Crooked Timber Liberals Monopolizing the Facts, Chris Bertram shooed me away...
[Crooked Timber comments threads are an opportunity to engage in conversation, not the granting of a soapbox for you to promote your private obsessions. Please go away. CB]
It's not just liberals either.  The owner of the Bleeding Heart Libertarian blog e-mailed me and politely asked if I would tone it down.  My response was pretty much the same thing a gadfly would say, "I'm a am I supposed to tone it down?  Bite less frequently?" [Update] Banned From Bleeding Heart Libertarian [Update] Banned from EconLog

The trick of Holbo considered (with his own emphasis) accurately discerning whether these bites are necessary...and if they are...what are the next steps....
But then Socrates must think he knows something his fellow citizens do not, if he knows he is doing the right thing, asking funny questions that have gotten him hauled into court.  But surely he can know he is helping his fellow citizens to degree (so the reply will run).  Surely proving there must be something wrong with his fellow citizens' beliefs cannot fail to be some help.  But unless there is some way to take positive steps beyond that, is it really clear this is so?
The following is my evidence that there is something wrong with my fellow citizens' beliefs.  The positive steps are simply for my fellow citizens to ask people about pragmatarianism until they can see the Invisible Hand for themselves.

A Mountain of Evidence

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? - John Holbo
Context: Selling Votes
A group of citizens coming together for the sort of economic potlatch you suggest is no more a state than a pile of bricks is a house, and as such will not be capable of performing satisfactorily those functions that states are objectively superior at performing. - Jake
Context: Repatriation Holiday Lobbying - Money Speaks
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’. - Henri Vieuxtemps
Context: Selling Votes
Xero, I guess I am in the Keynesian camp (well not the tautological Austrian camp) I accept your proposal with score of 8/10. I still wonder if people will volunteer to spend enough on some government supplied basics, like defense or police or law courts, but maybe we could personally allocate 80 percent of our taxes, or 50 percent and see how it goes. - macroman
Context: Opportunity Cost for Thee, But Not for Me
Your solution seems reasonable, but why stop at voting for funding of various government agencies, instead of deleting the agencies? Additionally, what happens when boring but needed agencies enjoy zero funding? And what happens if military gets too little funding to effectively protect the nation? - Stone Glasgow
Context: Efficiency in Government
I'm not sure that its ultimately defensible (I'm not sure it isn't) and I am not sure that in a defensible form it wouldn't have some limits (say certain percentages of collected taxes automatically go to police funding, for example), but it seems to me clearly to be an idea worth considering. What would the outcome look like? I have some worries about this. Lots of people might allocate their taxes (or the portion they can) to the arts. - Andrew Cohen
Context: States Must Do Bad
That's assuming 150m people would want to do such a thing. You know as well as I do that many of those people wouldn't take the time or effort to properly allocate their taxes. Plus how would you guarantee that the "products" they purchase would be doled out proportionally to their investment?  Secondly, it'd be a major bread and circus type environment. What if defense was woefully underfunded because most people would purchase healthcare or arts and science endeavors? You'd empower the media enormously as they'd convince the masses to buy a certain "product". - LoneStarLocke
Context:  What's Wrong With a Representative Democracy?
Xero, Choice is usually better, but what if everyone chooses to allocate their tax dollars to, say, the National Endowment for the Arts and there is nothing allocated to National Defense? - Pappas
Context: Taxes, Competition and Pricing
Suppose I love classical music, and allocate 100% of my taxes to the symphony. Or I'm a farmer, and put 100% on farm subsidies. - Jay-Z
Context: Objections to the Simple Libertarian Argument for Environmental Regulation
You can't really expect people to take the time out to distribute their taxes in the optimal way for governance, because they don't have the interest, education, or experience for it, usually. Bureaucratic functions are left up to officials for good reason, because they usually are people with the appropriate knowledge and experience. Joe the Plumber might be good at his job, but he doesn't have the background or perspective for delegating funds for the government. - Serfin' USA
Context: How Does the Invisible Hand Work?
While I don't really trust them either, at least they are more knowledgeable in economics and have been elected specifically to do just that. Therefore, I trust them a bit more than I trust Joe Blow plumber who can't balance a checkbook to safe his life. - Cephus
Context: Congress You're Fired!!!!
By way of partial answer, even if we assume that the taxpaying public can and will become informed enough about our massive interconnected system of government to efficiently allocate their local, state, and federal taxes according to self-interest, individual self-interest and group welfare often conflict. And in practice, vast areas of government that are important to public welfare, but not individually impactful, would be underfunded--because there are limits to the rationality of the taxpayer. - Math Mage
Context: Deaf Left: Corporatism is Your Fault
Tyler said that "few people would directly allocate their taxes to public goods." Meaning, they would allocate them to programs/projects that are beneficial to them personally, and not to public goods. For example, people would fund their local park or soup kitchen, but not the military or clean air. Because people are greedy and self-centered -- which is why we have a freerider problem in the first place. - Tony
Context: Dear Left: Corporatism is Your Fault
As for taxation, my answer is NO. People are illogical. They tend only to see the things right in front of them, and lack vision. Someone with no license, for instance, will likely not want to put any of his money towards roads, only to realize down the timeline a bit that the pizza guy can't get to his house without that road...and in most cases, we don't miss something till it's gone...and in some of are tax cases, by the time something is gone, it's TOO LATE to fix it cheaply. - KevinKohler
Context: How Does the Invisible Hand Work?
That’s an open-ended question. It depends what you mean by “directly allocate”. If you mean something like the government presenting taxpayers with a menu of programs to fund, it’s likely the institutions near and dear to people’s hearts and self-image would get the bulk of funding. Things like schools, environmental programs, agriculture subsidies, etc. Voters and taxpayers are both rationally ignorant, so this would likely have a terrible impact on policy. - Aaron
Context: Politicians Don't Care About You
Government goods aren't necessarily "public goods." Taxpayers are likely to support programs in their own self interests; farmers will support farm subsidies, drivers, which most taxpayers are, will likely support gas subsidies. The majority will inevitably vote themselves benefits at the expense of the minority. Usually, the coalition that can form a majority isn't made up of the groups most in need, or which are most magnanimous. - Jason Weinman
Context: Indefensible and Embarrassing
Okay, now I understand your concept of investing in public goods. I don’t like it. I don’t know if Wal-Mart should hire more sales clerks or shelf stockers in the coming year. In the same way, I don’t know if the government should build a new school, a new reservoir or if it needs to fix potholes in the road over the next year. The average person has better things to think about, and it is highly unlikely that the outcome would be anything close to efficient. - geofree
Context: Confessions of a Libertarian
What's the point in that? All it would do is let everyone put their tax money into their pet projects, while entirely neglecting the many important but scarcely visible government agencies. It would also create a situation where the better an agency operated, the less money they would get--because they would get correspondingly less attention in the media, and therefore fewer "donations".  Direct allocation of taxes by the taxpayer is a dumb idea. It would be like trying to operate a business where your customers got to determine how the money they paid you gets spent. "Now I won't buy this item unless you put all of the gross income from my purchase towards the janitorial staff..."  Impossible to operate. Efficiency would drop through the floor. - Someone
Context: Which Congressperson Would You Trust With Your Taxes?
For your idea, taxpayers would have to be FAR more informed aboit what it takes for our society to function.  There is NO WAY that critical programs would be underfunded.  I'll say it again: allocating a big chunk of yoir tax bill would provide the feedback you desire, withou causing huge problems in areas folks just don't think about.  Would everybody remember to fund sewage treatment, for example?  Or would they just give all their money to their pet programs and assume that everything else would be covered by someone else? - What if...?
Context: What Causes The Growing Wealth Gap In America?
Unbundling public services will run into the same problems that philanthropy-reliant public services do/would (everyone wants the "John Doe Foundation Theater" and no one wants the "John Doe Foundation Water Treatment Plant" so we end up with a dozen theaters and hot and cold running sewage) combined with the popular misunderstanding of where government spending actually goes (in the States see the surveys where we see people wanting to balance the budget by cutting the 25% they have decided that we spend on Foreign Aid but this is not solely a US phenomenon.)  - Schadenboner
Context: Quartz article: Is China going to be #1?
I'm not so sure. You can lead a taxpayer to a position of responsibility, but you can't make them take it. Surely people would tend to allocate their money to their own pet concerns (veterans giving to defence, teachers to education, environmentalists to environmental protection, etc.), with the result that nothing coherent or workable emerged. And then, if they saw that more was needed here or there, they would tend to expect others to make the needed adjustment. Markets are good things, but there isn't actually an invisible hand that makes things work out. - DR
Context: Opportunity Costs
But, that is not how your proposed system would work. I own several pieces of agricultural land. I would give all my tax money to the Department of Agriculture and have them return it to me in the form of a farm subsidy.  Why should I even pay taxes if the government is just going to send nearly all the money back? - geofree
Context: Which Congressperson Would You Trust With Your Taxes?
Interesting idea. I do think however that most people are very pragmatic when it comes to allocating money for services that directy affect them. Consider however that funds such as FEMA would probably be devastated because people in Georgia or Utah are tired of paying for flood or hurricane damage, or on the brighter spot farming subsidies or oil subsidies could be slashed once more became aware of the slough there. - aitm
Context: Divine Authority vs the Invisible Hand
How many people even know what NIST is more less what it does?
What do you do when social security receives too little funding this year?
what happens when the next Katrina hits but FEMA has no funding? - Sociobiology
Context: Taking vs Trading
I'm not too sure this would work out to well myself. Me and my friends over many a drunken political discussion suggested solutions such as this many a time with with the end result almost always being that some often forgotten essential government programs would get left by the wayside until some sort of tragedy would occur to bring the 'error' into light. It is not beyond the scope of reason that once this tragedy occurs that it would essentially be too late for corrective action to take place. Think FEMA funding after several years of mild weather events (i.e. people not perceiving a necessity to contribute to FEMA during mild climactic periods). Another potential problem that we have theorized would be the public funding lash-back eradicating a good program if some scandal occurred that was really an isolated incident of corruption (say that a member of the FDA took a bribe and people died as a result). - Swit
Context: Survival of the Fittest Government Organizations
Public goods can't operate according to individual preferences adapting over time. Fer instance no one gives a shit about disaster relief until, whoops, there's a disaster. Adequate response to a disaster, which people demand, requires a consistent level of staff, training, supplies, and logistical clarity coordinating it all. That can't be maintained by a public which would allocate bare bones levels of funding in good years and then spike way up when there's a disaster. - Anonymous
Context:  An Economy Based on Wife Swapping
My bottom line is a prediction: if your proposal were to be carried out, a whole range of very mundane governmental activities would not be funded while a series of high-interest sexy activities would be overfunded. For example, NIH/CDC activities to fight AIDS and Alzheimers would be heavily funded (not that I'd mind the Alzheimers) but routine vaccinations would not be funded. Police SWAT teams would be funded but not the county clerk's office. Infrastructure generally would be ignored. - Bill Harshaw
Context: A Liberal Solves the Budget Deficit
Because there are hundreds of unsexy but essential government programs that need funding and most likely wouldn't get it if we could all pick and choose.  I dont know that i'd tick off the 'please use my tax dollars to replace the filters in the city sewers in Akron' as much as 'please use my tax dollars to fix education', but Akron needs clean water. - Jeremy Meyers
Context: Should Warren Buffett Voluntarily Pay More in Taxes?
Or, more likely we'll have an enormous, bloated "Department of Puppies and Blowjobs" and perpetually bankrupt law enforcement, transportation, health, and environmental departments. Plus roads that look they've taken mortar shellings, untreated water filled with cholera and dysentery (Oregon Trail, ho!), and schools run by whatever local fundamentalist religion does the best job of conning parents. - Wikkiwallana
Context: Taking vs Trading
People will "choose" to put tax dollars towards whatever seems sexiest. To them. How many are going to choose vaccine research? Inspection of the water system in Toledo? High-speed fiber optics installation at the DMV to provide faster turnaround on data requests by police forces? - Deuce
Context: Ask a Pragmatarian
I think this is a dangerous assumption. We cannot predict with any degree of accuracy where people might choose to allocate the funding under these circumstances. There is a great risk that some vital areas will end up greatly under-funded while other government organizations that are higher profile, but require less overall funding may end up with an embarrassment of funding. This kind of fund allocation by guesswork, trying to predict where others will put their funds, and then allocating your own contribution accordingly is certain to lead to considerable waste. - Just1Voice 
Context: Ask a Pragmatarian
Easy: Nobody allocates to debt-service payments in the first year. (Or maybe it’s just Megan McArdle and Greg Mankiw — same deal.) The US, which is the world’s largest issuer of AAA-rated securities, suddenly defaults. Or are you suggesting that 15% or so of the nation’s taxpayers would choose to allocate to debt-service payments? That’s another extraordinary claim, especially in light of the debt ceiling fuckup this summer. - bluntobject
Context: All Linky, no Thinky: Special Issue on My Confirmation Bias
I also wonder about whether we wouldn't see a huge increase in the budget for, say, saving panda bears (or American equivalent, whatever that might be), and a huge decrease in funds given to, I don't know, the IRS probably. Not that I"m a huge fan of the IRS, but that state of affairs would seem to create some practical problems. - Rob
Context: Deontological Ethics vs Pragmatic Ethics
Your idea is simply terrible. The examples are far too abundant to go into but here's just one: How many people will voluntarily fund the IRS? - mattski
Context: Crooked Timber Liberals - Monopolizing the Facts
Free market principles don't work in things other than markets. Market forces require things like informed customers, freedom of choice, and competition. You have exactly none of those things when it comes to, say, maintaining a power grid or highway infrastructure.  Off the top of your head: How many food inspectors are sufficient to ensure acceptable food safety? - Deuce
Context: Survival of the Fittest Government Organizations
Again, by giving every tax payer a line item veto, you force Congress to turn into a merry go around of idiocy reallocating money every time some voter decides that "I hate ____, let's not fund it." There is no real budget at that point. It's Congress plugging holes. And what everyone values differs. Do you think it would be good to let the pacifists completely stop funding the military? How about no money for food inspections so shiga toxin producing e-coli can get into our school foods and liquidating the brains of our school children? I can keep going to show just how little thought you have put into this steaming pile of **** you call a proposal. - obvious Child
Context: Teaching Economics to Liberals
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. - Linda Beale
Context: Repatriation Holiday Lobbying - Money Speaks
The problem is that whenever you design any new system or product, you first have to assume that people are lazy idiots who'll screw up in ways you never thought possible. This system could work in a small population of maybe less than 10000 people, but a country with the population of America? this system of yours is going to be a disaster. - Damarcus
Context:  Divine Authority vs the Invisible Hand
The government is not studying unicorns. Your idea as a theoretical matter makes sense, but as a practical matter, it is terrible and would make disastrous policy. First of all, most people would probably choose not to give any money to fund the federal government, which would be awful. Second, there would be a huge degree of instability and uncertainty regarding how much money each department or sector would be getting every year, which would make planning and long term projects completely infeasible. It would destroy our government system. Maybe that's what you really want. I don't know. - Krhazy
Context: Why a Balanced Budget is An Elusive Ideal
Given how poorly most people understand the budget (for example, vastly overestimating the amount of money that gets spent on foreign aid), I’d expect it to be a disaster. Maybe an instructive one, though! After a couple years of direct allocation, maybe people would be much better-educated in what gummint actually spends money on. - bluntobject
Context: All Linky, no Thinky: Special Issue on My Confirmation Bias
But how do you know that X% is the right amount? Moreover, you claim it embraces the market but the choices are highly limited and the prices are not at all likely to reflect a market price as their is no competition between ideas, furthermore if there were it would lead to horrendous results, voters would likely be influenced to spend their dollars on things not in their interest due to their lack of information and lack of interest in finding said information. - Anikdote
Context: Libertarian Pudding Tastes Good!!
I agree a lot of this. I don't think Lobbyist are inherently a bad thing. People should have the right to lobby Congress. I think the revolving door and the cost of campaigns has turned it into a system where lobbyist write the bills. I do think that ultimately Congress members have much more information than the normal voter. I'd like to think it is their job, they get the reports from the agencies, there's now way humanly possible to expect voters to work their jobs, spend time with their families and have comb through agency reports on what the government professionals recommend. - iliveonramen
Context: Teaching Economics to Liberals
I'm concerned that the general population cannot be as informed as specialists about a given field. I would not trust an engineer to decide whether I need surgery nor would I trust a surgeon to decide the concrete mix for a dam - or even a street or bridge. Specialists by definition know more about a subject then most other people. Our society is filled with them and, indeed, it's what makes our society what it is, starting with the first agrarian communities ~10,000 years ago. To leave specialized decisions in the hands of ignorant laymen is to invite disaster. - MoSurveyor
Context: Teaching Economics to Liberals
Third, this presumes good information on the part of the taxpayer/voter. We have pretty good evidence that many people lack good information, both from polling data (amount of money spent on foreign aid, for example) and from the continued existence of the Republican Party. - dr2chase
Context: Niall Ferguson does not know what "Western Civilization" means
You have no idea how efficient NASA is at researching the materials needed for flight at Mach 15 and you probably aren't even aware of why anyone would want to do that. The government does about 800,000 things that the average citizen isn't even aware of, yet some of those things can be literally life or death.- Deuce
Context: Ask a Pragmatarian
I haven't been following the thread, we can rehash some of the things probably already brought up. I will take the leap and say no. Its a very interesting idea and very appealing too. Here's why I disagree though, things like NASA, the CDC, and the FBI may go unfunded, not useful to everyone, but still critical services for the entire nation to function. Also, the safety net may go unfunded. From a simplistic economic view, no one would ever fund the safety net because those paying already have money and would not allocate money that would not benefit themselves. The ones who require a safety net would be outside the allocation system and we have no safety net at all. - Opteron
Context: Teaching Economics to Liberals
The problem with letting everyone choose where the taxes go would mean that it would be hopelessly in favour of military and less for education and agencies such as NASA. - Damarcus
Context:  Divine Authority vs the Invisible Hand
It's wrong to assume that people always make decisions that produce the best results. People are not rational, they value instant gratification more than long term gains. They overreact and have irrational risk assessments. Many americans spent more than they earned, bought into a housing bubble, and now find themselves jobless. In hindsight, those are not "efficient allocation" of their wages. If we allow people to make decisions on how their taxes are spent next year, how many would choose to make investments in roads, electricity infrastructure, satellites, space programme and so on? What if there aren't enough people willing to put their money to these programes, does that mean that these investments are not "efficient" or does it mean that your "allocation efficiency" concept really doesn't produce the best results overall? So how can that be "efficient"? - nonpareil
Context: The Invisible Hand?  A Quick Survey
What percentage of public services can you even name? How many people are going to put enough thought into this to support weather monitoring satellites, GPS system maintenance, air traffic control, or water filtration?  Do you know what happens when the air traffic control system doesn't have the funds to operate? - Deuce
Context: Ask a Pragmatarian
I’ll make this simple. Let us agree that the government has declared a tax rate of 35%. Lets us agree that the government has decided that there are to be two governmental programs: Ambulances and defense from foreign intruders.  What of the defense program if the taxpayers all allocate their taxes to ambulances? - John Flaherty
Context:  The Third Solution
But I don't think I have nearly enough information to allocate my taxes properly across all these functions even the ones that I find perfectly legitimate (which to be honest is most of them). Others are going to struggle with this too. And that information problem could come up with some perverse results. You may get a massive EPA budget, far beyond what makes sense, because people can't really grapple with all these trade-offs but they know they want to "protect the environment". What does that really help? You probably stop doing the environment much good pretty quickly, you suck funds away from other uses, and you're probably going to hurt the economy if you beef up the EPA's regulatory capacity. - Daniel Kuehn
Context: Thoughts on "tax choice": is it just anarcho-capitalism?
When I shop in the private sector, I am representing my own needs and interests. I am familiar with those, and if I make a mistake of some sort, the burden for it falls only on me. Shopping in the public sector is very different. It requires learning and then representing the needs and interests of 310 million people. As has already been pointedly illustrated, that job is too big for any individual. This is why from the very beginning we have chosen representatives who are deliberately removed and insulated from the masses to make public shopping decsions on behalf of the country. Things have gotten so complicated, that we have given them around 15,000 staffers and better than 20,000 lobbyists to help educate and guide them in their decision-making. Do you have say three dozen top notch, blue-ribbon staffers at your house to research, report on, and advise you in regard to spending and other matters? No? Why would you think that you could do a better job than a full-time elected specialist who does, and that with you starting from a base so weak that it allows you to believe that watching C-SPAN makes you an insider? - Cardinal Fang
Context: The Interests of Consumers are the Interests of the Human Race
The vast majority of Americans don't have the ability, the time or the mental capacity to understand every program and department in the Federal Government and wouldn't even begin to understand how each of these programs and departments actually benefits them.  You'd single handedly tear apart the federal government as Federal Agencies would be forced to advertise in order to get money for programs.  Imagine the idea of having to spend federal dollars informing people that they need to give money in a certain direction in order to have clean water, early detection warnings for tornados or hurricanes... This whole idea is one of the most idiotic things ever thought of. You can barely trust voters to make responsible choices in who they vote for.   Churchill once said the greatest argument against democracy is 5 minutes with the average voter.  I wouldn't want your average joe deciding what gets funded and what doesn't, much as I distrust politicians. - Jetboogieman
Context: Debunking the Crowding Out Concept
The typical taxpayer doesn't have one minute to spend on becoming educated on the best use of public money. there are litterally millions of options and alternatives. Thats why we elect members of our community, to be our representatives, and we pay the to be our full time representative. It's their jobs to figure out the best way to spend tax payer money, and if we don't like they way that they are doing it, we can vote them out of office. I really trust the consensus of 538 congress people elected by the people, most of them highly educated, who assumably study and debate the issues as a full time job, more than I trust the consensus of 150,000,000 people who are basically ignorant.  It's not a perfect system, but it's probably the best one that has ever existed, which is demonstrated by America's dominance in the world. - imagep
Context: The Interests of Consumers are the Interests of the Human Race
Nah. Thats a terrible idea. Figuring out what in our government needs to exist and how much funding it needs is the job of someone who knows about those things. The layperson doesn't have that sort of experience or knowledge. The American people at large cannot even be expected to vote, let alone be trusted with the responsibility of funding all the things that need funding. Americans are more politically apathetic now than they have ever been in the history of our nation, and yet you want to hand them the keys and let them determine what national programs get funding? - Nonsensei
Context: The Devil's Advocate for Public Goods
There is a department is the U.S. government called the Pipeline and Hazardous Materials Safety Administration. You and 99.999% of the American populace have never even of heard of it. If they don't get funding, a natural gas line will explode and kill a lot of people. How does your proposal work handle that? - rathi
Context: How the Invisible Hand Works
Most Americans do not have the information required to judge the cost of any number of things the government does. Off the top of your head, how low can you drop the FAA's funding before air safety is compromised? - Deuce
Context: Survival of the Fittest Government Organizations
Err.... I was more thinking along the lines that it would be terribly inefficient, impossible for departments to plan their annual budgets and personnel capacities when it could change on a whim every year, people would tend to put their money toward programs that benefit them personally the most leaving other important programs gutted, some programs could end up with more money than they even need or want, it would make rich people have even more influence than they do now and as such the system could be gamed, and most people are pretty stupid and would generally make bad decisions on where to allocate the money. Basically, the whole idea is extraordinarily bad and would be a logistics nightmare that only an anarchist hoping for the government to collapse would seriously suggest. - BarkAtTheMoon
Context: Can Economics Explain Human Sacrifice?
If people can choose from anything, dont you think too many people will put money in things that they directly benefit from more more so than, say courts or roads? Obviously, some will allocate more for roads or courts they use but i see that these may become underfunded and many will not notice since they dont go to court or use those specific roads. - ClassicalLiberal
Context: The Visible Hand vs The Invisible Hand
Why would I send my money to fund National Defense when I can benefit from someone else paying for it? Although in my "perspective", I may value National Defense, this may not be reflected in my allocation of money. I'll just send my money to a program that benefits me. - Free market & self allocation may be ill-equipt to handle community goods. - JeffLV
Context: How to Defeat a Liberal in a Debate
As applied to your concept: you could have individuals over-allocate tax dollars to the programs that benefit those individuals directly, and under-allocate tax dollars to programs that benefit all of us collectively. For example, seniors might allocate 100% of their tax dollars to retirement programs (Social Security, Medicare) and nothing to any other program. - Knox Marlow
Context: Taxes, Competition and Pricing
You don't have a choice. You can't decide to forgo national defense and just get social security instead. - Deuce
Context: Survival of the Fittest Government Organizations
The whole vote with your taxes idea has actually been growing on me. The only problem is that I can see some important things getting critically underfunded because voters don't understand them, or just because voters are stupid. Maybe if the government got like 15 percent of the total budget that it could do what it wanted with to correct for shortfalls. As for the other, it's not so much that liberals don't accept the invisible hand. I understand how the market is supposed to work, and in the majority of cases, it does work that way. It's just that some people seem to think it always works in every situation. Since you've already said that you think universal health care would probably work better than private sector, I'm assuming you're not one of those people, which means we probably actually agree on most things. - atrasicarius
Context: Aikido, Dune and Taxes
You completely ignored what I said. I said that a good number of Americans, spurred on by various conservative speakers, would want a larger army to fight the muslims. Eventually the army is so huge that it actively "encourages" us to continue sending our tax money to them. - Generational Apostate
Context: The Devil's Advocate for Public Goods
Being able to allocate where you tax dollars is spent does not mean the will be spent efficiently, it only means where they are spent will more effectively represent where you want your tax dollars to be spent. The individual will not have the means, the time nor the resources to be able to determine on an ongoing basis if their tax dollars is being spent efficiently, it will only ensure that it effectively represents what their percieved interests are. The average invidual will not be able to determine if the federal government should spend a couple billion dollars on Interstate X or on Public project Y. Nor would they have the understanding to determine that building the F18 is a more effecient use of their tax dollar then building the F35, or perhaps building 20 new M1A1 MBT. - Lord Tammerlain
Context: Teaching Economics to Liberals
Take, for example, our military and defense establishment. A soldier or Marine fighting on the front lines in Afghanistan is ideally well-equipped, well-fed, and supplied with the proper ammunition. The average taxpayer, sitting thousands of miles away, is not in a proper position to properly assess the needs of that individual trooper. For him to be effective at his job, he needs good body armor. He needs a functioning and reliable weapon. He needs quality ammunition. In other words, a bureaucracy like the DoD requires a dedicated source of funding and should not be subject to the whims of donation drives by private citizens, because this would likely result in unsteady funding and inferior equipment. The average taxpayer is not capable of properly assessing the logistical needs of the troops who are attempting to carry out their mission because they are not privy to perfect information or education regarding strategic and tactical circumstances. - StillBallin75
Context: How to Defeat a Liberal in a Debate
Once again, you are purposely, dogmatically, and perniciously ignoring the fact that I presented a far, far more viable way to place government services on the free market--by cutting the fedgov and letting states provide them--and compete with each other to provide the best package. Furthermore, you haven't explained how it's to anyone's advantage to have everyone earmark their taxes to, say, the Department of the Interior, thereby not only starving out all other departments but providing Interior with more money than it could possibly find useful ways to spend. You quote John Stewart Mill all day, saying that the nation is full of experts, but you not only fail to explain how the experts among us will disseminate their great wisdom among the rest, you give no indication at all how people will coordinate their efforts to ensure no department is left behind. And you certainly don't explain how a populace that can't even be coerced into properly researching their political candidates can be coerced into doing all of this work. - acptulsa
Context: The Principle Concepts of Libertarian Economics - Feedback Requested
Right. Because taxpayers are going to take the time to research all the available options and carefully weigh what needs funding.  For that matter, who decides what options are available to be chosen from? Within a broader category (like, say, defense), who decides what weapons systems will be bought, and how many?  We have representatives for a reason: they're supposed to spend the time developing the expertise and studying the options to make good decisions on our behalf. We can then judge them by the results, and vote them out if we don't like the results. It's a very rational division of labor.  The fact that many Congresspeople are idiots, or deep partisans from safe districts, is a problem. But direct democracy at the level of granularity you're talking about isn't a solution.- raytri 
Context: How to Defeat a Liberal in a Debate
My concern is that, lacking ESP, how is anyone going to know what is getting the funding it needs and what is not? Suppose we have another national security scare.. the public has not shown itself to be particularly careful and their critical thinking skills, on the average are poor. Given that our news media focuses so heavily on conflict, I can easily see a situation in which 75% or more of the tax allocations go to the military, leaving our governments domestic services grossly underfunded. - Just1Voice
Context: Ask a Pragmatarian
But I simply don't believe in pragmatarianism, since most people would opt to not spend on defense, infrastructure, etc. ...necessary evils that don't look pretty and smell good. - ChuckBerry
Context: Would You Go Into Debt Paying for Government Programs?
Your solution, while theoretically sound, suffers from the same issues any other system of government does: people. They're generally uninformed, ignorant, and totally uncaring. I'd give it a good chance that most people wouldn't even take 10 minutes to think about where their taxes are going to and would just go "soldiers good, all goes to defense" or something along those lines. - Plu
Context: Can Economics Explain Human Sacrifice?
Are you capable of explaining all the functions each of those 15 departments performs? Are you in communication with the heads of each department so they can communicate their budget needs? Explain the impact of raising or lowering funding for every single department. Now detail how a populace in which 50% of them don't even vote will somehow individually learn how to handle a budget so complex that it takes hundreds of congresscritters+ assorted aides to understand. - rathi
Context: How Would You Allocate Your Taxes?
This is why I favor a representative democracy. I know that I cannot become an expert in all the arenas that the government must make policy on. Therefore, it is more efficient for me to vote for those experts that I agree with and for them to make political decisions on my behalf. However, I also support a check in that these representatives can be overruled by via referendum so that if they make a political decision too unpopular to their constituents it can be stopped. - samsmart 
Context: Why Is Your Partner Cheating On You?
A hundred million individuals making decisions about funds they have no real knowledge or expertise in assigning, without any real coordination between them, and heavily influenced by self-interest. How can you not see that this would end horribly? - Deuce
Context: Ask a Pragmatarian
but much like dell, congress has a lot more data available than just how much people like stuff. if every single person in the country voted for giving the white house a new paint job, they still wouldn't allocate a trillion dollars to it because that would be too much fuckin paint. so they do studies and bring in experts and whatever the hell else, and decide how much the war on drugs currently costs and how much it should be costing, and each rep comes to a decision, and they all compromise on a number. as opposed to your system, wherein each tax payer would decide how to allocate their taxes based on different data and with no idea what everyone else is doing or how things will work overall. - kingnixon
Context: Other People's Money
Epiphyte makes a comparison to a market economy. However, each individual must buy specific goods, meaning that the market will naturally balance from industry to industry, though not necessarily within an industry. An individual does not need to contribute to education in the same way, however, leading to chaos. - Robesdesaixtare
Context: Other People's Money
What distinguishes government from non-government is precisely that government exists to produce a public good, i.e. a good whose enjoyment is unrelated to one's own contribution towards paying for it and cannot be made related to it without altering the nature of the good in question. There is no such thing as "the same process be[ing] applied to public resources", as this would simply be a contradiction in terms. It is the distinguishing mark of private resources that the said process can be applied to them at all - and of public resources that it cannot. - Tommi Uschanov
Context: Opportunity Costs
You're not talking about a public market. The taxpayers could not directly see the effects of their money. Donations are not "goods". As I noted before, people will have an impetus to buy specific goods, but not to fund specific agencies. And honestly, the average taxpayer isn't informed enough to spend their taxes well. You end by launching into a monologue about conveying ideas, conveniently ignoring the fact that you still need to prove your ideas. And maybe all the taxpayers combined have more information than a senator, but probably not. In any case, they're not coordinated, so they can't put all that information together. - Robesdesaixtare
Context: Other People's Money
You will find that a surprisingly large number of social (and legal, and political) constructs are attempts to commit everyone in a group to do something in order to avoid problems like the above. The requirement for everyone to pay taxes for the programs that are decided around election time is necessary because you would find that pretty much nothing would be provided if people could choose whether or not to spend money on it. We can't coordinate with each other if a country is made up of millions of people and our decisions can be made independently and/or anonymously. -  Neu Leonstein
Context: Helping Liberals Understand the Opportunity Cost Concept
You're proving my point. All that can be reported, which means that lawmakers have the information. They are also coordinated enough to process it and act on it. I, however, do not know what you have noticed, or the next, guy, etc., so we cannot make decisions as well as a lawmaker who has access to, yes, all the data. Not a microscopic fraction. And what makes you think that the only lawmakers are in congress? - Robesdesaixtare
Context: Other People's Money
The major disadvantage of not-thought-throughism vs the current system is that if individuals allocated their taxes, then it is very likely that the majority of taxpayers really won't pay very much attention to how everyone else is spending their taxes. This will cause the following problems.  1. some projects will not receive enough funds and will be doomed to fail. Everyone who sent money those projects will have completely wasted it.  2. some projects will receive way more funds than they actually can use, and unless the surplus is allowed to go toward other projects, it will go to waste.  Now, I know that the government doesn't always perfectly predict how much money projects will cost, but I assure you that they will do a whole lot better than a group of laymen who aren't communicating with each-other. And when things do go wrong, it will be impossible for public funds to be re-allocated to correct with inaccuracies. - Sam I am
Context: Pragmatarianism -- *The FINAL Thread*
LOL for the last time, taxpayers aren't coordinated. - Robesdesaixtare
Context: Other People's Money
What would not work in either case (the family or the partnership) is unco-ordinated spending where everyone pursued their own personal agenda. - Absalon
Context: Alex Tabarrok: Public goods, public goods, public goods!!!
Because some things would be underfunded, and others overfunded. It's not really a fallacy, just a stupid argument. - Barry
Context: Baxter & King 1993: Why government spending isn't just moving money around
@Xerographica: To me, the "best use" argument is a little misdirected, since I am not trying to outline the exact allocation, but to indicate that there should be a larger commitment of government resources to investment in public infrastructure or other forms of capital (including education). As for your specific argument about the self-directed tax allocation, I very much disagree. First, we're talking about public goods, by and large, where the private market has insufficiently directed resources toward specific public purposes. Second, to expect individual taxpayers to properly allocate funds is very problematic. Basically, I think that the resources would mostly find themselves in a few highly visible public efforts, while many areas would no doubt be starved of funding. If you were using a cost-benefit analysis argument, I'd probably agree with you, as would almost anybody who thinks seriously about economics. - Julian Janssen
Context: Building the Foundations of a Wealthier America


  1. Pragmatarianism sounds like a good way to guarantee underprovision of non-excludable goods with dispersed benefits and focussed costs.

  2. The free-rider problem isn't applicable given that I'm not advocating that people pay less taxes.

    What government organizations do you think would be underfunded?

  3. Xero, Econ 101 identifies many theoretical situations which private markets do not optimally fund. Examples include positive or negative externalities and non-excludable goods.

    So: science research and broadcast media would be two typical examples.

    Taking a cue from the behavioural-econ post on ThinkMarkets and from the beginning of your post: since people have a very short amount of time to decide what government departments to fund, they wouldn't make this decision optimally. Witness donations to non-profits going to the ones with the snappiest flyers or what's mentioned in major newspapers / well-known films.

    It's not to do with the level of tax.

  4. human mathematics...the issue isn't positive or negative externalities...the issue isn't whether a good is excludable or not. If you look on the right side in the keywords section it should be clear what the issue is...opportunity costs.

    Science research and national healthcare both have positive externalities. How do we decide how much money each public good should receive? A dollar that we spend on science research can't also be spent on national healthcare...therefore we need to make a tough decision. The question is who should make this decision?

    The basic premise of pragmatarianism is that you have information that I don't have and vice versa. Think about that and then multiply that by 150 million taxpayers. How much information is that? Where are all the positive externalities found if not in all that information? Our brains have trouble grasping something that complex.

    By allowing taxpayers to directly allocate their taxes we would allow an infinitely greater amount of information to determine the most efficient allocation of limited resources. We end up with a more accurate answer when each and every taxpayer is forced to decide how they would divide their limited taxes between science research or national healthcare.

    Witness the popularity of the reality TV show Jersey Shore...witness the popularity of iPods...witness the popularity of anything...

    Who is to determine what is optimal? One person? One hundred people? Who is to determine what is adequate funding for anything? My vote is for 150 million taxpayers. If your vote is for congress then I'd be interested to see any economic studies that support your decision.

    The fact of the matter is...congress's current tax allocation responsibilities only makes sense from a historical perspective...not from an economic one. Many traditions like Christmas are completely harmless...but this isn't the case with congress. We can clearly see from countless failed socialist experiments that it's dangerous for a small group of individuals to make resource allocation decisions for the entire country.

    1. If opportunity cost / information / hayek were the only factor you wouldn't need a public sector at all.

    2. Your stylised model of the world is insufficiently realistic for this conclusion to be applicable to real governance.

  5. You’ve got two insurmountable hurdles for this plan of yours. The first is an inability to perform economic calculations as we discussed elsewhere (if we need to go further into this topic then so be it). The second is the problem of knowledge.

    The invisible hand works well in a market economy because the decisions of each individual interact with each other to produce enormous quantities of wealth and production. The only reason this works is because each individual decision is made for the sole benefit of the actor involved in the transaction. For example, a homeowner is able to compare the various home security plans available in his area and determine which is the best value based on his own subjective ideals. Perhaps he may even decide that the S&W .357 he carries is enough security for him. The point is he (and his family) is the sole recipient of any benefit or loss as a result of his decision. He has a personal motivation to determine proper prices levels, service options, additional bells and whistles, and so on.

    Contrast this with national defense (or any other government service). How does a person determine how much to spend in taxes for national defense? He cannot compare it with any competition because there is none. He cannot determine which services are more desirable and/or efficient because he has nothing to evaluate it with. There is no method available to determine if a service is over- or under-funded.

    1. Did you look over all the responses? Isn't the only hurdle really that people do not understand how the invisible hand works? Isn't this hurdle relevant to this plan and your plan and the plan of anarcho-capitalists?

      Regarding the two hurdles you a search on this page for "Tommi Uschanov". You can read my reply to his critique here...Opportunity Costs.