Socialism is basically public ownership of the means of production. Not quite sure what percentage of the means of production have to be publicly owned before a system qualifies as "socialist"...but as my scope of government diagram demonstrates...socialism is a continuum...
The fatal flaw with socialist systems is conceit. This idea of a fatal conceit, which was popularized by Hayek, basically refers to a situation where you are so confident in the value of your idea that you use your neighbor's home as collateral to help fund your idea...but you don't bother asking for their permission to do so.
Socialists by no means have a monopoly on conceit. If we look throughout history...all the man made disasters boil down to conceit. Whether it was Hitler mortgaging Germany to pay for war or Mao mortgaging China to pay for industrialization...the root cause of all man made disasters has been, and continues to be, conceit.
When Obama made the analogy of Republicans driving the car (the economy) into the ditch...it should be clear to us that the car ended up in the ditch because Republicans were driving while under the influence of conceit. When Democrats and Republicans hand the keys back and forth over and over and over...it should be painfully clear that neither party has a monopoly on conceit.
The opposite of conceit is humility. As Socrates said, "...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." In more recent times, Milton Friedman said, with very strong emphasis, "If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it."
Would it be possible to have a socialist system based on humility? In other words...what would happen if the public owned a majority of the means of production...but taxpayers were allowed to directly allocate their taxes? If you wanted your neighbor to allocate his taxes a certain way...then you would have to try and persuade him to do so.
In the thread I posted on How the Invisible Hand Works, I tried to flesh out this type of socialism based on humility. Pragma-socialism, as I've labeled it, becomes increasingly more difficult to imagine as you increase the percentage of public ownership. Imagining 50% public ownership isn't too difficult....but what about 80%...or 90%...or 100% public ownership of the means of production? Can you imagine a pragma-socialist system where the tax rate was 100%? I sure can't.
Here's my comment that provides the basis for imagining a pragma-socialist system.
TNAR, heh, you're sure interested in debunking a socialist system where taxpayers could directly allocate their taxes. Let me address the compromises first though and see if that doesn't help put the socialist system in context.
So the compromises. My goal is to try and come up with a reasonable compromise that both you and the liberals would accept. You're willing to accept Compromise A while liberals perhaps might be willing to accept Compromise C. Therefore...my challenge is to convince both sides to consider the merits of Compromise B.
Part of the value for your side is that offering Compromise B to liberals would force them to consider how the invisible hand works. This, in my opinion, would be priceless. Many people think they understand how the invisible hand works but when asked whether taxpayers should be allowed to directly allocate their taxes then we quickly discern the truth of the matter...Unglamorous but Important Things. Given that we live in a Democracy...we should really consider the value of helping voters understand how the invisible hand really works.
Your critique of Compromise B is that it wouldn't allow competition between the public and private sectors. Is this really the case though? How could somebody's spending decisions in the private sector not influence their spending decisions in the public sector? If you donate money to the Red Cross...would you also allocate any of your taxes to FEMA? If you pay for private healthcare...would you also allocate any of your taxes to public healthcare? If you pay for private education...would you also allocate any of your taxes to public education? If you donate money to Greenpeace...would you also allocate any of your taxes to the EPA?
As I'm sure you're aware...we can't just say that Democrats would do this and Conservatives would do that. People are more complex than party stereotypes. So what would happen if more and more taxpayers allocated their taxes to public healthcare? At some point the demand for private healthcare would decrease. Let's say that for some reason private healthcare failed to compete and went out of business. This is very unlikely but we're just engaging in a mental exercise. Now...libertarians wouldn't be able to say that the government did anything wrong...given that this was an act of the invisible hand. The consumers made their decisions.
The consumers' decisions would represent a step towards socialism. In other words...the invisible hand would have led us towards a greater percentage of public ownership of the means of production. If the invisible hand also decided that the public sector, rather than the private sector, should be responsible for education then we would have taken another step towards socialism. To be clear...I'm not saying that these steps will necessarily happen...right? That's because there's no way that anybody could truly predict the outcome of allowing the invisible hand to determine the proper division of labor between the private and public sectors.
The question is...how far down this path towards socialism could the invisible hand feasibly take us?
Let's say that enough people voted for the establishment of a government organization that was dedicated to supplying free cheese. Maybe people that wanted to work for the Dept of Free Cheese would genuinely care about giving free cheese to people who needed free cheese the most. Maybe these employees would work longer hours for less money and fewer benefits. Maybe they would cut overhead costs as much as possible. Maybe they would hold regular fundraisers to remind the American public why free cheese is important. It's kind of hard to think of government organizations behaving like non-profits isn't it?
What if the Dept of Free Cheese happened to stumble upon a cheese formula that was even tastier, healthier and more cost effective than any cheese you could buy on the private market? The demand for free cheese would skyrocket...more and more people would allocate their taxes to the Dept of Free Cheese and less and less people would buy private cheese. This would represent another step towards socialism.
Again...we're not looking at likelihoods...we're just considering how far down the path towards socialism the invisible hand could possibly take us. Conversely...we could also consider how far down the path towards anarcho-capitalism the invisible hand could possibly take us. We could consider a scenario where more and more people donated money towards a national militia and less and less taxpayers allocated their taxes towards the Department of Defense.