Partial Knowledge and Opportunity Cost

This is my response to the comments that Anonymous shared on my post on An Economy Based on Wife Swapping...

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If you read through all the responses to pragmatarianism that I shared on this page...Unglamorous but Important Things...it should be clear that Swit, and many others, made the same type of argument that you did.  Therefore, I addressed your concern by showing you that others share your concern.  Perhaps you think that because others share your concern it validates your concern?  It doesn't.  It just creates a picture of you and Swit pointing your fingers at each other and saying, "this guy is too myopic to fund FEMA during years when there are no disasters".  In other words...you guys think that you are atypical taxpayers when in reality you're just typical taxpayers.

"Citizen allocation of taxes won't result in efficient levels of disaster relief."

A better word to use is "adequate".  You're concerned that tax choice would not result in adequate levels of disaster relief.  Conservatives are concerned that tax choice would not result in adequate levels of national defense.  Liberals are concerned that tax choice would not result in adequate levels of social programs.  Yet, I'm not advocating that we reduce the tax rate.  Therefore, given that the tax revenue would be exactly the same, where would the money go if not towards programs that liberals care about and programs that conservatives care about?

Who is to say what constitutes "adequate" levels of funding for government programs?  If you couldn't care less about space exploration then should you be in charge of determining what constitutes "adequate" levels of funding for NASA?  Conversely, if I believe that we should already have colonies on Mars...then should I be in charge of determining what constitutes "adequate" levels of funding for NASA?  Perhaps Newt Gingrich should be in charge of determining what constitutes "adequate" levels of funding for NASA?

You believe that 538 congresspeople can somehow know what constitutes "adequate" levels of funding for government programs.  But here's what Hayek would say about your belief...

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. - Hayek, The Use of Knowledge in Society

What solution are we trying to determine?  We're trying to determine what constitutes adequate levels of funding for FEMA, for NASA, for the EPA and so on and so on.  You believe that 538 congresspeople have access to enough facts to determine the solution.  My argument is that the solution is "produced by the interactions of people each of whom possesses only partial knowledge".

What I struggle to understand is how we are on such different pages on this concept.  Do you think that Hayek was saying that the solution could be determined by the interactions of 538 congresspeople each of whom possesses only partial knowledge?  The point of Hayek's essay was to demonstrate why socialism fails.  What is socialism?  Socialism is a committee of government planners that think they have enough facts to determine adequate levels of funding for organizations.  But what is congress if not a committee of government planners?  So why would Hayek argue that 538 government planners can have access to enough facts to determine the solution?  Why would he argue that 538 people could overcome the knowledge problem?  Why would he argue in favor of socialism?  He wouldn't.  Hayek was arguing that the solution can only be determined by the interactions of millions and millions of people each of whom only possess partial knowledge.

Bastiat, in his essay on the Seen vs the Unseen was pretty much saying the same thing as Hayek...but from the angle of values/priorities.

It is not seen that, since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library. In brief, he would have put his six francs to some use or other for which he will not now have them. - Bastiat, The Seen vs the Unseen

As I argued before...538 congresspeople have no idea which public goods you value most.  Without knowing what all our priorities are it's impossible for them to know how much funds NASA should receive relative to the EPA or FEMA.  As individuals we can say that space colonization is more important than disaster relief or environmental protection.  We can point our fingers at other taxpayers and say, "you are being myopic if you can't see that we only have a finite amount of time left in this solar system before our sun dies."   But when it comes to public goods....our priorities cannot be accurately determined by a king...and they cannot be accurately determined by 538 congresspeople...and they certainly cannot be accurately determined by voters.  In order to accurately determine what our priorities should be each and every taxpayer should be allowed to consider the opportunity costs of their tax allocation decisions.

Economics is the study of scarcity.  Hayek's partial knowledge concept and Bastiat's opportunity cost concept are powerful tools that can help us understand how scarce resources are efficiently allocated.  When we add fallibilism into the mix we get the idea that allowing 538 congresspeople to allocate 150 million people's taxes is the equivalent of putting all our eggs in one basket.  As I argued in my post on Fallibilism vs Fairness...the equation is as follows...

Scarcity + Fallibilism = Hedge Our Bets = Tax Choice = Pragmatarianism