Friday, March 16, 2012

Pragmatarianism Disproved?

A couple guys from the libertarian forum just started an anarcho-capitalist blog.  Their blog is off to an auspicious start given that their first post was an in-depth critique of pragmatarianism...Pragmatarianism Disproved.

They cover many of the relevant economic concepts...with graphs even!  But what's really funny is that they based most of their critique on a 100% tax rate!!  Ouch...my most of me!  As I mentioned in my entry on pragma-socialism...try as I might...it's impossible for even me to imagine a pragmatarian system with a 100% tax rate.   I just can't wrap my mind around it.

My bottom line rebuttal doesn't directly address their points.  It addresses the fact that they used a 100% tax rate as their example.  That's what's really fascinating.  The Magna Carta Movement gave taxpayers the keys to the car and for some reason they decided to drive us from our current tax rate all the way over to a tax rate of 100%.  How do the guys from the LibertarianAnarchy blog explain the taxpayer's behavior?  

The most universal economic principle is that everybody wants the most bang for their buck.  This is what Adam Smith considered "self-interest".  The neoclassical economists refer to this as "maximizing utility" and the Austrian economists refer to this as "people acting purposefully".   

If we somehow ended up at a 100% tax rate then....as far as I can tell...there are only two possibilities... 

1. All those economists were wrong...people do not want the most bang for their buck
2. A tax rate of 100% would give taxpayers the most bang for their buck

I can argue for days and days against a government committee setting a tax rate of 100%...but I've got absolutely no argument against millions and millions of self-interested...utility maximizing ...individual taxpayers acting purposefully to set a tax rate of 100%.  

At this point it might help for me to explain how taxpayers would indirectly determine the tax rate.  Basically...the tax rate reflects how much the government does.  The more things the government does...the greater the justification for a higher tax rate.  The less things the government does...the greater the justification for a lower tax rate.  In a tax choice system...people could vote for things that they wanted the government to do...but it would be up to taxpayers to use their own, individual, hard-earned taxes to indicate exactly what the government should do.  

For example...if taxpayers chose not to allocate any of their taxes to the drug war...then the scope of government would narrow....and people would pressure congress to decrease the tax rate.  If taxpayers chose to allocate their taxes to public healthcare...then the scope of government would expand...and people would pressure congress to increase the tax rate.  This is assuming of course that enough taxpayers allocate enough of their taxes to congress to maintain its existence.  

Regarding the moral arguments...
He truly doesn't care--at all--about the infringement of Natural Rights and libertarian ethic.
Here's what the anarcho-capitalist David Friedman has to say on the topic of moral/deontological arguments versus consequentialist arguments.  

The short version...
I generally prefer consequentialist arguments. I think I understand economics better than I understand moral philosophy, and possibly better than anyone understands moral philosophy. - David Friedman
The long version...
I guess the first thing is that it offers arguments which don't require that people already share your religion...using the term "religion" broadly. That as far as I can tell, nobody, whether deontological libertarians or communists or anyone else really has a really convincing argument to show that their moral views are right. Many people believe that they do but I don't think that they do. Ayn Rand, at least, presented an argument. Ayn Rand claimed in effect to have defeated David Hume's is ought problem. Hume argued that you couldn't derive on ought from an is. I have a discussion up on my webpage of the holes in Rand's arguments. As far as I can tell she simply didn't do it. I don't think it can be done as far as I know. So in order to persuade people by a natural rights argument there has to be some reason why they believe in natural rights to start with because you don't have any good arguments to show that they ought to believe it. Whereas my argument...it claims to show...it hopefully shows...that my system would be better in terms of the value that almost everybody already has. So I'm really saying if you regard natural rights to be really important...well look...in my system rights will rarely be violated. If you regard people being happy and being healthy and living long lives...look in my society people will be in effect wealthier than in societies with governments, therefore you should like the results of those things...and so forth and so on. So I think that I have an argument which does depend on convincing people that economics is relevant to human behavior but doesn't depend on convincing them of your particular right and wrong beliefs.
Now the further problem with at least the versions of deontological libertarianism that I'm familiar with is that in the form in which people often state them they lead to conclusions that nobody believes. I spend a chapter in Machinery and Freedom going through that and if you really believe that the solution to polution is to say that nobody is allowed to pollute anybody else's property without their permission well you can't really exhale because carbon dioxide is a pollutant and you can be sure that some of the carbon dioxide you exhale will go onto somebody else's property. And similiarly you can't turn on a lightbulb because your photons will trespass. And once you start trying to make a more sophisticated version of the theory which deals with those...pretty quickly you start running into the kind of arguments that you run into in the consequentialist defense of libertarianism. - David Friedman, Legal Systems Without Government
In my post on the opportunity costs of public goods...I shared a few videos of Rachel Maddow arguing for more spending on public goods.  In one of her videos she says...
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
Rachel Maddow was making a consequentialist argument.  Her goal is for the government to do things that "benefit the country as a whole".  The thing is...Rachel Maddow and I are not going to have a very productive discussion if she makes consequentialist arguments and I respond with deontological arguments.  It's like if she says something in English and I respond in Chinese.  If her target audience understands English...then why would I argue in Chinese?  If her target audience cares about benefiting the country as a whole...then why would I argue for property rights? 

Sure you could argue that property rights actually do benefit the country as a whole..but that would of course be a consequentialist argument.  If property rights do have any sort of measurable value/benefit...then why wouldn't the tax allocation decisions of millions and millions of taxpayers reflect this truth?

Here's what else the guys at the LibertarianAnarchy blog have to say about morality...
By analogy, the founder of pragmatarianism plays the role of a sort of amoral deity: concerning morality, he says that we ought to make no judgement.
Pragmatarianism is neutral on morality because everybody already has their own morals.  Pragmatarianism isn't a religion.  With regards to making judgments though...

Yesterday on Fox....Bill O'Reilly had Lt. Col Ralph Peters on his show.  During their discussion on Afghanistan...Peters said, "When we invest our blood and treasure I expect a positive return".  This is of course the universal "maximizing utility" concept that I discussed in the beginning.  Compare it to this quote that the guys at LibertarianAnarchy blog shared...
There is always open to each actor the prospect of improving his lot, of attaining a value higher than he is giving up, i.e., of making a psychic profit. What he is giving up may be called his costs, i.e., the utilities that he is forgoing in order to attain a better position. Thus, an actor’s costs are his forgone opportunities to enjoy consumers’ goods. - Rothbard
Coincidentally...David Henderson, over at the Econlog Blog, also saw the same show on Fox....Sunk Costs in War.  Here's a bit of my comment...
It's been a few years since I was stationed in Afghanistan, but looking through my photos in the folder which I dedicated to "crops"...I see figs, grapes, pomegranates, wheat, eggplant, etc...but by far the most common crop was the opium poppy. If a small village only had one crop then it would invariably be the opium poppy.
Whether it's a retired Colonel expecting a positive return from his taxes...or Rothbard discussing psychic profits...or Afghan farmers selecting the most lucrative crops...it should be self-evident that everybody wants the most bang for their buck.  This is the universal economic principle.

If we allow taxpayers to directly allocate their taxes...then we can be all but certain that they would behave according to this universal economic principle.  The question then becomes...why do so many supposed proponents of this principle struggle to recognize the value of pragmatarianism?  What am I missing?  Why wouldn't we want to give the taxpayers the keys to the car?  What are we afraid of?

That's the mystery!  The proof is in the pudding but neither side is willing to taste the pudding.  

OR...maybe I'm the one that is missing something obvious!  It kind of makes more sense that I'm the bonehead....versus everybody else being the boneheads.  Well...keep the critiques coming!  Eventually we'll solve the mystery.

11 comments:

  1. Of course, as a pragmatarian, you seem to insist that you do not know what is what any better than anyone else, including Rachel Maddow. Why even try making a consequentialist arguement when you can see only one part of the elephant. Why bother making any arguement at all?

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    1. The part of the elephant that I can see indicates that we're all just blind men touching different parts of an elephant. What reasonable person could disagree with this?

      Rachel Maddow sees one part of the elephant and Bill O'Reilly sees another part of the elephant. This isn't going to change. What can change is our winner take all political system. Rachel Maddow should be able to directly allocate her taxes according to her truth, Bill O' Reilly should be able to directly allocate his taxes according to his truth, you should be able to directly allocate your taxes according to your truth. We should all be able to directly allocate our taxes according to our own truths.

      The blind men never would have been able to discern what it was that they were touching if they had voted on the blind man that they believed had the most truth. To discern what they were touching they would have had to add all their partial knowledge together. By allowing taxpayers to directly allocate their taxes we would be adding everybody's partial knowledge together. This would allow us to discern the actual scope of government.

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  2. One thing that you're missing is that your argument is just as much deontological as any other. You're saying that we should choose your system because it maximises utility. But why should we maximise utility, rather than minimising slavery? It's just as much a moral assumption as any other.

    Also I don't have time to expand on it now, but your "solution" to the public goods problem is also subject to the same problem, ie. externalised costs/benefits.

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    1. Are you saying that consequentialism is just a type of deontological argument?

      How is pragmatarianism not based on internalized costs/benefits? You can certainly only spend your own taxes...so the costs would definitely be internalized. The benefits would be no different than giving somebody a gift...or making a donation to a non-profit organization.

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    2. No Richard Allan is right. It might be useful to take a standard public goods model with utility maximizing agents, and show us how the same problem wouldn't break down in the exact same way. I'm not seeing it either.

      The costs would be internalized, but the benefits wouldn't. That's the whole problem, Xerographica. Public goods will be sub-optimally produced.

      Tax choice is anarcho-capitalism. It is the exact same thing.

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  3. I didn't think it was a very good post either - I left a comment there. I'd be curious what you think, because I honestly don't see:

    1. How this "pragmantarianism" idea is any different from anarcho-capitalism. It seems exactly the same to me, and

    2. How it really grapples with the issues posed by public goods at all.

    If you have thoughts on the comment I left, I'd be interested - I'm thinking about doing a post of my own on tax choice tomorrow maybe.

    Pick up a textbook treatment of utility maximization with a genuine public good (not a good that government produces - but a public good). The standard model says that the person with the highest demand for this good will pay its full cost, and everyone will free right after that, and the public good will almost certainly be under-provided for.

    If tax choice can't change this outcome (and I honestly don't see how it can), it's not a very good way of dealing with the problem of public goods as far as I can tell.

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    1. It would be super awesome if you could write up a post on this because, unfortunately, I really struggle to effectively convey this concept!

      Pragmatarianism is all about the free-rider problem. Well...it's all about determining the actual extent of the free-rider problem. The tax allocation decisions of taxpayers would highlight private sector supply failures.

      For example, if the private sector is adequately meeting the demand for education...then why would any taxpayers "spend" any of their taxes on public education? If any taxpayers DID spend any of their taxes on public education then their decisions would definitively prove that the private sector was not adequately satisfying people's demand for education.

      Regarding a 100% tax rate...like I mentioned in my post...I really can't wrap my mind around it. Here's how I kinda see it though. Let's call it "pragma-socialism". Here's how it compares to anarcho-capitalism and socialism.

      Ownership of the means of production

      anarcho-capitalism = 100% private ownership of the means of production

      pragma-socialism = 100% public ownership of the means of production

      socialism = 100% public ownership of the means of production

      Planning

      anarcho-capitalism = 100% decentralized

      pragma-socialism = 100% decentralized

      socialism = 100% centralized

      So whenever we're talking about pragmatarianism...we're assuming that people have to pay some taxes. Given that people have to pay taxes then you wouldn't be able to just allocate your taxes to yourself. If people could do that then pragmatarianism would just be the same thing as anarcho-capitalism.

      In a pragmatarian system you would have to spend your taxes on organizations in the public sector. And any organization in the public sector would be there because it was supplying what taxpayers were demanding. If taxpayers did not demand space exploration...then nobody would allocate their taxes to NASA and the scope of government would narrow...and people would pressure congress to lower the tax rate.

      If you get a chance it might help to take a look at the following...

      Libertarianism and the Free-rider Problem.

      Eric Evans and Xero Discuss the Invisible Hand

      Like I said, it would be really great if you could critique this concept and consider how it stacks up to the alternatives. It's always good to have more options.

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    2. So you can't give it back to yourself. Can you generate transfer payments at all?

      And how does the tax rate work - is that voted on? I've seen you write things about a tax rate that moves in different directions over time as a signal of how the public sector is doing.

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    3. In my post on awesomeness spotting...I talked about how a private individual...a physician by the name of Jeffrey Brenner...completely of his own accord studied ways to reduce healthcare costs. Clearly there are very significant positive externalities associated with the success of his efforts. In a tax choice system I'd vote for him to be considered a public good. If enough other people agreed then we'd be able to directly allocate some of our taxes to him. In that case then he would be able to give his taxes back to himself.

      That's the only type of situation in which somebody would be able to give their taxes back to themselves. Of course...if Jeffrey Brenner bought a fancy car and a mansion...then he better be significantly reducing healthcare costs if he wanted taxpayers to continue supporting his efforts.

      Regarding the tax rate...yeah...I have difficulty explaining this. The tax rate basically reflects the division of labor between the public and private sector.

      Let's pretend that there are only 4 goods...cars and laptops in the private sector and education and healthcare in the public sector. For simplicity sake let's say that each good receives 25% of the revenue...therefore the tax rate would be 50%.

      Now, what happens if a fellow by the name of Khan comes along and starts a school in the private sector? Clearly it's only an issue if he starts producing better results than public education. So people who value education start giving him more and more money and spend less and less taxes on public education. After a while nobody gives any money to the department of education.

      So the scope of government has been cut in half and it follows that the tax rate should be cut in half as well.

      In a tax choice system...taxpayers are in charge of determining the scope of government. If the scope of government expands...then taxpayers would put pressure on congress to increase the tax rate. If the scope of government narrows...then taxpayers would put pressure on congress to decrease the tax rate.

      People could always pay their taxes to the IRS as normal. And, people could pay their taxes at anytime throughout the year. For example, at anytime throughout the year you could go to the EPA website and directly submit a payment. The EPA would then send notice of your payment to the IRS.

      For the most part...in a tax choice system the public sector would operate just like the non-profit sector. The main difference would be that the IRS would just keep track to make sure that people had paid the proper amount of taxes.

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  4. What if the government provides no services in which I'm interested?

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    1. A. Pressure congress to lower the tax rate
      B. Lobby for a private service that you are interested in to qualify to receive taxes. For example, you could lobby for the Salvation Army ("doing the most good") to qualify to receive taxes.

      The point is that right now we have no idea what government services people are truly interested in. The only way we can accurately determine interest is by observing how people spend their money. For example, if no taxpayers allocated their taxes to FEMA then there's absolutely no reason that the government should be in the "business" of disaster relief.

      Once we have a more accurate picture of which government services people are genuinely interested in, aka...they put their taxes where their mouths are, then you'll be in a much better position to understand what you're up against.

      In other words, it's all about supply and demand. The actual demand for government services will point out any supply shortages of private services.

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