Thursday, September 27, 2012

Noah Smith's Critique of Pragmatarianism

I've certainly "harassed" a lot of people about pragmatarianism.  But nobody has consistently endured my repeated pestering longer than Noah Smith has.  For example...here's my very first comment on his Sept 2010 blog entry...
Allowing tax payers to vote with their taxes would lead to the most efficient division of labor between the public and private sector.
The only difference between public and private goods is that, with public goods, people can free-ride off the contributions of others. Add the element of coercion (taxes) and the invisible hand can allocate public resources as efficiently as it can allocate private resources.
That was the only comment on his blog entry...and he didn't even respond.  After a few more comments he still didn't respond so I created a blog entry to document his lack of response...The Ostrich Response to Pragmatarianism.  That manged to get a response out of him...which was..."I guess it's just that I have trouble understanding what you write..."  Ehh....oh.  I did get a C in one English class...so...it wasn't like he was the first to bring that to my attention.  Writing definitely does not come easy to me so I found his response to be somewhat reasonable.

After several more attempts to engage him on the idea of allowing taxpayers to directly allocate their taxes...I took my usual summer break from promoting pragmatarianism.  That seemed to do the trick!  Absence makes the heart grow fonder!  Here's our discussion from his latest blog entry...EconoTrolls: An Illustrated Bestiary

Xero: Hah...you saved the best for last! This post alone was worth adding your blog to my blog roll.

Now I feel obligated to live up to my reputation. But I'm so tuckered from trolling so many other places that I don't know if I can muster the effort to spam you. Oh wait...I already did. [I linked the words in that sentences to other places I had discussed pragmatarianism]

Have you ever had Spam Musubi? My gf is from Hawaii...it's her favorite dish...she thinks it's deeeelish. Then again...her favorite movie is Dumb and Dumber. That probably explains why she's dating me.

What's with the uncategorizable though? Maybe I haven't said "pragmatarianism" enough times? Oh oh...and I think I'd go with this as my one liner... "Here I am...trying to convince you that it's a brilliant idea that leaders of government organizations should be forced convince you that their brilliant ideas are worth your taxes. So many brilliant ideas...so few resources! That's how economics works."

Well...since I'm here anyways...[truncated]

Noah: Awww, I missed you Xerographica! Not sarcasm. :)

FWIW, people choosing which programs their tax dollars go to presents a coordination problem. Imagine if the budget last year for highway-building was $50B. Now imagine that everyone thinks they did a good job and highways are important, so they allocate more to highways. But since they all do it at once, the highway-building dept. now has $500B this year. What do they do with all that extra cash?

Xero: Heh, missing a troll of any sort is way bad precedent.

Too much extra cash? Here's the simple answer. Brace yourself...because this might sound absurd...but I'm guessing that each government organization would have a fundraising progress bar on its website. And...just like in the non-profit sector...taxpayers would be able to pay their taxes at anytime throughout the year.

Here's a fun "fact" that I learned the hard way (via a speeding ticket and traffic school)..."A $10 million investment in public transportation results in a $30 million gain in sales for local businesses." Does that mean that a $100 million investment in public transportation results in a $300 million gain in sales for local businesses? I have no idea what the curve would look like...but I can guarantee that every single government organization would want to maximize their revenue...just like most taxpayers would intuitively understand the idea of diminishing returns.

Now for the complicated answer. The other day I was driving at the speed limit on the freeway when I noticed a couple cars ahead pull over to the side of the freeway. I instantly assumed they had gotten into an accident but then more and more cars started pulling over to the side. What did they know that I didn't? As I was slowing down and looking all around...I spotted something in the sky...it wasn't a bird...it wasn't superman...it was actually the shuttle Endeavor.

If all the blind men agree that they are touching an elephant...if both libertarians and liberals allocate 100% of their taxes to the Dept of Defense...then is it a coordination problem or is everybody seeing Godzilla heading our way? If everybody you know buys the new iPhone...is that a coordination problem...or a bandwagon problem...or a bubble...or a fad...or just our consumer culture at work? Personally...I would never buy an Apple product...just like some people would never buy spam. Our wide diversity of perspectives, interests, values, concerns, fears and hopes would ensure heterogeneous activity in a pragmatarian system. So if everybody should happen to bet on the same horse...then you'd have to ask yourself whether they know something that you do not.

Eh, don't take my word for it. Just e-mail Peter Boettke...after all...the name of his blog is "Coordination Problem". If you haven't read his new book yet...my offer to buy it for you still stands.

Noah: OK, so what determines the size of the fundraising bars? Isn't there an incentive for govt. agencies to say they need much more than they actually need?

Xero: Definitely...but it would be checked and balanced by taxpayers wanting more for less. That's the basic dynamic involved every time you spend your own money. You want to purchase products at the lowest possible price and producers want to sell their products at the highest possible price. The bargaining process is what incorporates all our perspectives (information, values, interests, concerns, hopes, dreams, etc) into determining how limited resources are used.

Public goods don't have literal price tags on them...and you aren't going to sit by the door waiting for the EPA to send you a box of environmental protection. But when you give your money to the EPA...you're actually giving them a portion of your life. Here's the quote from Henry David Thoreau that "Name" shared in the comments..."The price of anything is the amount of life you exchange for it." How much of your life is protecting the environment worth?

Who are taxpayers? They are the people that produce the products/services that we voluntarily exchange our lives for. That's why they are our true representatives. And if I feel like Jeff Bezos is failing to represent my interests in the public sector....then I can easily give him less money to spend in the public sector simply by choosing not to shop on Amazon.

J.S. Mill referred to bonsai trees a few times in On Liberty. A bonsai apple tree won't produce nearly as much fruit as an apple tree that has had the opportunity to reach its full potential. Perhaps liberals perceive that poor people, through no fault of their own, are like bonsai trees...and we would greatly benefit as a society by giving them whatever they need to reach their full potential. Clearly giving them all iPhones wouldn't help them reach their full potential...so what would? Options...giving them more options. But options are created by giving people the freedom to come up with new and innovative uses for limited resources. For example, people now have the option to become pilots because the Wright Brothers had the freedom to apply their unique perspectives to their limited resources.

Having more options in life is having more freedom and more freedom leads to more options. So we give taxpayers the freedom to choose how they spend their own taxes in the public sector. This freedom will invariably lead to more options and everybody will greatly benefit.

In other words...a mind is a terrible thing to waste. If you can't choose how you spend your time/money then your mind is wasted. By allowing 538 congresspeople to spend taxpayers' money...we are wasting the minds of 150 million of our most productive citizens. Well...partially wasting. Socialist experiments have already demonstrated the consequences of completely wasting the minds of your citizens. Yet...we still allow a small group of government planners to decide how 1/4 of our nation's revenue is spent.

Errr...somewhat less seriously...I figure government organizations would create commercials kind of like Pat Robinson asking people to donate money for an interstellar cruiser. Would you spend any of your taxes on an interstellar cruiser? Yes? Well don't blame me if you wake up on Mars one day...it was your tax allocation decisions that contributed to the NASA bubble.

Noah: OK, but how would taxpayers know how much each agency needed? They can determine how much money they give, but the amount of money requested is set by the agency, right? So if the agency sets its website fundraising thermometer with a max of $100B when it can only really spend $50B effectively, how do people know when to stop giving it money?

Xero: Errr...because you would tell them.  You would create a blog entry that offers conclusive proof that the Dept of Transportation can only really effectively spend $50 billion dollars.  Isn't that what economists are for?  And then the Dept of Transportation would offer conclusive evidence that refutes your conclusive evidence.  And then all the trolls would chime in with their own conclusive evidence.

And taxpayers would be swimming in all sorts of conclusive evidence.  Why?  Because we forced government organizations to "solely" rely on persuasion.  Persuasion is the most wonderfullest thing.  It's really hard to overestimate its value.  Without persuasion there wouldn't be any information.  A person holding a gun doesn't have to explain to you why you should give him your money.  But if he didn't have the gun then he would be forced to explain that he wants your money to buy drugs.  That information would not persuade you to give him your money...which is why he resorted to using a gun in the first place.

Capitalism works because people are forced to solely rely on persuasion if they want your life...which explains exactly why socialism does not work.

If you understand the value of persuasion...then you will very much appreciate that Milton Friedman was not overreacting in this video when an interviewer started to ask him a hypothetical..."if you were a dictator for a day..." question.  Friedman quickly cut him off and emphatically said..."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."  Oh man oh man!  That perfectly embodies the difference between capitalism and socialism...the difference between conceit and humility.  As Hayek said..."The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

In a pragmatarian system...because of the possibility of the free-rider problem...people would still be forced to pay taxes anyways...so the gun would still be there.  But that doesn't mean that we have to eliminate persuasion from the equation.  We force people to pay taxes but we should solely rely on persuasion to convince them to spend their money...to spend a significant portion of their lives...on the public goods that we believe are underfunded.

Another way of looking at persuasion...and understanding what impels people to act...is from the perspective of "unease".  I disagree with Mises on quite a few points...but it's really hard to find anybody who has explained the general idea of human action as effectively and concisely as he did...

"We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care."

The amount of funding that government organizations received would reflect our levels of unease.  If the thought of taxpayers giving too much money to the Dept of Transportation made you uneasy then you'd blog about it.  If your unease was based on solid evidence...then your evidence would make taxpayers uneasy and influence their tax allocation decisions.

What makes me uneasy is not knowing what is truly making 150 million of our most productive citizens uneasy.  Why wouldn't we want to find out?  How can we prioritize how we spend our limited resources when we don't truly know what the biggest public concerns of our nation actually are?

Truthfully signalling our biggest concerns will help our brightest minds understand exactly where they can make the biggest impact in our lives.

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