Saturday, March 31, 2012

What are Taxes Worth?


In my post on A Wife Swapping Economy...I predicted that Peter Boettke would be the first economist to fully endorse pragmatarianism.  Here's my extended response to his blog entry...Don Boudreaux on Ludwig Lachmann...

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In the comments, Tom Palmer shared his favorite essay by Lachmann, "The Market Economy and the Distribution of Wealth".  I read it twice and found lots of great clues.  Here's one..
Moreover, what is a resource today may cease to be one tomorrow, while what is a valueless object today may become valuable tomorrow. The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. - Lachmann, The Market Economy and the Distribution of Wealth
...which you can compare to this clue that Bastiat offered before Lachmann was even born...
If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good. - Bastiat, Justice and Fraternity
...which you can compare to this clue that Turgot offered before Bastiat was even born...
There is no need to prove that each individual is the only competent judge of this most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He alone has an experience which is all the more reliable since it is limited to a single object. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want. - Turgot, The Turgot Collection
Our most valuable resource isn't any of our material resources...it's our individual "foresight"...our own "particular knowledge"...which I've taken to refer to as our unique perspectives...Perspective Matters - Economics in One Lesson.  Our unique perspectives allow us to see how limited resources might be used in new, valuable and productive ways.

Yet, for the past 300 years the people who have understood the value of perspectives have argued to limit the scope of government and reduce taxes.  Why didn't they see the value of millions and millions of taxpayers, each with their own unique perspective, having the freedom to use their taxes, the symbolic representation of their own countless sacrifices, to determine the proper scope of government?  Why didn't Turgot or Bastiat or Lachmann or Hayek or Friedman or Buchanan or Boettke or Kling or Rizzo or Caplan or Boudreaux see the value of allowing millions and millions of our most productive perspectives to use their taxes to reveal exactly what the government does that is worth their countless individual sacrifices?

You guys have the power to fundamentally change the debate with liberals.  Why not switch tactics on them?  Why not simultaneously prove that Einstein's definition of insanity doesn't apply to you guys?  Why not try an Aikido move by letting liberals have their taxes in exchange for individual foresight?  Would it be worth it to give up one thing you value in exchange for another thing that you value even more?  That is, of course, the very definition of sacrifice.

Why not have this discussion with liberals?  Discussion is simply free-trade.  It's where two or more people freely exchange their perspectives with each other.  We all value our perspectives... so wouldn't we all stand to benefit by freely trading our perspectives on perspectives?

How would liberals respond to our offering?  Is Paul Krugman really going to argue that his perspective does not matter?  Is Jeffrey Sachs really going to argue that the combined perspectives of 538 congresspeople are more valuable than the combined perspectives of 150 million of our most productive citizens?  Would Krugman and Sachs really argue that, from their perspectives, one use of a limited resource is as good as any?  Would they really argue that, from their perspectives, economics does not matter?  Let's find out!

Friday, March 30, 2012

The Visible Hand vs the Invisible Hand



Created this awesome (hah) picture to try and help illustrate a point that I'm struggling to make in this discussion over at the Ron Paul Forums... NAP, Utilitarianism, and Natural Law: Differentiating Morality, Practicality, and Legality.  The fellow that I'm having a discussion with, ProIndividual, wants to know what the end result would be of pragmatarianism.  How could I possibly know the end result of 150 million self-interested taxpayers determining the distribution of public funds?  

Tax choice is a means to end.  The "means" are the tax allocation decisions of 150 million self-interested, utility maximizing, purposefully acting taxpayers.  Are the "means" perfect?  Definitely not.  But they might as well be when you compare them to our current "means" of 538 congresspeople spending 150 million people's taxes.

Would allowing the invisible hand to determine the distribution of public funds drive us to pragma-socialism or anarcho-capitalism or somewhere in between?  Who knows?  Who cares?  Once you understand that perspectives matter...then you'll understand the value of allowing the perspectives of 150 million taxpayers to help shape the public sector.

So let's get this Magna Carta Movement started.

Sunday, March 25, 2012

The Magna Carta Movement

In this post...Consequentialist Discussion - Ron Paul Forums...I suggested that anybody who appreciates consequentialist discussion should take a look on the 9th page of this thread...Where Do Ron Paul's Ideas Come From?

Yesterday, helmuth_hubener responded to my post in that thread.  As I mentioned in my blog entry, you won't be able to read the thread unless you're a member of the Ron Paul Forums.  This is because the owner of the forum has all anarcho-capitalist discussion moved to the Political Philosophy category in order to avoid giving Ron Paul any negative publicity.

Here's my response to helmuth_hubener...and my attempt to tie everything together using the concept I discussed in my last post...Perspectives Matter - Economics in One Lesson.

The Conceptual Foundation for a Magna Carta Movement.

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helmuth_hubener, I spent an hour listening to Ralph Raico's first lecture...History: The Struggle for Liberty.  You guessed correctly that I would find it very enjoyable and enlightening.  If you haven't already done so, please do me a favor and carefully read this post of mine...Perspectives Matter - Economics in One Lesson.  It should take a lot less time than an hour to carefully read.

The thing is... Raico's first lecture strongly supports my argument.  So I can't quite figure out why you're considerably more enthusiastic for secession than you are for tax choice.  Admittedly, I didn't listen to the second lecture...but felt it was worthwhile to first compare some notes to see if we might not be saying the same thing in different ways.

Here's what you said...
More pragmatic than your tax-earmarking plan -- which I'm not against mind you -- is to advocate for smaller polities. Political breakup. Secession. Nullification. 10th Amendment. Any movement toward the radically decentralized tiny polities that existed in the Western European situation that was so stunningly, unprecedentedly, shockingly, thunderingly successful. Your tax-earmarking plan I put in kind of the same category as the "Read the Bills" plan -- a nice idea, sure let's have Congress pass that, I'm all for it. Is Congress going to pass it? No. So in the meantime, let's do other things which are proven to work. Political decentralization has a track record like nothing else ever -- its track record is that it completely transformed an entire world and made us all rich.
...and here's what Ralph Raico said...
...it was taxpayers who were represented in these different assemblies.   So when people talk about let's say the democractic factor...in the Dutch cities or in the the Italian city states it's not to be understood in the sense of present day democracy.  It's not mass democracy by any means...it's democracy of the taxpayers.  And that's what was involved in these assemblies.  Now, mentioned representative assemblies...there was also the general scholastic philosophy of natural law, and I mentioned the different charters granted by rulers and acting as sets of limitations on their power.  The most famous is the Magna Carta in English history.  Not famous to my students.  Who I think, they aren't that bad, they're just kind of average.  They've all heard of a lady called Harriet Tubman.  Many many fewer of them... virtually none of them know who Martin Luther King was named after.  And as for things like the Magna Carta, well, it's pretty much a mystery... - Ralph Raico, History: The Struggle for Liberty
Err?  You don't think that tax choice...aka pragmatarianism...aka the Magna Carta Movement would work.  So you suggested we try something that has been proven to work.  In order to help me better understand exactly what that is...you provided a link to Ralph Raico's lecture...where he attributed the success of Western Europe to a "democracy of the taxpayers"...which was made possible by the Magna Carta.

Isn't tax choice just the modern version of a "democracy of the taxpayers"?   Here's a passage that Raico quoted in his lecture...
Almost everywhere in Latin Christendom the principle was, at one time or another, accepted by the rulers that, apart from the normal revenues of the prince, no taxes could be imposed without the consent of parliament … By using their power of the purse [the parliaments] often influenced the rulers policies, especially restraining him from military adventures. A.R. Myers, Parliaments and Estates in Europe to 1789 
Compare it to the passage on the Wikipedia article on tax choice...
To guard against despotic royal rule, parliament sought to limit the kings’ powers to impose taxes so as to curtail their ability to maintain a standing army beyond times of war and immediate external threat - The evolution of parliament's power of the purse
Why did the Magna Carta work?  Because it decentralized power and control.  It transferred the power of the purse from one person to many people.  Why would tax choice work?  Because it would transfer the power of the purse from many people to a multitude of people.

Would secession achieve the same results?  Well...let's take a closer look...
Within this system, it was highly imprudent for any prince to attempt to infringe property rights in the manner customary elsewhere in the world. In constant rivalry with one another, princes found that outright expropriations, confiscatory taxation, and the blocking of trade did not go unpunished. The punishment was to be compelled to witness the relative economic progress of one's rivals, often through the movement of capital, and capitalists, to neighboring realms. The possibility of "exit," facilitated by geographical compactness and, especially, by cultural affinity, acted to transform the state into a "constrained predator" - Ralph Raico, The European Miracle
It would be great if you could read my post on the Dialectic of Unintended Consequences.  Here's a brief overview.  In the 50s and 60s, when unions were at the height of their power...they demanded such high wages that it became economically sound for companies to move their production overseas...aka "exit".  Where did the companies go?  Well...they couldn't go to China because Chairman Mao had blocked China completely off.  So the companies went to countries that were open to foreign investment...Hong Kong, Singapore, South Korea and Taiwan.  Those countries developed and then sent their own foreign investment into China.  They were able to do so because Deng Xiaoping had opened China up to foreign investment.

Why is it a good idea to be open to foreign investment?  Why is it a bad idea to be closed to foreign investment?  Do we have to push for secession to help people understand this concept?  Let's consider it on the individual level.

A while back I was banned from the Bleeding Heart Libertarian website.  Check out this screenshot from Matt Zwolinski's website...


The screenshot is part of Steve Horwitz's article Hating the State and Loving Liberty.  On the top of the screenshot it says, "The more we talk about loving liberty, the more we will recognize impediments to liberty in all of their forms, and the more likely we are to persuade others who claim to love liberty but perhaps don't see all its implications".  On the bottom it says, "The site has blocked you from posting new comments.  Showing 0 comments."

All too often we do on the individual level what Mao Zedong did on the national level.  We close ourselves off to foreign investment.  We close ourselves off to new ideas.  We block people and concepts that we do not agree with.  We ban other people's perspectives.

What happens when we close ourselves off to different perspectives?  What happened when Mao Zedong closed China off to foreign investment?  What happens when our government closes the public sector off to the perspectives of 150 million taxpayers?   We invariably suffer from a fatal conceit that has negative consequences.  

Here's what you posted about Deng Xiaoping...
Right, excellent example, and interesting that he is a hero of yours. Certainly his actions caused a great increase in the well-being of hundreds of millions of people, something which is more than most of us can say about our lives.
In context, he was saying that to justify his adoption of more-or-less free market ideas and tossing communism in the garbage heap. One European economic paradigm, that of Karl Marx and Frederich Engels, got tossed out because it didn't work, and another, the European or Western-style free market, got brought in. He was saying: guess what, guys? The free market works. It catches mice.
I think it's almost certain that Deng Xiaoping wouldn't have been able to accomplish what he did manage to accomplish if he had suggested tossing communism in the garbage can.   In a nation full of indoctrinated communists...that probably wouldn't have gone over too well.  He was also, after all, largely responsible....if not primarily responsible...for Tiananmen square.  When I lived in China I wasn't able to access Wikipedia... so... yeah... by no means did Deng Xiaoping suggest abolishing communism.

Of course...if you're not a member of this forum, then you wouldn't be able to access this Political Philosophy category.  Why is that?  Because the forum owner decided it might not be in Ron Paul's political interests to be associated with anarcho-capitalism.

The owner of the Ron Paul Forums and Deng Xiaoping both acted pragmatically.  What's the opposite of being pragmatic?  It's being dogmatic.  Both Mao Zedong and Murray Rothbard were dogmatic.

As I'm sure you're aware, Rothbard hated the state so much that if there had been a button that would have instantly and entirely abolished the state...then he would have pushed that button until his thumb blistered.  But by pushing that button he would have disregarded the multitude of people who, from their perspectives, believe that the state is absolutely necessary to ensure our survival and prosperity.  It doesn't mean that they are right...but it definitely means that Rothbard would have been wrong to completely disregard their perspectives.

As I argued in my post...Perspectives Matter - Economics in One Lesson...it's fundamentally important that we solely rely on persuasion to try and change people's minds.  

As far as I know, given that we live in a nation full of statists, you're not going to get anywhere by advocating that we abolish the state.  I might be wrong...but from my perspective, it's completely unnecessary to advocate abolishing the state or seceding from the state.  What we need to do is focus on promoting the idea that perspectives matter.

The basic idea is that two heads are better than one.  This is simply because we all have extremely limited perspectives.  I didn't know about Ralph Raico's lecture...but you did.  Why did you make the effort to share your partial knowledge with me?  Because you wanted to persuade me.  As a direct consequence of listening to the lecture I ran across this...
I now return to the fundamental question with which I began this article:  What is the difference between a just king and a great robber? For Aquinas, the difference is that the just king provides a public good: peace.  By diligently defending justice in the community, he shows himself worthy of his keep in the form of tolls and tributes limited by the fundamental law of the land, and he does not extract more than the maintenance his state requires. - Christopher Todd Meredith, The Ethical Basis for Taxation in the Thought of Thomas Aquinas
and this...
Thus, considered in themselves, in their own nature, in their normal state, and apart from all abuses, public services are, like private services, purely and simply acts of exchange. - Bastiat, Private and Public Services
and this...
The distinction between just taxation and legal plunder therefore hinges on the question of whether the taxpayer receives sufficiently valuable services in exchange for his payment. As Bastiat explains, “The state can put its taxes to either a good or a bad use. It puts them to a good use when it performs services for the public equivalent to the value it receives from the public. It puts them to a bad use when it squanders its revenues without giving the public anything in return.” - Christopher Todd Meredith, Taxation and Legal Plunder in the Thought of Frédéric Bastiat
and this...
Public taxes, even with the nation's consent, are a violation of property rights, since they can be levied only on values that have been produced by the land, the capital, or the industry of private individuals. Thus, whenever they exceed the indispensable minimum necessary for the preservation of society, they may justly be considered as an act of plunder. - Jean-Baptiste Say
and this...
If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good. - Bastiat, Justice and Fraternity
and this...
In other words...this is a case of commerce producing tolerance, producing harmony, producing a willingness to interact of course for mutual benefit. - Ralph Raico, History: The Struggle for Liberty
Out of all these insightful passages...this one by Bastiat is perhaps the most relevant to the idea that perspectives matter..."There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it."

How long ago did we pass that point in the road?  As Ralph Raico said in his lecture...his students have all heard of Harriet Tubman...but the Magna Carta is a mystery to them.  Our focus shouldn't be on abolishing the state...or worrying about the tax rate...or worrying about whether something is or isn't a legitimate public good.  Instead, our focus should be on helping people understand the value of opening our government up to "foreign" investment.  In other words...we should focus on trying to persuade people that's it's extremely valuable to integrate the combined foresight of 150 million taxpayers into the government.

In my post on a taxpayer division of labor...I discussed the idea of 150 million taxpayers each with their unique perspectives focusing on the areas that concern them.  Here's a pretty terrible illustration of the idea of 538 congresspeople blocking the perspectives of 150 million taxpayers.  A sword was easy to draw...but my girlfriend didn't quite grasp the concept until I explained it to her.



It's not just dangers that we might miss...but it's also opportunities that we might miss as well.  This is the Seen vs Unseen concept.

Of all people, you should be pretty aware that I'm not having much success doing this on my own.  So let's start a Magna Carta Movement!   In any case...you should really start your own blog.

Saturday, March 24, 2012

Perspectives Matter - Economics in One Lesson



Does your perspective matter?   Your perspective represents your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge.  Does all that matter?  Here are your options...

1. No, your perspective does not matter
2. Yes, your perspective does matter

Let's consider both possibilities.

1. No, your perspective does not matter

If your perspective does not matter then one use of your limited resources is as good as any.  Therefore, it shouldn't matter if congress uses your taxes to clog toilets.

2. Yes, your perspective does matter

If your perspective does matter, then one use of your limited resources is not as good as any.  Therefore, it's entirely up to you to decide whether it matters if congress uses your taxes to clog toilets.

Here's the paradox.  You can't choose which government organizations you give your taxes to.  Therefore, your perspective does not matter.  In order to resolve this paradox you have to figure out why your perspective matters in the private sector but not in the public sector.  Why would the "best" use of your limited resources matter in the private sector but not in the public sector?  Why would economics, otherwise known as the study of scarcity, matter in the private sector but not in the public sector?  Either economics matters...or it does not.  Either your limited resources matter...or they do not.  Either your perspective matters...or it does not.

Too Many Eggs in One Basket

Let's consider a situation where people's perspectives did not matter at all...socialism.  A committee of government planners tried to determine the "best" uses of an entire nation's resources.  The result?  Epic fail.  Why though?  Simply because putting too many eggs in one basket minimizes rewards and maximizes risks.  We all have unique perspectives...yet we all make mistakes...aka fallibilism.  This is why it's not a good idea to put too many resources in the hands of government planners.

What about our system though?  Our system is a mixed economy.  We have two sectors...the private sector and the public sector.  In the private sector your perspective matters...you can determine the best use of your limited resources.  In the public sector, however, your perspective does not matter...you cannot determine the best use of your limited resources.  In essence, we follow the rules of economics in the private sector but not in the public sector.  What do you think the results are of disregarding the rules of economics in the public sector?  What do you think the consequences are of disregarding 150 million taxpayer's unique perspectives?

The consequences are substantial fails, depressions and recessions, which represent the misallocation of substantial resources.  Think about it on the individual level.  Let's say that you make a mistake and gamble your home on a failed business idea.  What are the results of putting all your eggs in one basket?  What are the consequences of misallocating your resources?  You lose your home.  But do any of your neighbors suffer from the consequences of your mistake?  Nope.
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors.  This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah, Fallibility in Human Organizations and Political Systems
Individuals and corporations simply do not control enough resources to cause substantial failures.  On the other hand, our committee of government planners, aka congress, does.  If the tax rate is 25% then we can imagine that 538 people control 1/4 of our nation's resources.  That is too many eggs in one basket.  Our mixed economy is part socialism...and we understand exactly why socialism fails...so why is it any surprise when our system substantially fails?  Yet, what happens when substantial failures occur?  Each party conveniently blames the other party.  And guess what?  You believe them and the pattern repeats itself.

As long as we disregard 150 million taxpayer's unique perspectives, we will have to deal with substantial failures.

Humility vs Conceit

The best analogy of economics, that I know of, is Buddha's parable of the blind men and the elephant.  Each blind person was touching a different part of the elephant.  We all have access to an essential part of the truth...which is our own unique perspective.  Economics, the study of scarcity, only has meaning in terms of our perspectives.

The trick is understanding that our perspectives, while unique, are extremely limited.  It requires humility for us to appreciate just how limited our perspectives truly are.  People that fail to appreciate just how limited their perspective truly are, can be said to suffer from conceit.  These conceited people erroneously believe that other people's perspectives do not matter.

In order to understand the dynamic between humility and conceit, let's consider Frederic Bastiat's perspective and then compare it to Elizabeth Warren's perspective.  Here's Bastiat's perspective...
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." -  Frederic Bastiat, The Seen vs the Unseen
What difference do the results make?  That depends entirely on your perspective.
 In the first place, justice always suffers from it somewhat. Since James Goodfellow has sweated to earn his hundred-sou piece with some satisfaction in view, he is irritated, to say the least, that the tax intervenes to take this satisfaction away from him and give it to someone else. Now, certainly it is up to those who levy the tax to give some good reasons for it. We have seen that the state gives a detestable reason when it says: "With these hundred sous I am going to put some men to work," for James Goodfellow (as soon as he has seen the light) will not fail to respond: "Good Lord! With a hundred sous I could have put them to work myself." -
Frederic Bastiat, The Seen vs the Unseen
What are some good reasons for taxes?   That depends entirely on your perspective.
When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even. But when James Goodfellow hands over a hundred sous to a government official to receive no service for it or even to be subjected to inconveniences, it is as if he were to give his money to a thief. It serves no purpose to say that the official will spend these hundred sous for the great profit of our national industry; the more the thief can do with them, the more James Goodfellow could have done with them if he had not met on his way either the extralegal or the legal parasite. - Frederic Bastiat, The Seen vs the Unseen
Which brings us to Elizabeth Warren's perspective.  As I mentioned in my post on the opportunity costs of public transportation...she provides a perfect example of somebody who is conceited.  Here's the famous bit from her speech...
I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!  There is nobody in this country who got rich on his own. Nobody.  You built a factory out there—good for you! But I want to be clear.  You moved your goods to market on the roads the rest of us paid for.  You hired workers the rest of us paid to educate.  You were safe in your factory because of police forces and fire forces that the rest of us paid for.  You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.  Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.  But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along. - Elizabeth Warren
Do you think that Elizabeth Warren knows better than James Goodfellow what is and isn't essential for the successful operation of his business?  Why would anybody want their business to fail?  Why would anybody want their country to fail?  If Goodfellow has to pay taxes anyways...then why wouldn't he spend his taxes on the public goods which benefit his business the most?  If we have to pay taxes anyways....then why wouldn't we spend our taxes on the public goods which benefit our country the most?

If our perspectives do not matter then our country does not matter.  Value only has meaning in terms of our  perspectives.  We can maximize our country's value by allowing 150 million taxpayer's unique perspectives to determine the distribution of public funds.

Personal Shoppers

Congress functions as our personal shoppers for public goods.  Unlike in the private sector however, we do not have the option to shop for ourselves.  If you believe that congress is wasting your taxes then you should have the option to directly allocate your own taxes.  There's absolutely nothing wrong with having public personal shoppers...as long as taxpayers have the freedom to skip the middlemen and directly give their taxes to the government organizations that produce the "best" results.

What About Fairness?

Fairness is wonderful and admirable and desirable...but it does not trump certain failure.  Ignoring the rules of economics always results in failure.  If you want to support fairness...then it has to be with your own taxes.  No matter how you spin it...supporting fairness with other people's hard-earned taxes is nothing more than conceit.  You're assuming that your perspective is not as limited as somebody else's perspective.  We all have limited perspectives, which is exactly why we should strive to tolerate, if not respect, other people's perspectives.  Here's what Milton Friedman strongly emphasized...
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.
If we can't persuade other taxpayers that fairness is desirable...then we shouldn't impose our perspective on them even if we had the power to do it.  This is because it's entirely possible that we might be wrong.  Therefore, we should hedge our bets by incorporating a multitude of unique perspectives into the public sector.

What About Information?

Persuasion isn't just valuable in terms of tolerance...it's also valuable in terms of the exchange of information.  In order to try and persuade other taxpayers that fairness matters...you would have to share your partial knowledge with them.  In order to try and persuade you that perspectives matter...I have to share my partial knowledge with you.  In order for government organizations to try and persuade us that their responsibilities matter...they would have to share their partial knowledge with us.  This is how we solve problems and make significant progress.
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. - Friedrich Hayek, The Use of Knowledge in Society
What is the total amount of information contained within the perspectives of 150 million taxpayers?  Does congress even know your name...let alone your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge?  All that information is not conveyed by voting.  It can only be conveyed by allowing you to choose which government organizations you give your limited resources to.

It's important to be really clear on this...so here's a bit of redundancy.  Taxpayers should not serve the government...the government should serve taxpayers.  We should not exist to satisfy the demands of the government...the government should exist to satisfy our demands.  The government should not shape the perspectives of taxpayers....the perspectives of taxpayers should shape the government.  The government should not be the sculptor and taxpayers should not be the medium   The relationship between taxpayers and the government should not violate the rules of economics.  The longer that the government disregards our perspectives...the longer that we'll have to suffer the economic consequences.

Conclusion

Hedging our bets by allowing taxpayers to directly allocate their taxes minimizes the risk and maximizes the reward for our country as a whole.  It shouldn't matter whether an organization is public or private...what matters is whether it produces results.  Results only have meaning in terms of your perspective, which is exactly why you should have the freedom to choose which government organizations you give your limited resources to.  Sacrifice without reward is waste...and nobody wants their taxes wasted.

What is the value of 150 million taxpayers, each with their own unique perspective, striving to ensure that their sacrifices are not in vain?   From my perspective, the value of pragmatarianism is 150 million times greater than the value of 538 people spending money that they did not toil, strive, labor, sweat and sacrifice to earn.

The question then remains...does your perspective matter?

The Granularity of Congress in a Pragmatarian System

It's not in the top 5 different responses to pragmatarianism...but the topic of granularity has got to be in the top 10.  Granularity basically refers to how narrowly/specifically you would be able to directly allocate your taxes.  For example, in this thread...Debunking the Crowding Out Concept...Deuce posted the following...
So wait. Under your plan people are responsible for funding individual actions by government agencies now? Like, I can fund the purchase of 10,000 M-16's for a base in Ohio but not fund an invasion of Afghanistan?
When it comes to granularity in a pragmatarian system...anybody's guess is as good as mine.  Just recently though I thought about granularity in terms of congress.  So far nobody has brought it up.

In a pragmatarian system, if somebody didn't want to directly allocate their taxes, then they would still be able to just give their taxes to congress.  But would any taxpayers want to only give their taxes to specific congresspeople?  

It's kind of interesting to try and imagine how that would play out.  Would you be inclined to give any congressperson your taxes?  If so, which one?  Which congressperson would receive the most/least amount of taxes?  Does the thought of any single congressperson receiving too much tax money make you nervous?  If so, what would that amount be?  

Kind of along a similar vein...in terms of how the scope of government might expand...here was my response to Daniel Kuehn's comment which he posted here...Pragmatarianism Disproved?
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. 
While you're at it...try and figure out what would happen to the political parties in a pragmatarian system.  

Perspectives Matter - Backstory

The study of knowledge (epistemology) is pretty darn interesting.  Here are a couple discussions which provide some recent background on my upcoming post (Perspectives Matter - Economics in One Lesson).  The first discussion took place on a political forum...Libertarian Pudding Tastes Good!!!...and the second discussion took place on Gene Callahan's recent an entry on business cycles....Notes on a General Theory of the Social Cycle.

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Reiver
Why isn't socialism a viable concept? Because it's impossible for a king...or a committee...to determine the optimal level of funding for an organization.
This doesn't make sense. Economic planning is the norm in all viable economic paradigms. Capitalism is certainly reliant on it, with the invisible hand often deliberately avoided.

Not Amused

Companies change their plan with conditions, government try to force the condition to fit their plan.

Companies often reduce spending, and terminate products that are no longer viable. Government rarely reduces spending, and rarely only terminates program spending.

Over time, companies provide more value for the same, or less cost, or go out of business. The cost of government has little to do with it's value.

Reiver
Companies change their plan with conditions
But they actively avoid the market. The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)

Xerographica

It's only nonsensical if you're unfamiliar with the opportunity cost concept...
Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. - Wikipedia
To familiarize yourself with this concept take a look at the following...
If a pragmatarian system were implemented...would you guess that the scope of government would narrow or broaden? In other words...would the result be anarcho-capitalismpragma-socialism or somewhere in between?

Reiver 
It's only nonsensical if you're unfamiliar with the opportunity cost concept...
Opportunity costs ensure a distinction between economics and accountancy. It doesn't provide any counter to my comment. Try again:

The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)
To familiarize yourself with this concept take a look at the following... 
I'm not interested in your petty advertising of your blog. Defend your argument with something that makes sense!

Xerographica

Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because your perspective doesn't matter.

Xerographica

Maybe you missed my question. Here it is again...

Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because you perspective doesn't matter.

So does your perspective matter? Is this a difficult question for you?

Reiver

The problem is that you have made economic comment that is certainly invalid. Clearly you also cannot (at least attempt to) suggest otherwise.

Xerographica

Why are you avoiding the question? Let me ask again. Does your perspective matter?

Reiver

If you want to improve your comments and achieve some validity? Certainly! So far I haven't seen a valid economic comment from you. Your attempt to reply with a reference to opportunity costs, for example, was laughable

Xerographica

So your perspective matters! But only in terms of me improving my comments and achieving some validity? Your perspective only matters in this ridiculously limited regard? You exist solely to improve my comments? Are you sure your perspective doesn't also matter in other areas as well?

Reiver

Your dodge really isn't imaginative or entertaining. Except for your petty attempt at advertising your blog, care to actually try to respond 'with economics'?

Xerographica

LOL...I'm asking you if your perspective matters. How did I define "perspective"? I defined it as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Economics, in case you missed it, is the study of scarcity. For some reason you believe that your perspective...your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge...has nothing to do with with study of scarcity.

*awkward*

Hmmm...maybe you should read my blog and then try again.

Reiver

You're not going to impress me with reference to ECon 101 textbooks. Let's see if we can coax you towards economic comment, just for the crack:

The socialist calculation debate has effectively been won. Rather than referring to the theoretical reproduction of neoclassical perfect competition, we can refer to the use of market socialism and how- with a more stable market supported by the defence of property rights (including the worker right to receive the value of their labour)- it actually reduces the need for economic planning

Try and critique the comment. Don't go back to the insipid dodging!

Xerographica

Insipid dodging? My "insipid dodging" definitively proved that you don't know the first thing about economics. You can't even answer the question of whether your perspective matters. If people's perspectives do not matter then what's the point of discussing scarcity? One use of a limited resource would be as good as any.

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The economist Gene Callahan recently posted an entry on business cycles....Notes on a General Theory of the Social Cycle.  So I posted a comment on how how perspectives matter...but Callahan totally misunderstood me.  I took full responsibility and tried again.  Here was his response...
@xerographica: “The problem is that I’m the only one seriously advocating that taxpayers be allowed to directly allocate their taxes.”
That’s cool and all, but i don’t see what it has to do with creating a general theory of social cycles.
Shucks.  Here was my third attempt...with a bit more polishing...

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It boils down to hedging our bets. We all make mistakes…aka fallibilism…therefore…we shouldn’t put all our eggs in one basket. Let’s evaluate this on three levels...
  1. Epic Fail = Socialism resulted in epic fails because all the eggs were in one basket. One committee controlled an entire nation’s resources.  
  2. Substantial Fail = Mixed economies like our own result in depressions and recessions because we allow a committee (538 congresspeople) to control the distribution of 150 million people’s taxes. In other words…we have way too many eggs in one basket. For example, a tax rate of 25% means that 538 congresspeople control around one quarter of our nation’s resources.
  3. Micro Fail = If I gamble my home on a business idea that doesn't pan out…then I'll lose my home...but this won't have any impact on my neighbors’ homes.
The only difference between the three failures is scale/scope.  Depressions and recessions...widespread failures...are a direct result of large scale resource misallocations.

As we established…the efficient use of limited resources depends entirely on our perspectives. Does congress have any idea what your perspective is on how they should spend your taxes? Does it matter that they do not?  What difference does it make that 538 congresspeople have no idea what 150 million people’s unique perspectives are?

People think that voting reveals their perspectives. Nothing could be further from the truth. The only way to reveal somebody’s perspective is to allow them to make decisions with their own, individual time/money. This is exactly why taxpayers should be able to choose which government organizations receive their own, individual taxes. This would allow them to integrate their unique perspectives…which would lead to the efficient allocation of public funds…which would reduce…if not eliminate…widespread failures.

Of course…I could be wrong!  The thing is though...this very concept is based on the idea of fallibilism…
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. – Raaj K. Sah, Fallibility in Human Organizations and Political Systems
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Callahan responded that I was trolling and bothersome.  He also said that pragmatarianism is my "pet peeve".  It's my "pet peeve" that the perspectives of 150 million taxpayers do not matter in the public sector?  That's one way of putting it.  Why isn't it his pet peeve as well?   Why isn't it every economist's pet peeve?  Does it matter that your perspective has no direct influence on the distribution of public funds?  Is it possible for a committee of 538 people to efficiently allocate a huge chunk of our nation's resources?  Am I tilting at windmills here...or are economists ignoring the neon pink bull wreaking havoc in our china shop?

Friday, March 23, 2012

Consequentialist Discussion - Ron Paul Forums

For a while now I've been participating on the Ron Paul Forums.  In order to avoid giving Ron Paul any negative publicity...the forum owners move all anarcho-capitalist discussions to the Political Philosophy subcategory...which is only accessible to members of the forum.  When I joined the forums, that seemed to be the category most relevant to pragmatarianism, so that's been the only place where I've participated.

Unfortunately, nearly all the anarcho-capitalists there are of the "natural rights" type.  Meaning...they make moral arguments against the government...ie "taxes are theft".  Not too long ago however, a few members and myself had a discussion of a decidedly more consequentialist...aka "results"...nature.

The discussion we had seemed extremely productive...but my perception might be skewed given that I've participated in so many less productive discussions with people making moral arguments.  Kinda like how hunger, the best sauce, can make even the most meager dishes taste delicious.  But if you're at all interested in consequentialist discussions then I highly recommend reading the discussion which took place on the 9th page of this thread....Where Do Ron Paul's Ideas Come From?  Well...for me it's on the 9th page because I always change my settings to display the maximum amount of posts per page.

In another entry of mine...Is There a Platypus Controlling You...I mentioned another highly worthwhile post that another member had written.  In my opinion, both these two things...wistfulthinker's comments on coercion... and the consequentialist discussion... make it well worth the minimal effort it requires to sign up to the Ron Paul forums in order to read them.

Part of the challenge when it comes to pragmatarianism is articulating my thoughts.  How can I most effectively communicate the value of applying market principles to the public sector?  It seems like I'm constantly revising and tweaking the delivery in an attempt to get it right.  When I get it wrong...people's responses highlight my failure to explain some key concept.  The tricky part is when somebody stops responding .  It doesn't mean that I got it right...but there's just no evidence for me to figure out exactly where I failed.

Here are a few guesses...
  1. They gave up...they decided it wasn't worth their time to continue the discussion (opportunity cost)
  2. They wanted to respond...they just never got around to it
  3. They couldn't respond...they were unable to counter my arguments 
Of course, in  my mind, what I'm saying is true.  So I get the sense that, if somebody does start to understand my argument, then it will be disconcerting for them to have their fundamental beliefs challenged.  By no means is it a pleasant sensation or experience to begin to understand that your accepted beliefs are actually myths.  

Some myths are harmless.  Personally, I would never try and dissuade somebody of their belief in Santa Claus or God.  On the other hand...some myths are extremely harmful.  Believing in congress is decidedly harmful.  It's really not a good idea to allow 538 people to decide how 150 million people's public funds should be distributed.

What's the best way to dissuade people of their beliefs in congress?  The best way has to be based on consequentialist arguments.  Somehow you have to demonstrate that it's extremely beneficial to allow 150 million people to directly allocate their own taxes among the various government organizations.

Here's my post...which happens to be the last post...from the discussion on consequentialism...

[Update] helmuth_hubener replied to this post.  You can read my response to his response here...The Magna Carta Movement.

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newbitech, helmuth_hubener put it better than I could...especially with his example of the man rushing to get his wife to the hospital. From the anarcho-capitalist perspective...forcing people to pay taxes is like forcing that man to stop and give that other guy directions. That wouldn't be an efficient allocation of his limited resources.

Pragmatarianism, on the other hand, says that people should be forced to pay taxes...but they should be allowed to choose which government organizations receive their taxes. Forcing people to pay taxes recognizes the value of the collective...while allowing people to choose which government organizations receive their taxes recognizes the value of the individual.

Let's consider the following...
If you read enough (if you are young enough), eventually the truth will become evident and you will realize that having one group have a monopoly on ultimate decision-making over an arbitrary geographical area is total craziness! You'll have an aha! moment, and step back and look at that idea and say "how could anyone think that's a good idea? Why would a monopoly over all ultimate decision-making be likely to lead to good results, when a monopoly over anything else, say, paper-making, inevitably leads to bad results?" You'll likely realize things like:
1. Monopoly over ultimate decision-making doesn't work. How could it? It's crazy.
2. Monopoly over ultimate decision-making destroys prosperity.
3. Monopoly over ultimate decision-making is immoral. It is opposed to natural rights / human nature. - helmuth_hubener
The challenge here is to try and figure out how allowing taxpayers to directly allocate their taxes could lead to bad results. How could injecting individualism into the public sector be a bad thing?

Pragmatarianism is pragmatic consequentialism. My hero...Deng Xiaoping...was a pragmatic consequentialist. He went around saying that it shouldn't matter whether a cat was black or white...what matters is whether it catches mice. What I'm going around saying is that it shouldn't matter whether an organization is public or private...what matters is whether it produces good results.

Why would any taxpayers spend their money on an organization that produces bad results? Would you? Nobody would. Yet helmuth_hubener and others don't seem to trust the opportunity cost decisions of millions and millions of taxpayers. This is the part I really struggle to understand. The problem has never ever ever ever been with the taking...it's always been with the spending.

A committee should never impose priorities. They are welcome to respond to priorities...they are welcome to try and tell you what your priorities should be...they are welcome to try and influence your priorities by sharing partial knowledge with you. Congress though, unlike the board of a fortune 500 company, tries to impose its priorities on an entire nation. This is a recipe for substantial failures.

Unlike with socialism though...congress does't control all the resources. So rather than producing epic failures...our system produces recessions/depressions. Mises and many others were certain that a mixed system was unsustainable...and it would inevitably slide towards socialism. I kind of doubt this though because our system does self-correct to some extent...but the core problem is never addressed. Well...aside from those that advocate throwing the baby out with the bath water.

I have no problem with the existence of government...or congress...or taxes....as long as taxpayers are allowed to use their individual taxes to indicate what their priorities are. I can't argue against the priorities of 150 million taxpayers. The priorities of taxpayers should shape the government...the government should not shape the priorities of taxpayers.

In other words...taxpayers should be the sculptor...and the government should be the medium. It's a fatal conceit to believe that it should be the other way around.

Honestly though...for as long as I've been a member of this forum...this is the first time we've ever had an honest to goodness consequentialist discussion. Every other time it's been the deontological argument..."taxes are theft".

Wednesday, March 21, 2012

Anarcho-capitalism and Pragmatarianism

Anarcho-capitalists can be divided into two groups...consequentialist and deontological.  The consequentialist anarcho-capitalists believe that the private sector can do everything better than the government.  For example, anarcho-capitalists like David Friedman and Peter Boettke make economic arguments for eliminating the government.  Perhaps they might say that their favorite political philosopher was Adam Smith.

Deontological anarcho-capitalists...more commonly known as "natural rights" anarcho-capitalists...make moral arguments for eliminating the government.  For example, the "taxes are theft" argument is an argument that "natural rights" anarcho-capitalists would make.  They'll also frequently use words like "aggression" and "violence" and "rape"...and "hate".  If "natural rights" anarcho-capitalists had to choose one of their favorite political philosophers chances are really good that they'd choose Murray Rothbard...Do You Hate the State?

Personally, I've never heard a consequentialist anarcho-capitalist make the "taxes are theft" argument...but plenty of deontological anarcho-capitalists have no problem making consequentialist arguments.  In theory though...a "natural rights" anarcho-capitalist should support abolishing the government no matter what the consequences would be.  Just like a consequentialist anarcho-capitalist should support a little government if it can be proven that the consequences are better than abolishing government.

When it comes to pragmatarianism...so far, all the "natural rights" anarcho-capitalists that I've proposed the idea to have vociferously rejected it.  On the other hand, only two consequentialist anarcho-capitalists have had anything to say about it.  James E. Miller seemed open to the idea while David Friedman did not see the value....
I don't think that letting taxpayers allocate their taxes among options provided by the government solves the fundamental problems of government. - David Friedman
Unfortunately, that's all he said.  He never substantiated his claim...and the suspense is killing me.  Well...not quite...but I would really love to hear his critique.  Some thing with Peter Boettke!  Any other consequentialists...anarcho-capitalist or otherwise...are certainly welcome to share their critique of pragmatarianism as well.

In the meantime...I'll try and figure out what's going on with all these "natural rights" anarcho-capitalists.  For example, when I posted my libertarian pudding image on the Ron Paul Forums...one of the anarcho-capitalists who wrote this critique of pragmatarianism...modified my image in a way that made his opinion on pragmatarianism quite clear.

Here was my response...
Anarcho-Capitalist, if the government is truly shit...then wouldn't allowing taxpayers to directly allocate their taxes help them understand that the government is shit? Most of the people I talk to fanatically believe that the government is not shit. They believe that the government helps flush shit down the toilet.  
Both sides of the debate can't be 100% correct. What I don't understand is...if you're so dogmatically certain that your perspective absolutely reflects reality...then why wouldn't you tirelessly promote allowing taxpayers to see exactly how their own, individual, hard-earned taxes are being spent? What else could more effectively open their eyes? You say that their money is just being flushed down the toilet yet you don't want them to open their eyes. It just doesn't follow. 
The other side believes that you're nuts...and you believe that they're nuts...so why not just empower 150 million self-interested, utility maximizing, purposefully acting, psychic profit seeking taxpayers to use their hard-earned taxes to prove which side is truly nuts? What are you afraid of? The more you fight against pragmatarianism the less credible your position becomes.
With that in mind, here's the illustration that I came up with.  Feel free to disseminate it and modify it




















Here's a snippet of what I had written earlier over on the libertarian forum...Taxes Are Not the Problem...
The goal of pragmatarianism is to highlight the folly of committees determining funding. You can think whatever you want about taxes and still agree with the fundamental premise of pragmatarianism. Anarcho-capitalists, minarchists and libertarians can argue for days about whether taxes are truly necessary...but they should all be able to support the key premise of pragmatarianism: it's a myth to believe that a committee can determine the optimal level of funding for an organization. If you believe that a committee can determine the optimal level of funding for any organization...then that is the same thing as believing in socialism.

Pragmatarianism is something that we should all be able to support.


Tuesday, March 20, 2012

Libertarian Pudding Tastes Good!!

All pictures are not worth a thousand words.  Take, for example, these tax choice pictures that I created using MS PowerPoint...




































It's two versions of the same picture.  Which one do you like better?  Yeah yeah...I won't give up my day job!  If anybody thinks they can illustrate the concept better than I did...well...they are probably right.  But, I'd definitely like to see some proof!  Because, after all, the proof is in the pudding.  Feel free to post these images around and modify them however you like.

For a while now I've thought about trying to illustrate this concept...but what finally motivated me to do so was this epic debate between liberals and libertarians... Does The Libertarian Movement Embody The Worst of Human Traits?

As usual...the debate centered around the proper scope of government.  Why invest so much time and energy into debating the proper scope of government?  I get that liberals might want to argue over the proper scope of government...but what excuse do libertarians have?  It seems pretty clear that the large majority of libertarians do not understand that if an individual or a committee can truly know the proper scope of government then socialism is a viable concept.

Why isn't socialism a viable concept? Because it's impossible for a king...or a committee...to determine the optimal level of funding for an organization.  This is because funding can only be determined by demand. And what is demand? Demand is the aggregate of priorities.  For some reason people think that voting reveals their priorities.  The truth of the matter is that priorities can only be revealed when people spend their own time/money.

Therefore, in order to determine the proper scope of government (taste the pudding) we should just allow taxpayers to directly allocate their taxes...aka pragmatarianism.  For example, at anytime throughout the year you could visit the Environmental Protection Agency (EPA) website and submit a payment. The EPA would then notify the IRS that you had submitted a payment.

Consider tax choice from the perspective of Frédéric Bastiat...
It is quite true that often, nearly always if you will, the government official renders an equivalent service to James Goodfellow. In this case there is no loss on either side; there is only an exchange. Therefore, my argument is not in any way concerned with useful functions. I say this: If you wish to create a government office, prove its usefulness. Demonstrate that to James Goodfellow it is worth the equivalent of what it costs him by virtue of the services it renders him. - What Is Seen and What is Unseen
A useful function for one person might be a useless function for another person.  Which is why it's useless to debate the proper scope of government.  

One thing that libertarians tend to ask is how the tax rate would be determined.  Congress would still determine the tax rate but it seems reasonable to say that the tax rate would reflect the scope of government.  If taxpayers only decided to fund congress, the IRS and Dept of Defense...then it wouldn't make any sense for congress to set the tax rate at 50% or 75% or 100%.  So...the tax allocation decisions of millions and millions of utility maximing taxpayers would determine the scope of government...and the scope of government would determine the tax rate.  The more things the government does...the greater the justification for raising taxes.  The less things the government does...the greater the justification for lowering taxes.

This is all painfully obvious to me...but, unfortunately, I fail miserably at conveying this concept to others.  For example...consider this exchange that I had with a libertarian...

Xerographica

I didn't ask about lowering taxes...so your answer isn't quite clear. Let's try this another way. If you had to choose between A) allowing taxpayers to directly allocate their taxes and B) your form of libertarianism...then which would you choose?

RabidAlpaca

What kind of a stupid question is that? "Would you like my way, or yours?" Clearly I would prefer my way, where the tax rate is as low as possible, only high enough to fund the necessary services for the government to protect our natural rights. My original answer was perfectly clear as to how I stand.

If there are options as to where to allocate your taxes, as you suggest, then there is absolutely no reason that whatever the options are can't be accomplished by the free market. The government should only be there for common goals, such as national defense, the police, the fire department, and the judicial system, just as I stated before.

Xerographica

Naw, it wasn't a stupid question...you just failed to predict the follow up question. Which is...why wouldn't my way reveal the truth of your way? You say that the private sector is BETTER at accomplishing everything except for national defense, the fire dept and the judicial system...so why wouldn't the tax allocation decisions of 150 million self-interested, utility maximizing taxpayers (aka consumers) reflect the truth of your assessment? Why would they pay the government to do something that the private sector is CLEARLY better at doing?

If you truly understand how scarce resources are efficiently allocated...then you'd understand that my way is the "put your money where your mouth is" version of your way.

RabidAlpaca 

I see exactly what you're getting at, but it doesn't make any sense as to how it pertains to what I'm saying.

I see people keeping more of their paycheck as a way to best allocate funds, through the free market. People will spend money on what is dear to them. You seem to support some bastardized version where we all pay the substantial taxes into the government that we do now, but somehow directly vote as what to spend it on. This is not only inefficient, but also makes zero sense.

As to what Turtledude was replying to you:

"The state is the great fiction by which everybody seeks to live at the expense of everybody else." ~ Frederic Bastiat

Xerographica

I don't understand your response at all. You say that the private sector is clearly better at supplying cheese whiz. My response was to ask you why taxpayers would choose to spend any of their taxes on government cheese whiz. What's inefficient about this system? Do you think Bastiat would disprove? Why would he? In this system you would only be able to spend your own, individual taxes.

Why worry about the tax rate? The tax rate merely reflects exactly how many things the government does. In other words...the tax rate reflects the scope of government. If nobody purchases government cheese whiz...then the government would no longer supply cheese whiz. This would narrow the scope of government and the tax rate would decrease accordingly.

RabidAlpaca

I've answered you at least 3 times, in clear and plain english, and you continue to not understand. You seem to be trying to convince me of something, but doing a poor job of actually formulating it. There are certain government services, like the ones I mentioned, that are not optional, because they support every single citizen (for the fourth time: national defense, police and fire departments, and the justice system) This would require an extremely minimal tax rate. Everything else can be handled by the free market, to include cheese whiz. I've stated more than once that I don't like or understand the need for your a-la-carte tax system, and that's the last time I'll say it.

Xerographica

So...rather than allowing 150 million taxpayers to determine the proper scope of government...you'd prefer it if everybody just trusted that your perspective was correct. We are all just blind men touching different parts of an elephant...except for you. You're the only person that can see.
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. - Friedrich Hayek, The Use of Knowledge in Society
Evidently Hayek didn't know how exceptional you are. That makes sense though...because, like the rest of us blind people, he only had partial knowledge.

RabidAlpaca

Your'e an idiot if you think F. A. Hayek didn't support a free market, that was his baby. He argued very strongly against government control of the economy. I believe in a republic, not a democracy. "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." ~ Ben Franklin

In a democracy the majority can vote to take the rights from the minority. In a republic, everyone is protected equally under the law.

It's not my perspective, I'm a constitutionalist, it's the perspective of our forefathers, and what this country was founded on.

Xerographica

Oh, it's not your perspective...it's the perspective of a committee of government planners. Well...if a committee of government planners can truly know the proper scope of government then I don't know what possible objections you might have with socialism.

Of course I know that Hayek was a champion of free-markets. Do you think I just pulled that passage out of thin air? Hayek's partial knowledge concept and Bastiat's opportunity cost concept are the two economic justifications for allowing taxpayers to directly allocate their taxes.

According to Einstein...I'd have to be insane to try and promote the same type of libertarianism that has been promoted for the past couple hundred years. Nope...count me out...you go ahead. A while back I figured out that the same exact thing could be achieved by applying market principles to the public sector. Well...assuming that libertarians correctly guessed the proper scope of government.

Monday, March 19, 2012

Priorities in Peril

David Friedman is a bit skeptical regarding the evidence shared by those who are concerned with global warming.  Here are a couple of my comments on his global warming entries.

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Nordhaus on Global Warming

Speaking of partial knowledge. My guess is that none of you know the significance of my username. It refers to an epiphytic species of plant in the bromeliad family (ie pineapples)...Tillandsia xerographica.

For as long as I can remember I've been fascinated with epiphytes. Epiphytes, unlike parasites (ie mistletoe) do not derive any nutrients from their hosts, which is why they can grow on rocks as well as on trees and in quite a few instances...on cacti even!!! How cool is that? Talk about a marvelous adaptation in the ever constant conquest of space.  (Nerd alert - read the short Environmentalism and Ecology section for the Wikipedia article on Frank Herbert's classic sci-fi novel Dune)

The Orchidaceae, with around 30,000 species, is probably the largest plant family. It also has the greatest number of epiphytic species. What's unique about the orchid family is that their seeds are so tiny that they do not contain enough nutrients to germinate on their own. In order for the seed to germinate...it has to be penetrated by a certain species of fungus. The seed then manages to derive enough nutrients from the fungus to germinate. The fungus persists in and out of the roots of the orchid...and as far as I can tell...the orchid roots help the fungus colonize the tree that it is growing on...which is a mutually beneficial relationship.

Here we can see the opportunity cost concept. The orchid seed forgoes the weight of a "pack lunch" in order for the wind to carry it greater distances away.

The orchids that I study are the epiphytic, eurythermal, xerophytic species. In other words...they grow on trees/cactus/rocks and can tolerate wide fluctuations in temperature as well as extended periods of drought. This group represents perhaps anywhere from 1,000 to 3,000 species of orchids...depending on where you draw the line.  These species of plants make do with ridiculously limited resources. Relatively speaking...how many resources...nutrients/moisture...can there be on the surface of a cactus?  Economics is the study of scarcity...so if you want to study economics then you should study xerophytic epiphytes!

On the other end of the tolerance continuum...you'll find the species of orchids that have exact and extremely narrow temperature/moisture requirements. Some of them only grow in one valley...at a specific elevation...in a very specific microhabitat. These are the kinds of orchids that I have no interest in trying to grow outdoors here in Southern California.

That being said, it's bad enough that countless numbers of undiscovered species are lost from deforestation...but to lose species as a direct result of our impact on the climate only compounds the problems of unintended consequences. No species is an island...it's all a complex web of interdependent relationships.

We all have ridiculously limited perspectives...just like it's a fatal conceit for planners to try and impose their priorities on the use of limited resources...it's also a fatal conceit for us to impose our priorities on the environment. Both can have fatal and unseen and unintended consequences.  Should we err on the side of development or conservation?  What should our priorities be?

As I've mentioned before...my big picture solution is to allow taxpayers to directly allocate their taxes. This would give people the ability to allocate their individual taxes according to their partial knowledge and opportunity costs (priorities/values). Of course we're going to make mistakes...aka... fallibilism...which is exactly why we shouldn't put all our eggs in one basket.

David Friedman...the problem has never been with the taxing...it's always always always been with the spending. Of course...I might be wrong! Hopefully some day you'll see some value in making the effort to try and prove me wrong :D

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Richard Lindzen on Global Warming

Can't really contribute much in the way of critical analysis...but it really tugs at my heartstrings to see the polar bears sitting on tiny rapidly shrinking slabs of ice slowly drifting away. I think that's what they are going to do to me when I get old...if not sooner.

Oh wait...I thought of some critical analysis. We should always be very wary of the fatal conceit and unintended consequences. We overestimate our own intelligence if we think we can truly grasp the impact our activities have on the planet. Therefore, if we do err, it should be on the side of caution.

Then again, I might just be saying that because I'm biased towards polar bears. Then again...I REALLY hate the cold. When I spent a month doing military training up in the Andes...it was the worst. There was no water pressure so taking a shower was pretty much like standing naked under an icicle that was slowly melting. That being said, one of my fondest memories was when I took a break from chopping wood and I briefly saw an Andean condor soaring high up in the clouds.

Well...my point was that my biases probably cancel each other out...but then I started to talk about nature again...so I guess that they really do not.

Sunday, March 18, 2012

Daniel Kuehn's Critique of Pragmatarianism

Daniel Kuehn just shared his critique of pragmatarianism.... Thoughts on "tax choice": is it just anarcho-capitalism?  His critique is really interesting because Kuehn kinda seems like a libertarian...but all his concerns were of a liberal nature.  So I wonder which label he goes by...not that it really matters though.

What's neat about his entry is that it illustrates all but one of the five most common responses 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%)

1. The Ostrich Response (aka no response)
At first I thought it was a really dumb idea - then after he clarified some stuff I'm somewhat more positively disposed.   
I wonder what percentage of non-responders fall into this category.  First impressions are pretty darn important so it would be great to figure out how to make the tax choice idea not appear so dumb at first glance.

2. The Coordination Problem Response (Information Problems)

For some reason I was kind of surprised to see this concern.  I guess because I see him occasionally comment over at Peter Boettke's blog...Coordination Problem.  Also, the name of Kuehn's blog is "Facts and Other Stubborn Things".   The first thing that comes to mind when I think about "Facts" is my favorite passage from Hayek....
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
Pragmatarianism is the solution to the information problem.  I discuss this in more detail in my post on partial knowledge and opportunity costs.  Kuehn wrote...
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.
This passage fit nicely into my collection of coordination problem responses...Unglamorous but Important Things.

3. The Taxes are Theft Response

This was the one argument he didn't make.

4. The Rich People Are Evil Response
Basically, the public goods that will get provided are the public goods that rich people like. In this sense, the system isn't democratic at all - it's hardly "one person one vote".
I should really start a collection dedicated to this type of response.  Here are a few of the places where I've addressed it...

My discussion with the liberal John Holbo - Selling Votes - I challenged him to show me a correlation between wealth and values.  Also, quite a few times I brought up personal responsibility in terms of ethical consumerism......Dude, Where's My Ethical Consumerism.

My discussion with the liberal Linda Beale - Other People's Values - It's a hasty generalization to say that the wealthy are evil.

My discussion with a communist - A "Hard Times" Milestone  "Yes, the more taxes people pay the more power they have...but I can't see how this power to fund public "goods" can possibly be used for evil purposes."

My discussion with the libertarian Matt Zwolinski - Fallibilism vs Fairness - People should be able to put their taxes where their hearts are...aka ethical consumerism.   Also, fairness should never trump the efficient allocation of scarce resources.

Tax Choice - A Strategy for the Occupy Movement - Again with the idea of ethical consumerism...you can't give corporations the middle finger with one hand and your money with the other hand.

To summarize...

1.  There's no correlation between wealth and values
2.  Fairness should never trump the efficient allocation of scarce resources
3.  The 99% has a personal responsibility to put their money where their hearts are

5.  Other (The Free-rider Problem)

As I discussed in my post on Libertarianism and the Free-rider problem...the possibility of the free-rider problem is partly what motivated me to reject libertarianism.

Kuehn's Conclusion
You don't see the government funding indisputably private goods here, and you don't see a complete lack of rhyme or reason to how things are allocated. The things that bug Xerographica are real - but I think we should take it as an opportunity to make further tweaks - namely to push some democratization and devolution. That I could get behind. But "tax choice" seems to me like a dud.
Heh, his first impression was "dumb" and his second impression was "dud".  That's progress...isn't it?

What's funny is that I can imagine back in the day...the people who defended regular human sacrifice would say...we haven't had a drought in years, we've been winning all our battles, the volcano hasn't erupted, the sun hasn't fallen from the sky and the demons haven't stolen our children.

It's a total myth that 538 congresspeople can efficiently allocate the taxes of 150 million taxpayers.  There's just no way that a committee of any sort can determine the optimal level of funding for any organization.