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.

Monday, September 24, 2012

Our Mixed Economy - Capitalism vs Socialism

Here in America we have a mixed economy. We have capitalism in the private sector and socialism in the public sector. In other words...resources are allocated by the invisible hand in the private sector and by the visible hand in the public sector...


In this diagram I've illustrated that the invisible hand determines how $11 trillion dollars are spent in the private sector.  This is also known as a market economy and is best illustrated by Deng Xiaoping.  On the other side I've illustrated that the visible hand determines how more than $3 trillion dollars are spent in the public sector.  This is also known as a command economy and is best illustrated by Mao Zedong.

Deng Xiaoping represents humility while Mao Zedong represents conceit (see The Dialectic of Unintended Consequences). Here's how Hayek described the idea of conceit..."The curious task of economics is to demonstrate to men how little they really know about what they can imagine they can design." The idea of conceit can be traced back to the founder of modern economics...Adam Smith...
The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, 1759
The idea of conceit is much older though.  For example...it was the point of Buddha's parable of the blind men touching different parts of an elephant.  Somebody who suffers from conceit fails to appreciate just how limited their perspective truly is.  As a result...they have no problem resorting to taking rather than solely relying on trading.  Taking forms the basis of the visible hand while trading forms the basis of the invisible hand.

The invisible hand works because it incorporates the perspectives of the individuals who engage in trade.  The buyer wants to purchase a product/service at the lowest possible price while the seller wants to sell a product/service at the highest possible price.  They both want to maximize the return on their labor so they engage in a bargaining process...which incorporates their unique perspectives.  If they can find a price that is worth their labor...then they will trade.

The visible hand does not work because it fails to incorporate the perspectives of all the members in a society.  If I resort to taking your resources...then I prevent you from applying your unique perspective to them.  Here's a diagram I created to help illustrate this concept...


How we use resources depends on our perspectives...which is why our perspectives are our most valuable resource.
When economists say, “We will never run out of resources,” what they often mean is that faced with increasing scarcity of one resource, we will always find new solutions to the problem that that resource originally solved. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources. - Steven Horwitz, Economists and Scarcity
In the past we allowed the perspective of one king to shape the public sector.  Now we allow the perspectives of 538 congresspeople to shape the public sector.  But in the future we will allow the perspectives of millions and millions of taxpayers to shape the public sector.

What will the outcome be of allowing millions and millions of taxpayers to choose which government organizations they give their taxes to?  We can't know the specifics.  All we can know is that wasting limited resources has negative consequences.  Allowing 538 congresspeople to prevent 150 million taxpayers from trading their taxes in the public sector has negative consequences because it partially destroys the perspectives of 150 million of our most productive citizens.

We all understand this concept on the individual level...because we all inherently understand that a mind is a terrible thing to waste.  All the invisible hand says is that, if it's a terrible thing to waste one mind, then it's a catastrophic thing to waste millions of them.  We can avoid this catastrophic waste by allowing the people who labored, toiled and sweated to earn their money to choose which public goods are worth their effort.
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 
Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat 
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
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat

Friday, September 21, 2012

There's Hope for Humanity...

...I just heard Rachel Maddow say, "...finite resources...".

Prayer and Sacrifice

Jason Kuznicki, over at the League of Ordinary Gentlemen, recently posted this blog entry on voting...Voting Part I: I Am Jason, of the Lizard People.  It's pretty great except for a few minor details.

In his post he compares voting to sacrifice.  Actually...voting is closer to praying...and paying taxes is the sacrifice.  To sacrifice means to give up something you value.  But if you just give up something you value for nothing...then that isn't a sacrifice...it's a waste.  That's why, when we sacrifice something we value, we expect something of greater value in return...   
Sacrifice will always be distinguished from the pure gift (if there is any).  The sacrifice proposes an offering but only in the form of a destruction against which it exchanges, hopes for, or counts on a benefit, namely, a surplus-value or at least an amortization, a protection, and a security. - Jacques Derrida, Given Time: Counterfeit Money
In other words...we all want to profit.  Therefore, "sacrificing" is the same thing as "spending".  Consider this dialogue from John Holbo's book on Reason and Persuasion...
S: You could have been much more concise, Euthyphro, if you wanted to, by answering the main part of my question.  You're not exactly dying to teach me - that much is clear.  You were just on the point of doing so, but you turned aside.  If you had given the answer, I would already be well versed in holiness, thanks to you.  But as it is, the lover of inquiry must chase after his beloved, wherever he may lead him.  Once more then: what do you say that the holy is, or holiness?  Don't you say it's a kind of science of sacrifice and prayer?
E: I do.
S: To sacrifice is to give a gift to the gods; to pray is to ask them for something?
E:  Definitely, Socrates.
S: Then holiness must be a science of begging from the gods and giving to them, on this account.
E: You have grasped my meaning perfectly, Socrates.
S: That is because I want so badly to take in your wisdom that I concentrate my whole intellect upon it, lest a word of yours fall to the ground.  But tell me, what is this service to the gods?  You say it is to beg from them and give to them?
E: I do
S: And to ask correctly would be to ask them to give us the things we need?
E: What else?
S: And to give correctly is to give them in return what they need from us?  For it would hardly represent skill in giving to offer a gift that is not needed in the least.
E: True, Socrates
S: Holiness will then be a sort of art for bartering between gods and men?
E: Bartering, yes - if you prefer to call it that.
Oh man, Socrates cracks me up.  That's probably one of the earliest documented cases of economic imperialism...as in economics invading other fields of study...in this case religion.  There's famine (scarcity of rain) so you sacrifice a cow to your god and pray for rain.  The objective is always abundance...which is epitomized by Eden and Heaven.  And it's the same concept with our political system.  We sacrifice our taxes and pray for economic growth...aka abundance.  So here's the breakdown...

Religion: trade between man and god
Politics: trade between man and government
Economics: trade between man and man

But it's all trade!  Therefore, it's all economics.  The debate...as always...is which company/party/god actually does listen to our prayers and is capable of providing abundance.  By far the very best reference that I've run across that encapsulates this debate is in the Bible...1 Kings 18.  If you haven't already read the Bible then this is the one story that will give you the most bang for your buck.

Here's a bit of background on the story.  The people of Israel started worshiping another god...Baal...and because God is a jealous god...he caused a severe drought.  These days droughts are still a big deal...but thanks to the extent of international trade...they don't have as severe an impact as they used to have.  The closest equivalent we have are depressions/recessions.

In order for the Israelites to understand exactly why they were experiencing such a severe drought...God sent his prophet Elijah to inform them.  Perhaps most of them already suspected that other people's behavior had something to do with the drought...but they couldn't be certain.  Kind of like with us and depressions.  What we all want is irrefutable proof.  So Elijah offers to conclusively prove which god is the true god.
20 So Ahab sent unto all the children of Israel, and gathered the prophets together unto mount Carmel.
21 And Elijah came unto all the people, and said, How long halt ye between two opinions? if the Lord be God, follow him: but if Baal, then follow him. And the people answered him not a word.
22 Then said Elijah unto the people, I, even I only, remain a prophet of the Lord; but Baal's prophets are four hundred and fifty men.
23 Let them therefore give us two bullocks; and let them choose one bullock for themselves, and cut it in pieces, and lay it on wood, and put no fire under: and I will dress the other bullock, and lay it on wood, and put no fire under:
24 And call ye on the name of your gods, and I will call on the name of the Lord: and the God that answereth by fire, let him be God. And all the people answered and said, It is well spoken.
25 And Elijah said unto the prophets of Baal, Choose you one bullock for yourselves, and dress it first; for ye are many; and call on the name of your gods, but put no fire under.
26 And they took the bullock which was given them, and they dressed it, and called on the name of Baal from morning even until noon, saying, O Baal, hear us. But there was no voice, nor any that answered. And they leaped upon the altar which was made.
27 And it came to pass at noon, that Elijah mocked them, and said, Cry aloud: for he is a god; either he is talking, or he is pursuing, or he is in a journey, or peradventure he sleepeth, and must be awaked.
28 And they cried aloud, and cut themselves after their manner with knives and lancets, till the blood gushed out upon them.
29 And it came to pass, when midday was past, and they prophesied until the time of the offering of the evening sacrifice, that there was neither voice, nor any to answer, nor any that regarded.
30 And Elijah said unto all the people, Come near unto me. And all the people came near unto him. And he repaired the altar of the Lord that was broken down.
31 And Elijah took twelve stones, according to the number of the tribes of the sons of Jacob, unto whom the word of the Lord came, saying, Israel shall be thy name:
32 And with the stones he built an altar in the name of the Lord: and he made a trench about the altar, as great as would contain two measures of seed.
33 And he put the wood in order, and cut the bullock in pieces, and laid him on the wood, and said, Fill four barrels with water, and pour it on the burnt sacrifice, and on the wood.
34 And he said, Do it the second time. And they did it the second time. And he said, Do it the third time. And they did it the third time.
35 And the water ran round about the altar; and he filled the trench also with water.
36 And it came to pass at the time of the offering of the evening sacrifice, that Elijah the prophet came near, and said, Lord God of Abraham, Isaac, and of Israel, let it be known this day that thou art God in Israel, and that I am thy servant, and that I have done all these things at thy word.
37 Hear me, O Lord, hear me, that this people may know that thou art the Lord God, and that thou hast turned their heart back again.
38 Then the fire of the Lord fell, and consumed the burnt sacrifice, and the wood, and the stones, and the dust, and licked up the water that was in the trench.
39 And when all the people saw it, they fell on their faces: and they said, The Lord, he is the God; the Lord, he is the God.
40 And Elijah said unto them, Take the prophets of Baal; let not one of them escape. And they took them: and Elijah brought them down to the brook Kishon, and slew them there.
41 And Elijah said unto Ahab, Get thee up, eat and drink; for there is a sound of abundance of rain.
Man, I really love that story.  It's timeless and infinitely applicable.  For example...it applies to the debate between liberals and conservatives and it also applies to me right here right now.  Who am I?  I am Elijah...I am a prophet of Baal...I am Joel Osteen...I am Rand Paul...I am Paul Krugman...I am just another entrepreneur trying to sell you a product/belief/idea that will increase your abundance.

What I want you to consume is the belief that tolerance will produce abundance.  You spend your money on your products/services and I'll spend my money on my products/services.  You make your sacrifices to your gods and I'll make my sacrifices to my gods.  You spend your taxes on your public goods and I'll spend my taxes on my public goods.  There's no fundamental difference...it's all trade for abundance sake.  The thing is...most of you already believe in economic and religious tolerance...but barely anybody believes in political tolerance.  But if you don't believe in political tolerance...then unfortunately you don't understand how tolerance produces abundance.

How does tolerance produce abundance?  Tolerance produces abundances because it allows for heterogeneous activity.  It gives people the freedom to tackle the same problem from different angles.  The problem of scarcity has an infinite number of solutions...and abundance abounds when we give each other the freedom to come up with new and innovative solutions.  And this is as true in the public sector as it is in the private sector.

Wednesday, September 19, 2012

Who Are Your True Representatives?


Ever watch Tosh.O?  A while back he made this statement regarding politics..."The idea that any of these candidates represent my interests is absurd."  So who are Tosh's true representatives?

From my perspective, it seems pretty straightforward that whoever Tosh gives his money to are the people who represent his interests.  Because, it wouldn't make sense for Tosh to give his money to somebody who didn't represent any of his interests.  What does make sense though is that the more money he gives to somebody...the greater he values their representation.

With that in mind...what percentage of your income do you voluntarily give to politicians?  Honestly I've never voluntarily given any of my money to any politicians.  That's why it's a funny joke when Tosh pointed out how absurd it is to refer to politicians as representatives.  Yet, it's not funny when people who do not represent my interests get to spend my money.  But maybe it's my fault for not voting?  Or maybe the problem is that the power of voting is diminished by all the money in politics?

We engage in two types of voting...literal and figurative.  Literal voting is conducted with ballots while figurative voting is conducted with dollars.  How often do you engage in each type of voting?  Personally, every day I engage in figurative voting...I give my money...the product of my labor...to the people who represent my interests.  This is why taxpayers are our true representatives.  

Yet, even though we all figuratively vote for taxpayers on a daily basis...and even though we voluntarily give them considerably more of our money than we voluntarily give to congresspeople...it's extremely difficult to persuade people that our true representatives should have the freedom to choose which government organizations they give their taxes to.  This problem boils down to failing to understand economics.

Figurative voting involves sacrifice...while literal voting does not.  When you spend your money on one thing...you can't spend that money on another thing...
By contrast, if a consumer wants a new TV set and a new washing machine and he can afford only one of these without drawing on his savings (which he dislikes), he is in a cross-road situation. He must deliberate until he arrives at a decision as to which course of action he prefers. Thus, while we have reason to assume that preference functions for alternative uses of private funds (including the savings alternative) have some firmness and consistency, our findings raise doubt whether the corresponding concept of a preference function for alternative fiscal policies is fruitful. - Eva Mueller, Public Attitudes Toward Fiscal Programs
Figurative voting requires that you decide between a new TV and a new washing machine.  Literal voting does not require that you spend any money.  You can simply indicate on a ballot that you support the candidate that promises you both a new TV and a new washing machine.  That's why figurative voting holds infinitely more weight than literal voting.  Figurative voting reveals your actual priorities and all our priorities determine how resources are used.  That's how economics works.  If you take our true priorities out of the picture...then resources will be misallocated...which leads to recessions and/or depressions.

Let's go back to your cross-road situation.  What happens if you choose to spend your money on a TV?  Then you would be figuratively voting for all the taxpayers who produced/supplied that TV.  For simplicity sake we'll refer to all of them as Mr. TV.  You would be indicating with your hard earned money that Mr. TV represents a portion of your interests.  In a pragmatarian system, Mr. TV would then take a portion of his income and choose which government organizations he gave his taxes to.

Which government organizations would he give his taxes to?  He'd give his taxes to whichever government organizations represent his interests...just like you give your money to whichever private organizations represent your interests.  It stands to reason though...that Mr. TV would be motivated to give his taxes to whichever government organizations help him represent your interest.  This is because your interest is his livelihood.  For example, if he doesn't give any of his taxes to repairing the roads...then you won't be able to drive to his store to purchase his TV.

So the next time you spend your money...please try and understand that you are figuratively voting for your true representatives.  If you value your interests...then you will support giving your true representatives the freedom to use their taxes to better serve your interests.  Nobody knows your interests better than they do.

Wednesday, September 12, 2012

Taking vs Trading

If aliens arrived on our planet...would they want to trade with us or would they just take whatever resources they wanted?  It's my firm belief that they would want to trade with us.  Here's my logic...

In order for an alien civilization to advance to the point that it could actually visit us...they would already have learned that progress depends on trading rather than taking.   This is because taking destroys individual foresight and if you destroy individual foresight then you hinder progress.

In very simple terms...two heads are better than one.  We all have unique perspectives so we can see numerous uses of the same exact resource.  Trading integrates perspectives which allows resources to be put to their most productive uses...while taking does the opposite.  It seems highly unlikely that an alien civilization could efficiently allocate all the resources necessary to visit out planet...yet fail to appreciate that their progress was a direct result of integrating everybody's unique perspectives.  

Here on planet Earth we still haven't figured out that our progress depends on integrating people's perspectives.  If we had figured this out then taxpayers would be able to choose which government organizations they gave their taxes to...aka pragmatarianism.  Once we understand why people's perspectives should matter...then we'll allow taxpayers to trade their taxes for public goods that they value...our rate of progress will increase...and visiting inhabited planets will happen sooner rather than later.  With the understanding of progress under our belts...we would see the value in trading with the aliens rather than taking their resources by force.

This concept was the point of Bastiat's Parable of the Broken Window...
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. - Bastiat, What Is Seen and What Is Not Seen
Right now we allow 538 congresspeople to spend around $4 trillion dollars.  Did they labor to earn that money?  No...they did not.  Taxpayers did.  When we allow congress to spend money that they did not earn...the perspectives of millions and millions of taxpayers are blocked from determining how their money should be distributed in the public sector.  As a result...progress is severely hindered.  Yet, people see roads and schools...so they see their tax dollars at work.  But they are simply seeing the SEEN...anybody can do that.  The challenge is to try and see the UNSEEN.  The unseen is the outcome of applying millions and millions of our most productive perspectives to the public sector.

The next time you watch a movie in which the aliens take the resources they want by force...or vice versa...hopefully you'll understand that what you're watching is merely a reflection of our society's lack of understanding regarding the correlation between perspectives and progress.