Tuesday, January 15, 2013

A Global Free-trade Agreement for Public Goods

People sometimes ask me how, in a tax choice system, we'd determine which organizations would qualify to receive tax payments.  My usual quick response is that, very generally speaking, voters would decide what's on the "menu" and taxpayers would order the "dishes" that most closely match their preferences.

An idea that was interesting enough to blog about just crossed my mind as I was browsing Inge Kaul's book...Providing Global Public Goods.  Now, I'm not saying it's a good idea...or a bad idea...and I'm not quite sure if I'd support it...but it's definitely thought provoking enough for me to throw out there.    

Continuing with the restaurant analogy...rather than limiting taxpayers to only dining at their own country's restaurant...why not allow them to dine at any country's restaurant?  Taxpayers would have to eat (pay their taxes) but they would be able to select the dishes from any country's menu.

Let's take Sarah for example.  She's a young American taxpayer whose number one priority is the environment.  At anytime throughout the year she could make a tax payment directly to the Brazilian equivalent of the EPA.  Sarah would receive a receipt...which, along with all her other receipts, she would submit to the IRS by April 15.

Markets allow resources to flow where they create the most value.  A tax choice system would create a market in our public sector...but the flow would generally be restricted to within our country.  Completely removing that restriction would allow for the global free-trade of public goods.  In theory this would create far more value.

Can you predict which country would receive the greatest inflow of public funding?  What impact would it have on the Israeli-Palestine conflict?

Clearly this public goods free-trade agreement would facilitate global convergence.  But how much would it help developing countries catch up with the rest of the world?  Well...that would depend on the rate of outflow.  As I argued in my response to John Holbo's critique of libertarianism...we can gain far more from global innovation than the world can gain from American innovation.  The more we help developing countries catch up...the more we'll benefit from their innovation contributions.

Speaking of my favorite Crooked Timber Liberal...I'll conclude this brainstorm with this comment that I posted on John Holbo's blog entry on selling votes (the discussion on my blog)...

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Peter T…oh man…never thought of that! It’s an extremely fascinating point though.

Let’s say Brazil was going to vote on whether it should develop or conserve the Amazon rain forest. Given that I’m not a citizen of Brazil I wouldn’t be able to directly vote on the proposal…but nothing would stop me from sending money to any Brazilian who was on my side of the issue. So I’d send $100 to a Brazilian conservation organization that would be responsible for buying votes for the pro-conservation side.

Everybody in the world would benefit from saving the rain forest…so how much money would everybody in the world send to the conservation organization? Then we can imagine all that money being exchanged for votes…in essence all that money would be transferred to Brazilian citizens that were willing to sell their votes in favor of conservation.

That’s some really heavy stuff. People in country A wouldn't send money to country B unless they cared about the outcome of elections in Country B. Imagine there was an Islamic fundamentalist party running against a pro-Western party in some Middle Eastern country…how much money would the world send to the organization responsible for purchasing votes for the pro-Western party? Then we can imagine all that money being transferred to people willing to sell their votes to the organization responsible for buying votes for the pro-Western party.

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