Wednesday, March 27, 2013

Dollar Voting vs Ballot Voting

There are way too many people who believe that voting adequately communicates the preferences of the public.  This myth prevents them from fully appreciating the importance, necessity and value of giving taxpayers the option to shop for themselves in the public sector.  Here are a few passages which should help bust this widespread myth.    
Legislation considered as a result of a collective decision by a group—even if consisting of all citizens concerned as in the direct democracies of ancient times or in some small democratic communities in medieval and modern times—appears to be a law-making process that is far from being identifiable with the market process. Only voters ranking in winning majorities (if for instance the voting rule is by majority) are comparable to people who operate on the market. Those people ranking in losing minorities are not comparable with even the weakest operators on the market, who at least under the divisibility of goods (which is the most frequent case) can always find something to choose and to get, provided that they pay its price. Legislation is a result of an all-or-none decision. Either you win and get exactly what you want, or you lose and get exactly nothing. Even worse, you get something that you do not want and you have to pay for it just as if you had wanted it. In this sense winners and losers in voting are like winners and losers in the field. Voting appears to be not so much a reproduction of the market operation as a symbolization of a battle in the field. If we consider it well, there is nothing “rational” in voting that can be compared with rationality in the market. - Bruno Leoni, Freedom and the Law
In fact, the market process and the legislative process are inescapably at variance. While the market allows individuals to make free choices provided only that they are prepared to pay for them, legislation does not allow this. - Bruno Leoni, Freedom and the Law
The analogy between spending and voting, although frequently used by defenders of capitalism, is imperfect. Equality aside, spending is a much superior—paradoxically, a much more egalitarian—way of allocating resources. This is because a dollar, once spent, cannot be spent again, leaving you less to spend on something else. Your vote can be used over and over. - David Friedman, The Machinery of Freedom
Since voting is much more of an all-or-nothing thing than spending, such inequalities as do exist have much greater effects. This may explain why in our society, where the poor are also politically weak, they do far worse on things provided by the government, such as schooling and police protection, than on those sold privately, such as food and clothes. - David Friedman, The Machinery of Freedom
Political institutions, such as congressional 'log rolling', have developed to mitigate the all-or-nothing features of voting. A congressman indicates how important his bill is to his constituents by how many votes on other bills he is willing to trade for support on his. This is an extremely crude and approximate substitute for the market—an attempt to represent, by bargaining among a few hundred men on a few thousand issues, the multitudinous diversity of two hundred million lives. - David Friedman, The Machinery of Freedom
But market demands are in dollars, not votes. The legality of heroin will be determined, not by how many are for or against but by how high a cost each side is willing to bear in order to get its way. People who want to control other people's lives are rarely eager to pay for the privilege; they usually expect to be paid for the 'services' they provide for their victims. And those on the receiving end— whether of laws against drugs, laws against pornography, or laws against sex—get a lot more pain out of the oppression than their oppressors get pleasure. They are willing to pay a much higher price to be left alone than anyone is willing to pay to push them around. - David Friedman, The Machinery of Freedom
It might be objected here that even if productivity rises, the poor need not share in the gains that result from this. Mises's thinking followed an utterly different line: in his opinion, capitalism was primarily a system of "mass production for the masses" and the unhampered operation of this system would be to nearly everyone's advantage. Because of their large numbers, the less well off when acting as consumers control much of the economy by indicating through their dollar votes what they want. In brief, Mises's argument against redistribution is that it is not the best means to aid the poor. - David Gordon, Justice and Redistributive Taxation: James Buchanan versus Ludwig von Mises
First, the stronger the preference is for something the greater is the willingness to pay. Thus purchase decisions reflect willingness to pay (WTP) and WTP reflects intensity of preference. This is an important modification of the majority voting system in which all preferences count equally, however strongly or weakly they are held. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers
Individuals express preferences about changes in the state of the world virtually every moment of the day. The medium through which they do this is the market place. A vote for something is revealed by the decision to purchase a good or service. A vote against, or an expression of indifference, is revealed by the absence of a decision to purchase. Thus the market place provides a very powerful indicator of preferences. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers
Mises described the market as a daily referendum on what should be produced and who should produce it. Every penny spent by consumers, in countless daily transactions, acts like a vote in a continual ballot, determining how much of each and every thing should be produced, and drawing production to where it is most highly valued. It is much more efficient than taking decisions through political elections, where people get to vote only every few years, and even then are voting for a package of disparate measures. In the market, every penny really does count, and it counts every day. - Eamonn Butler, Austrian Economics
In the market place minorities have "representation" and the number of "votes" a person has is related to his "proportioned productivity," so the incentives to act wisely are greater here than in the political sector. Therefore, it is relatively easy for an efficient firm to survive since it need only gain the support of creditors and consumers who have a direct personal interest in making wise decisions. - Gary S. Becker, The Economic Approach to Human Behavior
Since votes, however, can be cast for multiple reasons, it remains true that voting outcomes yield less information than do market purchases, and pure individualists may view this difference, perhaps along with the danger that minority interests may be overlooked in the public choice process, as decisive. - Herbert J. Kiesling, Taxation and Public Goods: A Welfare-Economic Critique of Tax Policy Analysis
But suppose he did not vote for him; and on the contrary did all in his power to get elected some one holding opposite views—what then? The reply will probably be that, by taking part in such an election, he tacitly agreed to abide by the decision of the majority. And how if he did not vote at all? Why then he cannot justly complain of any tax, seeing that he made no protest against its imposition. So, curiously enough, it seems that he gave his consent in whatever way he acted—whether he said yes, whether he said no, or whether he remained neuter! A rather awkward doctrine this. Here stands an unfortunate citizen who is asked if he will pay money for a certain preferred advantage; and whether he employs the only means of expressing his refusal or does not employ it, we are told that he practically agrees; if only the number of others who agree is greater than the number of those who dissent. And thus we are introduced to the novel principle that A's consent to a thing is not determined by what A says, but by what B may happen to say! - Herbert Spencer, Social Statics
Institutionally, earmarking provides a means of compartmentalizing fiscal decisions. The individual citizen, as voter-taxpayer-beneficiary, is enabled to participate, separately, either directly or through his legislative representative, in the several public expenditure decisions that may arise. He may, through this device, "vote" independently on the funds to be devoted to schools, to sanitation, and so on, given the specified revenue sources. Only in this manner can he make "private" choices on the basis of some reasonably accurate comparison of the costs and the benefits of the specific public services, one at the time. By contrast, general-fund budgeting, or non-earmarking, allows the citizen to "vote" only on the aggregate outlay for the predetermined "bundles" of public services, as this choice is presented to him by the budgetary authorities. - James M. Buchanan, The Economics of Earmarked Taxes
Ferejohn and No11 (1976) reported a successful experiment in decentralizing public-good decisions. Television programmes are public goods. Individual stations in the US Public Broadcasting Service vote with dollars for the programmes they prefer. If a particular programme receives enough dollar votes to cover the cost of producing it, that programme is purchased by the network. The procedure is repeated until it converges on an equilibrium. - John McMillan, The Free-Rider Problem: A Survev
However, elections are a blunt instrument for registering individuals' wants and needs. The choices are few. - Julian Le Grand, Motivation, Agency, and Public Policy
Outside of election periods, individuals are given little choice in how the income raised in taxation is used. The revenue disappears into the black box of government. True, it reappears as government spending programmes; but the way in which it is allocated between those programmes is determined by a complex web of governmental and parliamentary procedures, with little or no direct reference to the preferences of the people who paid the taxes in the first place. - Julian Le Grand, Motivation, Agency, and Public Policy: Of Knights and Knaves, Pawns and Queens
Most developed democracies have relatively few political parties, so voters' decisions tell us little about their real preferences. Imagine a United States in which consumers could choose from only two models of utomobile:black, four-door, four-cylinder economy sedans, or red, two door, eight-cylinder sports coupes that cost twice as much. Sedan buyers might be expressing a preference for economy cars, or they may not have enough money to buy the more expensive sports car. But it could be that they simply hate red cars. It could be that, in general, they prefer sports coupes but do not like the design or drivetrain on the one sports car available in the marketplace. The fact that a majority of consumers choose one car or the other would tell us little about their overall preferences, and the same is true for voters given a choice between two major-party presidential candidates, or three competing parties in a parliamentary system. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism
The capitalist society is a democracy in which every penny represents a ballot paper. It is a democracy with an imperative and immediately revocable mandate to its deputies. It is a consumers' democracy. By themselves the producers, as such, are quite unable to order the direction of production. This is as true of the entrepreneur as of the worker; both must bow ultimately to the consumers' wishes. And it could not well be otherwise. People produce, not for the sake of production, but for the goods that may be consumed. As producer in an economy based on the division of labour, a man is merely the agent of the community and as such has to obey. Only as a consumer can he command. - Ludwig von Mises, Economic Democracy
I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore
Using dollars in open markets muffles the rhetorical din and forces persons to reveal honestly the strength of their preferences in a common medium understood by all. "Put your money where your mouth is" is a coarse reminder of a high philosophical truth. If the tax collector cannot measure utility straight up, neither can the regulator who is all too likely to succumb to the demands of local residents (and voters) and to overlook or undervalue the preferences of outsiders. Direct political measurements of utility tend to destroy utility itself. The wealth proxy has a lot to commend it in straight utilitarian terms. - Richard A. Epstein, Mortal Peril: Our Inalienable Right to Health Care?
As a later chapter discusses in more detail, democracy (the voting mechanism) is a very poor means for determining people's preferences. Votes can be cast either for or against a limited number of proposals offered in referenda, but votes remain extraordinarily poor devices for registering the intensity of different people's wants and desires. Furthermore, why would we want to rely on the cumbersome procedures of democracy to determine how many toothpicks or bow ties to produce? - Richard B. McKenzie, Bound to Be Free
Moreover, unlike markets, voting schemes have difficulty representing the intensity of preferences for diferent goods or social outcomes. - Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution
Politics and the markets are both ways of getting people to respond to other people’s desires. Consumers deciding which goods to spend their money on have often been analogized to voters deciding which candidates to elect to public office. However the two processes are profoundly different. Not only do individuals invest very different amounts of time and thought in making economic vs. political decisions, those are inherently different in themselves. Voters decide whether to vote for one candidate or another but they decide how much of what kinds of food, clothing, shelter, etc. to purchase. In short, political decisions tend to be categorical, while economic decisions tend to be incremental. - Thomas Sowell, Applied Economics
You might say, “That’s okay, Williams, if you have enough dollar votes. But what about poor people?” Poor people are far better served in the market arena than the political arena. Check this out. If you visit a poor neighborhood, you will see some nice clothing, some nice cars, some nice food, and maybe even some nice homes—no nice schools. Why not at least some nice schools? The explanation is simple. Clothing, cars, food, and houses are allocated through the market mechanism. Schools are allocated through the political mechanism. - Walter E. Williams, Where Does Your Vote Really Count?
A further potential advantage of this initiative is that it can generate useful information. Policymakers will learn what taxpayers support most enthusiastically. After all, the way people spend money is a meaningful indication of what they value – in ways, more meaningful than how they answer opinion polls. Taxpayers obviously will gravitate to different programs. If our political process is functioning properly, the budget should track, at least in a rough way, the distribution of preferences among taxpayers. If it does not, then that is information our legislators should have. It also should be disclosed, so the media and voters will have this information as well. - Yair Listokin and David Schizer, I Like to Pay Taxes: Lessons of Philanthropy for Tax and Spending Policy


  1. Why is this collage of excerpts from a literary culture of Collegiate stupidity utterly stupid in itself?
    The answer is that it is crucially dependent on the notion that people will act for themselves rather than delegate. Assuming even minimal divergence in agent preference, capacity, or efficacy, whether natural or acquired, and all of the above is worthless shite.
    Hey, I'm not saying you are a bad guy or that you will necessarily bugger your own baby- thus justifying my contempt and criminally homicidal appetency towards you (Hegel says every consciousness ceaselessly posits the conditions for the extinction of every consciousness but its own)but, on the contrary, that you will not admit your own ontological dysphoria. Dude, you don't have to feel you are in the right Universe anymore than a woman stuck in a dude body needs to feel it's okay to pee standing up. We are bigger than the fucking Universe.
    You're a smart guy- you mentioned preference revelation on David Friedman who fucking Rip Van Winkled stuff since before Gibbard Satterthwaite or whatever but, fuck, his Mom & Dad were Rose & Milton and the guy is still keeping it together- not initiating bad shit AT ALL.
    Anyway, I invite you to retaliate by defacing my blog with comments as acid as this- except, fuck it, this isn't an acid comment at all. Fucking Robert Aumann- that rose of Sharon- and there is a rose-apple (in Skt this is called Jambu) from that Sharon which benefits young Palestinian people and handicaps old Secular Zionists, which- from the legal point of view can FUCKING REVERSE the stupidity of chucking bombs or stones or whatever.
    There is a fucking code to the Talmud- it's that the nicer guys win coz we wanna live in a nice land- sacred or not.
    Hey, don't be a stranger- drop in on my blog, from time to time, and tell me why I'm shit.

    1. Why is it dependent on the notion that people will act for themselves? If taxpayers could choose where their taxes go...congress would still be there. You could either give them your own tax dollars or you could shop for yourself. Why would you want to shop for yourself? Perhaps because you don't like what your personal shoppers are spending your hard-earned money on. How many people truly want congresspeople to be their personal shoppers? Who knows? But if people gave less and less money to congress...then congress would either change or go bankrupt.