Friday, August 16, 2013

Frequently Asked Questions (FAQ)

Here are some answers to frequently asked questions regarding pragmatarianism (tax choice).  I've selected the Environmental Protection Agency (EPA) to be my default example.

Wouldn't important government organizations be underfunded?

This is logically impossible because "importance" can only be determined by how much an individual is personally willing to sacrifice for something (opportunity cost).  If many taxpayers give a significant amount of their own tax dollars to the EPA then, and only then, could we say that protecting the environment is important to the American public.

Wouldn't taxpayers have to be better informed for this to work?

If environmentalists and the EPA have a good reason to believe that the environment should be a higher priority for taxpayers...then it would be their responsibility to share their information with taxpayers.  With the current system, taxpayers can't choose where their taxes it would be pointless for them to make the effort to learn about the environment or the EPA's efforts to protect it.  Therefore, pragmatarianism would eliminate rational ignorance.

How would it work?

At anytime throughout the year you could go directly to the EPA website and make a tax payment of any amount.  The EPA would give you a receipt and you'd submit all your receipts to the IRS by April 15.  Anybody who didn't want to shop for themselves would have the option of giving their taxes to their impersonal shoppers (congress).

How specifically could taxpayers allocate their taxes?

The granularity would be determined by the EPA and its supporters.  The greater the granularity, the less control the EPA would have, but the greater its knowledge of taxpayers' environmental priorities.  Any disparity in environmental priorities would reflect disparities in information.  Taxpayer choice would increase information intercourse.  

How would the tax rate be determined?

Congress would still be in charge of the tax rate.  If they set the tax rate too low...or too high...then they would lose funding.  This is because taxpayers would boycott congress if they weren't happy with the tax rate.  For example, if the tax rate was 40%, but taxpayers derived 60% of their value from the public sector, then they would be unhappy with the tax rate.  If congress wanted to earn more money, then they would increase the tax rate.  So the optimal tax rate would be the rate at which congress maximized its funding.  For more info please see Tax Choice Tax Rate.

Wouldn't this give too much influence to the wealthy?

Creating a market in the public sector would show us the exact percentage of the population that gives their taxes to the EPA. If this percentage is too small (insufficient demand breadth), then taxpayers would no longer have the option of giving their taxes to the EPA.  Therefore, in a pragmatarian system, the wealthy would only be able to fund truly public goods (goods that are broadly beneficial).  This means that pragmatarianism would eliminate the problem of concentrated benefits and dispersed costs.  For more info please see...Visualizing And Evaluating The Public Goodness Threshold.


  1. @Xerographica

    (coordinationproblem is causing me trouble posting so I put my reply here)

    “I call shenanigans on consumers being indifferent! Go buy some dates, remove the seeds, stick them in a blender with lemon juice and ice. You won't be indifferent once you try it! Heh”

    Well there is a point for the consumers being indifferent. It simplifies the variables so we can focus on the problem of economic calculation. (It really does not matter what goods we are using as examples)

    Whatever I write bellow the line. This is the question that I care most about being answered

    'I am a pragma-socialism lemonade producer and I will decide what sweetener to use by..... '


    On Derrida's quote & “That's a heck of a lot of economic calculation...all of which occurs in the complete absence of prices” - Have you not read Mises original 1922 article Economic Calculation in the Socialist Commonwealth or the corresponding Chapter of Socialism: An Economic and Sociological Analysis?

    “Every man who, in the course of economic life, takes a choice between the satisfaction of one need as against another, eo ipso makes a judgement of value. Such judgements of value at once include only the very satisfaction of the need itself; and from this they reflect back upon the goods of a lower, and then further upon goods of a higher order. As a rule, the man who knows his own mind is in a position to value goods of a lower order. Under simple conditions it is also possible for him without much ado to form some judgement of the significance to him of goods of a higher order. But where the state of affairs is more involved and their interconnections not so easily discernible, subtler means must be employed to accomplish a correct valuation of the means of production. It would not be difficult for a farmer in economic isolation to come by a distinction between the expansion of pasture-farming and the development of activity in the hunting field. In such a case the processes of production involved are relatively short and the expense and income entailed can be easily gauged. But it is quite a different matter when the choice lies between the utilization of a water-course for the manufacture of electricity or the extension of a coal mine or the drawing up of plans for the better employment of the energies latent in raw coal. Here the roundabout processes of production are many and each is very lengthy; here the conditions necessary for the success of the enterprises which are to be initiated are diverse, so that one cannot apply merely vague valuations, but requires rather more exact estimates and some judgement of the economic issues actually involved”

    Opportunity cost is omnipresent in life. While economic calculation is necessary under conditions of extensive complexity caused by the division of labour and accompanying division of knowledge.

    “But in a planned economy we encounter the forced-rider problem” I don't know why you bring this up. You are not talking about a planned economy, & so I am not arguing against a planned economy. You are arguing for the effectiveness of a spontaneous self ordering system without the features of profit loss and prices that are key to actual markets. While it does not sound to me like it can self organise. The economic calculation problem is not just about Central planning.

    Also the forced-rider problem has nothing to do with the economic calculation problem ether. It applies even if we don't care about the people and their preferences but only care about the preferences of the central planning board.

    1. I thought it might be helpful to "see" your perspective on the allocative efficiency disparities between the three different systems...planned, market and pragma-socialism. So I created a graphic with an allocative efficiency scale. Take a look at it and let me know where you would place each system on the scale.

      Regarding economic calculation...

      "It can never obtain as a measure for the calculation of those value determining elements which stand outside the domain of exchange transactions. If, for example, a man were to calculate the profitability of erecting a waterworks, he would not be able to include in his calculation the beauty of the waterfall which the scheme might impair, except that he may pay attention to the diminution of tourist traffic or similar changes, which may be valued in terms of money." - Ludwig von Mises

      "And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people's good their "bad?" Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service." - Murray Rothbard

      The value of the beauty of a waterfall...the value of snail darters...can be calculated simply be giving taxpayers the freedom to give their taxes to the EPA. But Mises and Rothbard both missed this. Why? Rothbard missed it because Mises missed it.

      Could Mises truly have understood "economic calculation" yet arrived at the conclusion that the government is able to supply the optimal amounts of defense, police and courts? It just doesn't seem to follow.

      "A third solution of the problem would be to confiscate all the profits earned by entrepreneurs for the benefit of the state. A one hundred per cent tax on profits would accomplish this task. It would transform the entrepreneurs into irresponsible administrators of all plants and workshops. They would no longer be subject to the supremacy of the buying public. They would just be people who have the power to deal with production as it pleases them." - Ludwig von Mises

      Which did Mises think more important...economic calculation or consumer sovereignty? In a pragma-socialist system...there would be consumer sovereignty...but not economic calculation based on literal prices.

      "The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation." - Ludwig von Mises

      I just don't see us getting too far off course simply because producers don't have prices to guide them.

      "What vitiates entirely the socialists economic critique of capitalism is their failure to grasp the sovereignty of the consumers in the market economy." - Ludwig von Mises

      When you respond to the survey I created I'll see how much weight you give to consumer sovereignty.

  2. Have you see the 'quadratic voting' idea?

    1. Nope, hadn't seen it. Thanks for pointing it out. It's fun to pretend that they got the idea from this blog entry...Crooked Timber Liberals Do Not Advocate Selling Votes.

      I just skimmed over the first search result...I'm not sure why 'quadratic'. It seems far more intuitive that the price of votes should be determined by the demand.

      And it's a bit off to use quadratic voting or regular vote selling rather than tax choice when it comes to something like a public park.

      For me vote selling would be relevant for things like gay marriage. If somebody is completely neutral on the topic...then they would simply sell their vote to the highest bidder.

      The 'quadratic vote' people are on the right track though...the answers/outcomes are far more accurate when people are given the opportunity to put their own money where their mouths are (deep input).

    2. Seems a bit like re-inventing the wheel...then starting with a rectangle. What about the 10,000 things most folks will overlook till they realize what a mess they have? In least.. we PLAY varios folks.. mayors, gGovernors, State legislators, US Senators...etc to sort it all out.

      If we botch the "general skills" of electing people to do what we WISH....can we do the fine details of operating the whole our spare time?

    3. Like I said in the FAQ... congress would still be there. So if you want to predict that nobody would give their taxes to the people that they voted for... then you need to come up with a plausible explanation for your prediction. Why would you be the only person in the country who saw the value in having congress spend your taxes for you? And why would we want to subject 300 million people to a system that only one person perceives is valuable?

      You think our system is in place because it provides value. Except, you seem to want to predict nobody but yourself is going to derive value from giving their money to the people that they voted for. You have to reconcile these two things.

      Personally, I'm guessing your prediction will be correct. Clearly this would mean that our system isn't in place because it actually provides value... it's just in place because it was developed before people understood how or why markets work. The various socialist experiments provide abundant evidence that people truly did not understand how and why markets work.