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 people are willing to sacrifice for something (opportunity cost).  If many taxpayers give a significant amount of tax dollars to the EPA then, and only then, could we say that the environment is a priority for the American people.

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

If environmentalists and the EPA have 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.

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' true preferences regarding environmental priorities.

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 taxpayers would let them know by giving them less positive feedback (tax dollars).  So the optimal tax rate would be the rate at which congress maximized its revenue.

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

Creating a market in the public sector would show us the percentage of the population that gives their taxes to the EPA. If the percentage is too small (insufficient demand breadth), then taxpayers would no longer have the option of giving their taxes to the EPA.  Therefore, the wealthy would only be able to fund public goods (goods that are broadly beneficial).  For a more in depth explanation please see...Visualizing And Evaluating The Public Goodness Threshold.

4 comments:

  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.

    ReplyDelete
    Replies
    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.

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

    ReplyDelete
    Replies
    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).

      Delete