Friday, February 21, 2014

The Most Valuable Balance of Inputs

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Reply to a reply on: The End of Growth Wouldn't Be the End of Capitalism by Noah Smith

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Shopping is the process by which consumers communicate their circumstances and preferences to producers. Taxpayers are the producers who have received a significant amount of positive feedback from consumers. For example, the owner of a bakery receives positive feedback because he spent his money on the inputs he needs to produce the output that consumers value enough to spend their money on. Clearly the owner of the bakery is financially incentivized to diligently determine the most valuable balance of inputs. Yet, for some reason, if the bakery owner is also allowed to shop for himself in the public sector...that incentive disappears? Perhaps it's because he'll make the same amount of money regardless of how he spends his tax dollars? He can allocate all his tax dollars to tilting at windmills and it won't hurt his bottom line?

You're really not thinking things through guy. You have absolutely no clue why we have an abundance of goods and services that match our preferences. You think it's beneficial to prevent people from shopping in the public sector because....

A. their preferences and circumstances are inconsequential when it comes to determining how society's limited resources should be used

B. voting allows them to adequately communicate their preferences and circumstances

C. congresspeople are omniscient

Go out and find anything that substantiates any of those three things. Maybe I'm an idiot and/or my confirmation bias prevented me from missing a highly cited paper that explains why it's really not necessary to allow people to accurately communicate their preferences and circumstances. Oh wait, I did find a highly cited paper, in fact the most highly cited paper on the topic, and it simply assumed C...that congresspeople are omniscient.

The most widely cited economic justification for our current system assumes that government planners are omniscient. It was written by the Nobel Prize winning liberal economist who said that, "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

If the supply of public goods doesn't accurately reflect many people's preferences and circumstances...then logically it's only going to accurately reflect a few people's preferences and circumstances. This has been the cause of every single war. If we want to avoid WWIII...then we need to implement tax choice in order to eliminate demand opacity.

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