Thursday, February 27, 2014

Split Preference Disorder

There is exactly one search result for "Split Preference Disorder".    LordChibiVampire is the first person to openly acknowledge that they suffer from this condition.  The symptoms don't quite match but that's a minor detail.  The point is that LordChibiVampire is a extremely brave person to be the very first person to talk about this condition that afflicts nearly all of us.

Reply to The Joseon Dynasty

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Let's pretend...shall we?

A. You're my BFF
B. You're a congressman

We go shopping together in a giant store that sells both public goods and private goods.  I'm actually doing all the shopping...you're just there for moral support.

I have my shopping cart.  First thing I put in is garlic.  Because...garlic really matches my preferences.  Next thing I reach for is some environmental protection...but before I can put it in the shopping cart you trip me and put it back on the shelf.  The next thing I put in my shopping cart is Warpaint (the band).  Well...not the actual band (I wish) but their CD.  For some reason you don't trip me.  Moving along I go to grab some public education and find myself sprawled out on the ground.  You tripped me again!  And you put the item back on the shelf and put a bunch of drug war in my cart instead.

Ok, I think I see what's going on here.  For some reason you believe that my preferences really suck when it comes to public goods.  Why just public goods though?

It doesn't make a lick of sense.   Not even a little bit.

If society, as a whole, derives more value when 500 congresspeople override our preferences for public goods...then the same has to be true when it comes to private goods.   The thing is...we know that this really isn't true when it comes to private goods.  So you've got this intense cognitive dissonance going on.

Unless everybody who isn't a congressperson suffers from split preference disorder?  LOL  The public preference side of our brain has lousy lousy lousy value judgement while the private preference side of our brain has excellent value judgement?  That's just so...sad/funny.  Is there a cure?  Is it contagious?

You grasp a few concepts but completely fail to see how they fit into any sort of big picture.  You've got a micrograsp of economics.  

The market works because we can give people positive feedback when they use society's limited resources to create things that we value.  We go around giving our money to people who do valuable things with society's limited resources.  If somebody does nonsensical things with society's limited resources...then we don't give them any positive feedback.  Why?  Because we don't trust their value judgement.

Let's think of it from a religious angle...buying/spending is sacrificing...and producers are gods.  You're saying that we'd worship the wrong gods in the public sector but we worship the right gods in the private sector?  I can discern when a private god is giving me blessings...but I can't discern when a public god is giving me blessings?

Why would we ever want to worship the wrong gods?  If Warpaint is a false god...then I don't want to worship and make sacrifices to them.

What's a false god?  A false god is a god that gives you nothing in exchange for your sacrifice.  A false god is a shyster...a thief...a false god will simply rip you off.  A false god says "No blessings for you!"

Somehow, in your world...we have enough value judgement to elect the right public gods...but we don't have enough value judgement to choose which public gods we make our sacrifices to?   How can the first decision require less value judgment than the second?  We're intelligent enough to choose our gods but not intelligent enough to know which ones we should make sacrifices to?

Clarifying The Demand For Public Goods

[update] Please join the discussion: Demand Clarity Would Eliminate Corporate Welfare [/update]

Question

"How are we going to bust up big ag that has caused so much disparity?" - rabbitcaebannog, The Free Market religion needs to fall on its sword

Answer

We create a market in the public sector.  If people can choose where their taxes go (logistics) then we will see exactly what the demand is for farm subsidies...




This chart shows us what the demand for farm subsidies might look like.  As you can see, there's very little demand breadth because the benefits are extremely concentrated...
Those who think that central planning will promote economic progress are naive.  When business enterprises get more funds from governments and less from consumers, they will spend more time trying to satisfy politicians and less time satisfying customers.  Predictably, this reallocation of resources will lead to economic regression rather than prosperity. - James Gwartney and Richard Stroup, What Everyone Should Know About Economics and Prosperity
Their resources can be used in two ways: investment in capital goods that can be used to produce a product for sale in competitive markets, or investment in lobbying and bribing politicians and in trying to develop legislation that will protect firms from competition or provide them with a share of the public budget.  Under a large government, "political investment" can become relatively more profitable than "market investment," and a shift in investment from the market to the political arena should be expected.  In private competitive markets, a firm must appeal to buyers to enter mutually beneficial trades: in political markets it can enlist the power of the state to force people to give up part of their income for the firm's benefit. - Richard B. McKenzie Bound to Be Free
Politicians exploit rational ignorance by conferring large benefits on certain constituents whose costs are widely dispersed and borne by the general population. Take the sugar industry. It pays the owners and workers to organize and tax themselves to raise money to lobby Congress for tariffs on foreign sugar. If they're successful, it means millions of dollars in higher profits and wages. Since they are relatively small in number the organization costs are small and the benefits are narrowly distributed. The Fanjul family, who owns large sugar farms in the Florida Everglades, capture an estimated $60 million annually in artificial profits. - Walter E. Williams, Rational Ignorance
My impression is that moves toward an economy with less open-market competition reflect a diversion of competition to the political process, as resort is made to greater governmental control over economic access to markets and terms of exchange.  Much of what passes for the new corporate economy should more accurately be called the new mercantilist, or the new “political” or politically regulated, economy, since it involves more political competition and the greater use of political rewards and penalties.  And this move to political influence has occurred in both small and large firm industries.  The “solution” (if such a “political” economy is a problem) usually is more political controls and political competition.  This is beneficial to those most adept at political competition, for they would benefit from increased demand for their services as political competition displaces market competition in controlling economic activity. - Armen A. Alchian, The Collected Works of Armen A. Alchian: Volume 2
Because the benefits of farm subsidies are so concentrated, if we implemented tax choice then it's highly likely that only a very small percentage of people will spend any of their tax dollars on them...
What a delicious prospect: a government office having to explain itself in order to persuade taxpayers to support its existence. The elements within the government that can make a persuasive case will do fine. Americans are not stingy or shortsighted. We will still have plenty of mine inspectors and curators. But who will voluntarily pay for the layers of bureaucratic barnacles that make up so much of the organization charts? Who will pay for the billions in subsidies that are doled out to agricultural, corporate and nonprofit special interests? Who will pay for the enormous pork-barrel projects? - Charles Murray, You Are What You Tax
If enough people don't pay for a public good (insufficient demand breadth)...then it won't be considered a public good.  As a result, people won't be able to spend their taxes on it.  

Another example is war...



There are multitudes with an interest in peace, but they have no lobby to match those of the 'special interests' that may on occasion have an interest in war. - Mancur Olson 
Going to war accelerated the move from indirect to direct rule. Almost any state that makes war finds that it cannot pay for the effort from its accumulated reserves and current revenues. Almost all war-making states borrow extensively, raise taxes, and seize the means of combat – including men – from reluctant citizens who have other uses for their resources. - Charles Tilly
In cases where a war has popular support (opinions, sentiment)...
As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market.  A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision
...it's extremely unlikely that most people would spend any of their own money on it.  This is because talk is extremely cheap...which is exactly why we say that actions (spending) speak louder than words (voting).  The reality is that the multitude has a myriad of far more valuable/beneficial uses of their own money...
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron...Is there no other way the world may live? - Dwight D. Eisenhower
Another excellent perspective on the subject...
The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. Even when weapons of war are not actually destroyed, their manufacture is still a convenient way of expending labour power without producing anything that can be consumed. A Floating Fortress, for example, has locked up in it the labour that would build several hundred cargo-ships. Ultimately it is scrapped as obsolete, never having brought any material benefit to anybody, and with further enormous labours another Floating Fortress is built. In principle the war effort is always so planned as to eat up any surplus that might exist after meeting the bare needs of the population. In practice the needs of the population are always underestimated, with the result that there is a chronic shortage of half the necessities of life; but this is looked on as an advantage. It is deliberate policy to keep even the favoured groups somewhere near the brink of hardship, because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another. By the standards of the early twentieth century, even a member of the Inner Party lives an austere, laborious kind of life. Nevertheless, the few luxuries that he does enjoy his large, well-appointed flat, the better texture of his clothes, the better quality of his food and drink and tobacco, his two or three servants, his private motor-car or helicopter -- set him in a different world from a member of the Outer Party, and the members of the Outer Party have a similar advantage in comparison with the submerged masses whom we call 'the proles'. The social atmosphere is that of a besieged city, where the possession of a lump of horseflesh makes the difference between wealth and poverty. And at the same time the consciousness of being at war, and therefore in danger, makes the handing-over of all power to a small caste seem the natural, unavoidable condition of survival. - George Orwell

I've shown you charts that represent special interests...now, for comparison, here's a chart that represents what a general interest might look like...




Unlike with farm subsidies and war...many people will readily grasp the material benefit of spending their money on public healthcare.  We can see that, unlike with special interests, the demand for a general interest will be very broad.  This is because it will truly contribute to the well being of most people.

Consider this last passage...
The expenses of government, having for their object the interests of all, should be borne by every one, and the more a man enjoys the advantages of society, the more he ought to hold himself honoured in contributing to these expenses. - Turgot
Given the disparity between actions (spending/values) and words (voting/opinions)...the only way we can accurately discern how specific or general an interest truly is would be to create a market in the public sector.  If we do not clarify the demand for public goods then the interests of the many will continue to be sacrificed for the benefit of the few.  

Monday, February 24, 2014

Follower Redistribution

There are five search results for "Follower Redistribution" but 485,000 search results for "Wealth Redistribution".

Comment on: valuation dilemmas

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Hi, how's it going? I have a blog too...but you're a much better writer than I am. My blog only has 10 followers... :(   Noah Smith's blog, on the other hand, has 660 followers. It's follower inequality...and I'm all about follower redistribution. You too?

Ok, the socialist calculation debate. I like the part where you've been reading quite a bit about it. Unfortunately, you haven't grasped it.

Shopping is the process by which consumers communicate their preferences and circumstances to producers. If producers were omniscient...then we wouldn't need to waste our time shopping. But producers are not omniscient. Nobody is omniscient. You had absolutely no idea that I was going to spend any amount of time on this product of yours.  Just like I have no idea how much time you're going to spend on this product of mine.

Maybe you'll simply delete my reply? Maybe it won't match your preferences like your blog entry matched my preferences?

You know who really matches my preferences? Bastiat. I really love that guy. He destroyed Keynes before Keynes was even born...
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes."
If your blog entry was the equivalent of a ditch being dug and then filled in over and over again...then I'm pretty sure I wouldn't have spent any of my limited time replying to it. I would have just assumed that you were insane.  Just like if some guy offered to dig up and replace my lawn each week.

The market works because you're not going to spend your money/time on nonsensical uses of society's limited resources.  Shopping is a vetting/vouching group effort.

Command economies fail because...

A. it's assumed that "life condition" surveys will provide enough information to ensure that society's limited resources are put to their most valuable uses.

B. it's assumed that incentives don't matter. Effort does not need to be tied to reward. The kids will make the same effort whether they are looking for Easter Eggs or poop.

Mises got consumer sovereignty (dollar voting) right...but he got prices wrong. It can't be about prices because if it was...then I'd have no idea how much of my time to spend replying to your blog entry. There's no price tag on your blog entry...yet here I am spending my time.

Every war since the 1920s was a consequence of Mises fetishizing prices. If he had made more effort to expand the relevance of consumer sovereignty...then he would have grasped that the only thing wrong with government is the visible hand.

Eliminating the visible hand would be as simple as allowing people to shop for themselves in the public sector. Their valuations would be far more truthful than any sort of cheap talk surveys...
As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. - Geoffrey Brennan, Loren Lomasky
When it comes to spending their own money...war is nonsensical to the vast majority of people. Unfortunately, wars will continue as long as people like you fail to understand the problem with a top down approach. So here I am. Gambling my own resources on a long shot.

Friday, February 21, 2014

The Most Valuable Balance of Inputs

There were zero search results for "The Most Valuable Balance of Inputs".

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.

Thursday, February 20, 2014

The Economy Is An Equation

Hah! Exactly one search result for "the economy is an equation".  Hawkeye15 beat me to the exact phrase!  I'm kinda surprised that there aren't more results.

Reply to: The Free Market religion needs to fall on its sword

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People didn't understand how evolution works so they believed in the superiority of divine beings. It's the same thing with economics. If you don't understand how economics works then you will believe in the divinity of congress. But government planners can't even supply the optimal amount of milk.

The economy is an equation...

y = f(x)

y = supply = dependent variable = output
x = shopping/demand/preferences = independent variable = input

supply = f(shopping)

If you change the input (shopping) then the output (supply) will change accordingly. For example, if everybody becomes a vegetarian then meat will no longer be supplied.

Imagine if we prevented women from shopping for themselves. If a lady wanted anything then she would have to find a guy to buy it for her. In essence, we'd be filtering the input. As a result, the output would change accordingly. What would happen to the supply?

A. it would increase in value
B. it wouldn't change in value
C. it would decrease in value

If you answer A...then please start a thread where you suggest that we create a law that prevents women from shopping for themselves.

If you answer B...then why didn't it change in value? How much time do you think women currently spend shopping (entering their input into the equation)? If you prevent them from shopping for themselves... then are men going to volunteer their time to shop for women? Even if they do...that time has to be taken from other uses.

If you answer C...then I would be really surprised. Because right now you think it's a good idea to allow 500 congresspeople to shop for millions and millions of people in the public sector.

If preventing women from shopping for themselves destroys value...then how much value is destroyed by preventing everybody but 500 people from shopping for themselves?

Think about it...if we prevented women from shopping...then how many different personal shoppers could they choose to give their money to? Around 150 million. That would be infinitely better than our current system. If we applied our current system to the private sector...women would have to give their money to 500 elected guys. It would be a supremely stupid thing to do.

You think it's a good idea to throw nearly all the data away because you fail to understand economics. You think the output will be just as valuable even if people's preferences and circumstances are removed from the input.

So the reality is that you are the religious one...with your strong and ridiculously blind faith that somehow congress knows your preferences and circumstances like god knows how many hairs are on your head.

You're welcome to believe in the tooth fairy, santa claus, the easter bunny and god...but things are really wonderful when you don't force your absurd beliefs on others. If we created a market in the public sector...then your congress would still be there. You'd be free to indulge your faith by giving them all your money...while us nonbelievers would be free to directly input our preferences and circumstances into the equation which determines how society's limited resources are used.

Monday, February 17, 2014

Demand Opacity

Another attempt to teach economics to atheists...

Reply to: Public Goodness Survey

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Damarcus, ok, now we've made it to the very point of this thread. Except, if you understood my first and second posts in this thread then you wouldn't have argued that corporations would use tax choice to eliminate competition.

As I failed to explain in my first and second posts...in a tax choice system we'll see just how many people give their taxes to a government organization. This information will make it impossible for there to be public goods that only benefit special interests. For example...

"There are multitudes with an interest in peace, but they have no lobby to match those of the 'special interests' that may on occasion have an interest in war." - Mancur Olson

If there are a multitude with an interest in peace...then they are not going to give money to the DoD if it has an interest in attacking other countries. Therefore, the shape of the demand for the DoD would be deep and narrow. It would have depth but very little breadth. Breadth requires multitudes.

Imagine there's a government organization that finds a way to eliminate war. If there are multitudes with an interest in peace...then the shape of the demand for this government organization would be deep and wide.

The more general the interest, the wider the demand shape. The more special the interest, the narrower the demand shape.

With the current system, we have no idea what the demand shapes look like for each and every public good. I refer to this as demand opacity. The current system creates demand opacity which facilitates exactly the kind of problem you described. Tax choice would eliminate demand opacity by allowing us to truly see the actual demand for each and every public good.

Sunday, February 16, 2014

Teaching Economics To Atheists

As usual I googled this blog entry's title before publishing and found this...
“I had a few friends in the same class that were angry with me and said I destroyed his freedom to religion, but in reality his actions were unconstitutional and were not related to economics at all,” she explained in her essay. “This was economics class, not Sunday school.”
Sara Elizabeth Sheppard busted her economics professor for talking about religion during class.  Hey Sara...pull up a chair.  Or not.  

When I googled this blog entry's title using quotes...there weren't any results.  This title is kinda silly.  Given that a recent blog entry was titled..."Teaching Economics To Anarcho-capitalists"...it feels like I'm doing a series.  What's next?  "Teaching Economics To Ventriloquists" maybe?

I shared my public goodness survey in the usual places and didn't get much response.  No real surprise there.  Interestingly enough...nearly all the responses came from the atheistforums.  Everybody who responded indicated that they really had no idea what I was going on about.  Maybe people in other forums also had no clue...but for some reason only the atheists voiced their thoughts?

So here is my 3rd...or 4th...or 20th...attempt to teach economics to atheists...

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I'm going to go with a somewhat ironic example.  How many of you have ever attended a typical church service?  When I was a little kid my mother forced me to go each week.  One thing they do during the service is pass offering plates around.  It's a container of sorts...and when it gets to you...you can choose exactly how much money you put in it.

Let's imagine that there's a church with a really small congregation and you're Dian Fossey's atheist grandson.  Instead of studying gorillas in the mist...you're studying christians in the church.  You hide in the rafters with your binoculars, notebook and bag of power bars.  When it comes time for the offering plate to be passed around...you dutifully write down in your notebook exactly how much money each christian puts in the offering plate...

Digit - $0
Rafiki - $5
Uncle Bert - $35
Macho - $0
Icarus - $10

You do this for an entire year.  At the end of the year...you add up how much money each christian contributed to their church...

Digit - $5
Macho - $5
Pancho - $5
Icarus - $10
Linus - $10
Obama - $12
Jerry - $15
Tom - $20
Rafiki - $25
Frank - $25
Pigpen - $25
Blink - $30
Joan - $30
Mary - $40
Frost - $45
Strongbad - $45
Carrie - $50
Pompom - $75
Stan - $80
Brittney - $200
Saya - $350
McLovin - $400
Twitch - $700
Butters - $800
Uncle Bert - $1000

In order to visualize the data...you create a graph...



There you go.  You just visually represented the demand for that church.

What do you think the demand chart would look like for Joel Olsteen's church?  His Lakewood Church is the largest church in America.  Each week an average of 43,500 people attend.  That's between the attendance of baseball games (30,514) and football games (67,604).

If I had to choose between attending a baseball game or a football game or a service at Olsteen's church...I'd definitely choose the service.  That alone doesn't say much because most sporting events bore me to death.  But a while back I accidentally channel surfed right into Olsteen's net.  His delivery is so silky smooth.  It's so seamless and seemingly so sincere.  It doesn't matter if he's a fake...it would be like accusing Kevin Spacey of not truly being the character that he's portraying in a movie.  It doesn't matter how big the disparity is between an actor and his character...a remarkable performance is still remarkable.

We know what the demand is for Olsteen, Spacey and sporting events....but we don't know what the demand is for public goods.  This is a problem.  Demand opacity is the most pressing problem we face as a society.  But the solution is really simple.  We just have to give taxpayers the freedom to choose where their taxes go.  This will eliminate demand opacity.

One concern is that the wealthy will have too much influence.  They will spend their taxes on public goods that screw the middle class and poor.  This concern is ridiculous though because if a "public good" harms most of the public...then it really isn't a public good.  A public good is something that is largely beneficial.  And once people can shop for themselves in the public sector...then we'll clearly see the demand depth/breadth for each and every public good.  Therefore, if a public good only benefits the wealthy...this will become readily apparent...and the public good would be removed from the public sector.  The point of this survey is to determine where that "removal" threshold might be.

Have I helped clarify things?  Or have I mucked things up even more?

Let me try and put it another way.  Imagine that there's a huge city that's only populated by atheists.  For whatever reason, there's not a theist in the city.  Imagine if you went to the bank and asked for a loan to start a church.  What do you think the loan officer would tell you?  "Ah, how brilliant!  You'll have a monopoly!  I wonder why no one else has thought of it before!?"  So the loan officer lends you a million dollars and you start your church.  And of course nobody shows up.  Why?  Because there wouldn't be any demand for a church in a city of atheists.  Errr...well...I guess theists could show up from other cities.  Maybe the absence of churches explains the absence of theists...heh.

The point is...it would be a waste of society's limited resources to build something that there's no demand for.  Just like it would be a waste of society's limited resources to start a war that there's no demand for.  But that's exactly what happens with our current system.   We substitute the actual demand for the guesses of 500 government planners (congresspeople).  But if the guesses of 500 government planners are really that great then we wouldn't need markets.

Markets work because the guesses of entrepreneurs are tested against reality.  Entrepreneurs that correctly guess the demand will make money.  Failure to correctly guess the demand results in bankruptcy.  Our job as consumers is to reward the entrepreneurs who correctly guess what our demands are.  That's what shopping is all about.  So if people can't shop for themselves in the public sector...then the guesses of government will not be tested against reality.

Yes, the guesses of congresspeople will be tested against elections...but voting doesn't reveal demand.  Voting reveals opinions...not values...

1. Should we conserve the Amazon rainforest?  Yes/No
2. How much would you like to donate to conserve the Amazon rainforest? _______

The first question reveals your opinion while the second question reveals your values/priorities/preferences.  It's great to know the public's opinions...but it's infinitely more important to know the public's values.  We can't put society's limited resources to their most valuable uses if we don't know what society truly values.  Shopping reveals values which is exactly why it's imperative that we create a market in the public sector.

Friday, February 14, 2014

Visualizing And Evaluating The Public Goodness Threshold

Nobody made a greater mistake than he who did nothing because he could do only a little. - Edmund Burke*
In a recent blog entry...What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You?...Razo challenged me to a duel (public debate)!  Who's Razo you ask?  He's with the International Voluntary Tax Fund.   That link takes you to his video...which is very interesting...and definitely worth liking.  Here's some of what Razo wrote on the Tax Choice Party facebook page...
Let's follow and expand your analogy. Divide the U.S. into two halves - those who are very intelligent and those who are very dull. History tells us that the most intelligent, especially at the upper extreme, will manipulate the system to their own individual advantage. This takes place no matter what political framework is chosen. In the past even forced collectivism hasn't been able to stop this, and liberal democracy is accelerating the division.
What will tax choice do to stop this?
Hmmm.  I spent over an hour on facebook composing and deleting around a dozen different responses (couldn't do that in a "real" public debate!).  A few were really long but the shortest was...
Concentrated benefits and dispersed costs are the logical consequence of rational ignorance and rational ignorance is the logical consequence of preventing people from shopping for themselves in the public sector. 
This is true...but I felt that it didn't adequately address some part of his concern.  I think it probably happens way too often where I make a point and expect the other side to think it through.  Or I assume they'll see the "obvious" stepping stones that they need to reach pragmatarianism.  Or something like that.  That's why it helps to draw diagrams, graphs and charts!

Ok, so in a pragmatarian system people will be able to choose where their taxes go.  You can read about the logistics here...pragmatarianism FAQ.

One concern from the liberal side is that rich will have too much influence because they pay most of the taxes.  Liberals are certain enough that the rich will spend their tax dollars in a way that will screw the middle class and the poor.

But there are two very important things to consider...

1. Nobody would stop the poor or middle class from shopping in the public sector.  The public sector wouldn't be some snobby country club or a stuck up Beverly Hills boutique.  You wouldn't have to be "this rich" in order to shop there.  This means that the EPA wouldn't laugh at anybody's $2 contribution.  Would they?  Maybe they didn't read the Bible story about the widow's mite?

2. We would be able to "see" exactly how many people contributed exactly how much to each and every government organization (GO).  This doesn't mean that we have to see exactly who these people are though.  We would just see how many different people donated to a GO and the amount that they each donated.  In other words, we would see the depth and breadth of the demand for each and every public good.

How many of you have already visualized where I'm going with this?

In order to help point out exactly where the stepping stones are...I've created a public goodness survey.  The survey consists of 10 different hypothetical public goods.  Each public good has its own chart which shows a different demand shape.

To participate in the survey simply rate each public good from 0 to 10...

0 = no depth/breadth = no public goodness
10 = maximum depth/breadth = maximum public goodness

...and indicate whether or not it should be a public good.

The objective is to determine exactly where the public goodness threshold is.  How deep/wide must the demand for a public good be in order for it to be considered a truly PUBLIC good?




1. PGA - In this case there's not much depth (people didn't contribute much) but perfect breadth (everybody contributed).  Every single citizen contributed the same exact amount of money to this public good.  Let's say the amount is $5 dollars.  Of course, $5 to the poorest person doesn't mean the same thing as $5 to the richest person.  This is the logic behind the progressive tax...
Economics can establish that a man’s marginal utility of money diminishes as his money-income increases. Therefore, they concluded, the marginal utility of a dollar is less to a rich man than to a poor man. Other things being equal, social utility is maximized by a progressive income tax which takes from the rich and gives to the poor. This was the favorite demonstration of the “old welfare economics,” grounded on Benthamite utilitarian ethics, and brought to fruition by Edgeworth and Pigou. - Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics
So what does PGA's chart tell us?  It tells us that everybody demands this good.  But income and demand for this good are inversely correlated.  The more money you make, the less accurately this good matches your preferences.




2. PGB - Another straight line.  But, it's twice as high on the y-axis.  So rather than everybody contributing $5...everybody contributes $10.




3. PGC - Uneven depth but great breadth.  Everybody demands this public good...but income and demand for this good are inversely correlated.




4. PGD - Lousy depth but great breadth.




5. PGE - Good depth and great breadth.




6. PGF - Great depth and breadth.




7. PGG - Great depth but lousy breadth.




8. PGH - Again, great depth but lousy breadth.




9. PGI - And again, great depth but lousy breadth.




10. PGJ - Great depth and decent breadth.

Can you think of other likely demand shapes?  Would any public goods match any of these shapes?

If we created a market in the public sector...then it's a given that each government organization (GO) would have a demand chart on their website.  As soon as somebody makes a payment directly to a GO...their demand chart would be automatically updated.  Like I said in the pragmatarianism FAQ...people would be able to shop in the public sector whenever they wanted.

The less demand depth/breadth a public good has...the stronger the case that it doesn't have enough public goodness to remain in the public sector.  If a public good is kicked from the public sector then taxpayers will no longer be able to spend their taxes on it.  As a result, people will understand that even a small contribution is better than no contribution.

Hopefully it should be clear that giving any group of people...poor, rich, white, black, male, female, gay, straight, atheist, theist, tall, short...the freedom to shop in the public sector will increase the accuracy of the demand charts.  By this same logic...wouldn't the accuracy of the demand charts greatly increase if taxpayers were given the freedom to shop in the public sectors of other countries?  Here's where I first considered this...A Global Free-trade Agreement for Public Goods.

If value was created by preventing people from spending their money on foreign private goods...then the same thing has to be true of foreign public goods.  But the reality is that no city, state or country can have a monopoly on the production of value.  This is because the production of value is the result of ideas...and there will always be new ideas wherever people are free to think and act.  But the value of a new idea/product/service can't be accurately determined if consumers are needlessly restricted.  If we want the pinata to release its treasure...we shouldn't spin, blindfold and tether consumers.  Same thing if we want the tail to be perfectly pinned on the donkey.  In order for humanity to derive the maximum value from the world's resources...we should make it make it as easy as possible for consumers to use their dollars to signal exactly where in the world resources should flow to.

For example, let's consider the Brazilian EPA's effort to conserve the Amazon rainforest.  Here's what the demand chart might look like if only Brazilians were free to give their taxes to their EPA...




What would happen to the demand chart if American citizens were also given the freedom to give their taxes to the Brazilian EPA?  It stands to reason that the demand would increase...




As each additional country gives its citizens the freedom to give their taxes to the Brazilian EPA, the accuracy of the demand chart increases...




If we look at the disparity in demand...then it's clear that massive amounts of value would be destroyed if we prevented taxpayers from shopping in the public sectors of other countries.  The Brazilian EPA would receive the wrong amount of funding...and as a result, rainforest that should have been conserved would be destroyed instead.

The amount of resources directed to the conservation of the Amazon rainforest should be determined by the amount of value the world derives from the Amazon rainforest.  And the only way we can know how much value the world truly derives from the Amazon rainforest would be to allow taxpayers to spend their taxes on any country's public goods.

What do you think?  Have I done a better job of pointing out where the stepping stones are?  Hopefully!  With these stepping stones illuminated...I can now provide the most succinct answer to Razo's question...
Let's follow and expand your analogy. Divide the U.S. into two halves - those who are very intelligent and those who are very dull. History tells us that the most intelligent, especially at the upper extreme, will manipulate the system to their own individual advantage. This takes place no matter what political framework is chosen. In the past even forced collectivism hasn't been able to stop this, and liberal democracy is accelerating the division. 
What will tax choice do to stop this?
It will open our eyes.

Right now we keep stubbing our toes because we're stumbling around in darkness.  Tax choice will enlighten us by removing the blindfold.  We will clearly see the depth/breadth of the demand for public goods.  If we see that the wealthy are the only ones spending their taxes on a public good...then this will call into question whether that good has enough public goodness to remain in the public sector.

As long as we have no idea what the actual demand for public goods truly is...then we will continue to blindly stumble around.  This demand opacity will destroy rainforests that should have been conserved...and we will continue to suffer the devastation of wars that neither side sufficiently demanded.  Pragmatarianism will eliminate demand opacity by illuminating the stepping stones that we need to walk out of these dark ages.  The steps we need to take are extremely simple...all that's required is to give people the freedom to shop for themselves in any public sector.

If any teachers/professors are interested in sharing this survey with your class...I'd be happy to e-mail you the PowerPoint document.  Just include your e-mail in a comment...or Google "public goodness survey" to find a website where you can register to send me a private message.

*HT Ryan Rickard

Thursday, February 13, 2014

Civic Crowdfunding Ethical Alternatives

Reply to: Oklahoma Restaurant: Not white, straight & rich? Screw you (context)

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I have a good friend who is gay and used to be my roommate. When we lived together he would love to complain that he was living in Glendale instead of West Hollywood. This had nothing to do with discrimination...and everything to do with a scarcity (relatively speaking) of things (in this case people) that matched my friend's preferences.

My gf, who is Korean (but a banana) was thrilled when a Kyochon Chicken opened up in Glendale. I love it as well...it's wonderfully spicy Korean BBQ chicken wings/legs. Having one in Glendale means that we wouldn't have to drive ALL the way to Korea Town (not that far). Unfortunately, it closed down shortly after it opened. Maybe the manager was inept...or maybe the demand wasn't there. I told my gf that, because she didn't go there often enough, it was her fault that they closed down. Glendale isn't Korea Town...it's Little Armenia. Zankou Chicken (which is also delicious) has been in business here for years.

Personally, I love the heck out of orchids. There's an awesome nursery in Santa Barbara...and an awesome one in San Diego...but none right in the middle...Los Angeles...which is next to Glendale where I live.

Should the mountain come to Mohammed...or should Mohammed go to the mountain?

One thing that I keep thinking about is the expression..."as happy as a kid in a candy store". Why is the kid so happy? Because there's a wide variety of items which really match his preferences. Isn't that what heaven would be like? Imagine going to heaven and discovering that there wasn't a wide variety of things that really matched your preferences...you'd want a refund...right?

If we want heaven on earth...then it's essential to understand the process by which candy stores come to have such a wide variety of things which really match kids' preferences. Basically, a kid has something that the candy producers want...money. So they are incentivized to innovate. They constantly try different combinations of inputs in order to put new and better options on the table. If the new option is truly better, then the kid gives them positive feedback by exchanging his money for the better option. And because no two kids have the same exact preferences...candy store owners strive to provide the variety of candies which will maximize their revenue.

What would a candy store look like today if kids had never been allowed to choose for themselves which candies they wanted? How could there be a wide variety of items which really match kids' preferences if they were never given the freedom to let the candy makers know what their preferences truly are? Without their individual input (spending decisions), it's a given that the selection of candies wouldn't be wide...and it wouldn't closely match their preferences. And kids wouldn't be so happy when they went to candy stores.

The standard for life is for everybody to be as happy as a kid in a candy store. There should be the widest variety of things that match our preferences as closely as possible. In order for this to happen, people have to be free to shop for themselves...and entrepreneurs have to be free to try and guess which combination of inputs will maximize their revenue.

Is this a rant? Or a random ramble? Maybe it's only remotely relevant to your questions? Is it possible that maybe your questions are the things that are only remotely relevant to reality?

The fact of the matter is...by critiquing the logistics of building an ethical alternative in Enid...you're making it clear that you don't really grasp the fundamental concepts.

Think about Las Vegas. I don't know how true the story is...but the idea is fascinating...somebody building a candy store in the middle of nowhere. Evidently, the candy closely matches people's preferences as so many of them are willing to make the drive. Just like I'm willing to make the drive to the orchid nurseries in Santa Barbara and San Diego.

Again, the point is that we really don't want to use a large amount of society's limited resources to only create a little value. Markets work because the amount of resources somebody uses reflects the amount of value they create for others.

A civil suit against Gary James would use a large amount of society's limited resources but we would never know the amount of value it created. Why? Because it was funded by people who didn't have a choice in the matter.

If a candy store owner could create the maximum value without the choices of each and every kid...then I would be confident that we would could create the maximum value by suing Gary James. But without the direct input of consumers, without their spending decisions...it's a given that we will be using a large amount of society's limited resources to only create a small amount of value.

Economically speaking, the greater the disparity between the demand and the supply, the more value that will be destroyed. If you demand a club sandwich, but I supply a knuckle sandwich, then value will be destroyed. Successful builders are the people who accurately guess the size of the unmet demand. Unsuccessful builders are those who waste society's limited resources trying to build something that there was insufficient demand for.

Ideally there should be a way for the people of Enid to show you their true demand for an ethical alternative. But true demand can't be revealed by cheap talk surveys...which is why voting doesn't reveal demand...it simply reveals opinions. True demand can only be revealed by individuals considering their circumstances and choosing...spending...sacrificing...accordingly.

This is why we have to create a market in the public sector. Doing so would give us the opportunity to create a government organization dedicated to building ethical alternatives. Taxpayers could give their money to this organization...and the organization would determine where an ethical alternative is most likely to create the most value. Then they could either build the alternative themselves...or grant the money to the most successful/qualified/experienced builders.

Of course, maybe a government middleman wouldn't be needed. You could start a crowdfunding website dedicated to ethical alternatives. People could propose ethical alternatives and anybody could contribute any amount to the projects. For example, you could propose an ethical restaurant in Enid...and people could contribute any amount to the project. If the funding goal was reached...then you would receive the money and get started building the restaurant. In order to increase your chances of reaching your funding goal...you'd have to show people that you did your homework. Plus, it would help if you had a few successful projects under your belt. What's really quite fascinating is that I think a new law makes it possible for people to be investors rather than just donors. If people are investors...then you have a crowd of people researching the viability/profitability of ethical alternatives. Given enough eyeballs, all bugs are shallow (Linus's Law). A crowdfunding site for ethical alternatives is a pretty brilliant idea. People could make money by doing good. I'd jump on it if pragmatarianism wasn't a thousand times more brilliant.

Wednesday, February 12, 2014

Ethical Consumerism, Ethical Producerism and Ethical Builderism

Consumers choosing between producers improves the quality of products. Producers choosing between consumers achieves ... what? - Ailiailia, Oklahoma Restaurant: Not white, straight & rich? Screw you 
Eh, Lincolnocracy kinda did a funny thing. He gave my "ethical producerism" a somewhat different spin..."arms companies not sell to regimes which routinely violate human rights". His use kinda makes sense though.

My intended meaning for ethical producerism was when you...

A. identify a business engaging in unethical practices
B. build a business to provide workers/consumers with a more ethical alternative

So ethical consumerism is the first step. You're going to boycott the racist restaurant in Oklahoma. Ethical producerism is the next step. You're going to build an ethical restaurant across the street from the unethical restaurant.

Uh, maybe I should use "ethical builderism" instead? "Builderism" is a really awkward word though.

Let me try again.

Ethical consumerism is the first step. You're going to boycott a sweatshop factory in India. Ethical builderism is the next step. You're going to build an air-conditioned factory across the street from the sweatshop factory.

When producers choose between consumers...and they aren't engaging in ethical producerism...then they are simply making a mistake. The question is...how big of a mistake are they making?

Let's say that I start a restaurant and I choose not to serve martians. Am I making a mistake? Maybe I'm being racist. Rayshist? Alienist? Martiast? In any case, it could be argued that I'm being unethical. But it's not a huge mistake because there aren't any martians around. So my financial loss is $0.

What happens though if martians start arriving on the planet? As each martian arrives on the planet...the size of my mistake increases. But as the size of my mistake increases...so does the financial incentive for somebody to engage in ethical builderism.

Of course, just because an Easter Egg exists...doesn't necessarily mean that it will be found or picked up any time soon.

Markets work because the kids aren't all tied together. As a result they cover more ground...which results in more Easter Eggs being found. This is why decentralized systems (markets) create more value than centralized systems (socialism). But even though more ground is covered in market-systems...it's still an imperfect system.

As a pragmatarian...I have absolutely no problem with the public sector also searching for Easter Eggs...as long as its up to taxpayers to decide for themselves whether what was found was truly an Easter Egg.

The more kids searching for Easter Eggs...the more Easter Eggs that will be found. And the more valuable the Easter Eggs are...the greater the incentive to find them.

Going back to my martian scenario...assuming martians need to eat...and assuming they have different food preferences...and assuming we can make food that matches their preferences...and assuming they have something of value that we want...then the larger the Easter Egg is...the less likely that it will be overlooked. But if the private sector overlooks it or doesn't pick it up...then I have no problem with the public sector supplying martian food...as long as taxpayers can choose where their taxes go.

So ethical consumerism/builderism in conjunction with pragmatarianism would allow the maximum freedom and create the maximum value.

The Free Market Easter Egg Hunt Analogy

I have already explained exactly why tax-earmarking is unlikely to lead to a private property society (aka anarcho-capitalism). There is just no reason for the one to lead to the other. The incentives are not there. There's no connection. - helmuth_hubener, Public vs Private System of Representation

Imagine it's Easter and there are a 100 kids about to go out on an Easter Egg hunt. The whistle blows...and the Easter Egg hunt begins! Except, the kids don't take off in a flash. They just kinda stand there looking bored. So you ask one kid why he isn't off trying to find the Easter Eggs.

HH: Hey kid, how come you're not making the effort to find the Easter Eggs?
Kid: The incentives aren't there.
HH: What do you mean?
Kid: The Easter Eggs were replaced with poop.

Yes helmuth, the incentives won't be there in a pragmatarian system because taxpayers won't have money to spend...they'll just have their poop to spend. Boy, you've really managed to disprove pragmatarianism! How could I have been so dumb to miss something so obvious? Of course organizations won't be incentivized to try and put better options on the table. Why would they try and innovate if all they get is a bunch of poop for their effort? LOL!

Seriously? Seriously? Seriously?

Once taxpayers can choose where their taxes (aka money aka something that everybody wants more of) go...then producers will be incentivized to use society's limited resources in new and better ways. Not just government organizations but all organizations. If a private organization comes up with some excellent health care innovation...then more taxpayers will want to spend more money in the private sector and less money in the public sector. Therefore, congress will increase its revenue by lowering the tax rate. It's ridiculously simple and straightforward.

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helmuth_hubener used up his allotment of my patience a long time ago.

But I am loving the Easter Egg hunt analogy and have been thinking about it for quite a while now.  And ever since my very first (and only) exchange with Steve Horwitz* I've been curious about who gets credit for analogies.

So I googled "market process" Easter Egg hunt and was *shocked* to discover that I wasn't the first one to think of the analogy.  But it wasn't at all surprising that the person using the analogy was my favorite economist James M. Buchanan...the intellectual father of tax choice.  Buchanan gave credit for the analogy to Richard Wagner...another excellent economist.

Searching for "free market" "easter egg" hunt found me this Easter Egg...
“Listen son, when the egg hunt begins, you need to pick up as many eggs as you can and drop them in your basket. Don’t stop to take the time to open the eggs to see what’s inside- there will be time for that later. Just find an area where no other kids are looking and search there for the eggs.” - Nick Shell, The Subtle Capitalist Message Of Easter Egg Hunts
This ties into Kirzner's emphasis on the importance of discovery...
Entrepreneurial discovery represents the alert becoming aware of what has been overlooked. The essence of entrepreneurship consists in seeing through the fog created by the uncertainty of the future. When the Misesian human agent acts, he is determining what indeed he 'sees' in this murky future. He is inspired by the prospective pure profitability of seeing that future more correctly than others do. These superior visions of the future inform entrepreneurial productive and exchange activity. The dynamic market process is made up of such profit-motivated creative acts in regard to the future. - Israel M. Kirzner, How Markets Work
It also invokes the idea of heterogeneous activity.  An Easter Egg hunt is a decentralized system.  You can imagine that far less ground would be covered if you tied all the kids together.  This is why centralized systems (socialism) find far less Easter Eggs.  And it's exactly why we should create a market in the public sector.

*I accidentally lied...The Failure of Market Failure

Teaching Economics to Anarcho-capitalists

As I've mentioned before...Anarcho-capitalism and Pragmatarianism...there are two ways that somebody can arrive at anarcho-capitalism...

Route 1 - they can study economics
Route 2 - they can study morality

The vast majority of anarcho-capitalists took the second route...it's shorter and easier.  The problem is...if somebody has arrived at the conclusion that coercion is immoral...then there's absolutely no reason for them to try and understand the economic arguments for anarcho-capitalism.  Coercion is wrong and that's the end of the story.  Because most anarcho-capitalism have taken route number 2...it's really hard for them to understand the value of pragmatarianism.  They don't have enough economics under their belt to "see" and appreciate the market process.  Route 2 anarcho-capitalists just have faith that noncoercion = abundance.

Step 1: Noncoercion
Step 2: ???
Step 3: Abundance
 
This is why, over on the Ron Paul Forums, I'm in the middle of my second debate with ProIndividual...Public vs Private System of Representation.  You can read about the first debate here... The Visible Hand vs The Invisible Hand

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Your destination is not a destination...or if it is, it's just more state socialism, albeit re-engineered. You can't escape the logic of that. - ProIndividual

You're saying that tax choice's destination is simply our current location?  If so, then you're saying that socialism is a perfectly viable concept.

If the supply of public goods is exactly the same before and after tax choice is implemented...then clearly government planners (in our case, 500 congresspeople) are capable of divining the actual demand for goods.
Right now we have 500 congresspeople determining how our taxes are spent in the public sector.  This is the visible hand.  The visible hand takes our money and determines how much of each public good gets placed in the shopping cart.  Can you see the contents of the shopping cart?  Of course you can...just look around you...it's the current supply of public goods.

In a tax choice system we would have millions and millions of taxpayers determining how their own taxes are spent.  This is the invisible hand.  The invisible hand would determine how much of each public good gets placed in the shopping cart.

Now, here you are telling me that the contents of both shopping carts would be exactly the same...




You're saying that somehow the visible hand managed to correctly determine exactly what the invisible hand would have placed in the shopping cart.  You're saying that the supply of public goods in a tax choice system will create the same exact amount of value as the current supply of public goods.  You're saying that the tax choice destination is exactly the same as our current location.  You're saying that socialism is a perfectly viable system for determining how society's limited resources should be allocated/used/distributed.

It's funny because if you read all these people's critiques of pragmatarianism...Unglamorous But Important Things...they are all certain that the contents of the two shopping carts would not be identical.  The vast majority of people are certain enough that the supply of public goods in a tax choice system would be far less valuable than the current supply.  In other words...they are certain that tax choice would take us to a far less valuable location.  

The average Joe believes that tax choice would take us to a far less valuable location while you believe that tax choice wouldn't take us anywhere different.  

Wednesday, February 5, 2014

Let's Embrace David Friedman's New Dining Custom

Comment on David Friedman's blog entry A New Dining Custom

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@PowerChild...I'm chuckling because you listed the eating accessories for David. Was that really necessary? Do you think David is a stranger in a strange land? He's not familiar with our bizarre customs and strange devices? Oh no, I'm still chuckling. I wonder if David copied the list for future reference. I can imagine that the next time he sits down to eat he'll whip out your list to make sure that he is fully accessorized. :D

It reminds me of a facebook group messaging discussion that a few of my friends and I were participating in.  Two ladies were discussing vibrators.  One is a fan of them while the other never uses them.  Here's the relevant snippet...

Jennifer Connelly: Pocket rocket is great it goes brerrrrrrrrrddr
Lol
Natalie Portman: I'm familiar with the device
I just don't need it

I think David is familiar with our eating devices...which is why it's funny that you listed them.  hehe.  Never mind me I'm just being ridiculous.

@Simon, yes! You're drunk! Me too! Not really though.

My database has four entries with the word "marriage"...one by Edward Burnett Tylor, one by Frédéric Bastiat, one by Friedrich Nietzsche and one by this fine fellow...
It is one thing to postulate universal rationality in human decision-making; it is another thing (and, in our view quite unjustified) simply to assume as an empirical matter that all human decisions are at all times universally arranged in equilibrium patterns. (To assume that no married person could change mates and become better off thus appears as a totally unjustified and unrealistic assumption, thoroughly undermining the usefulness of the "economic approach" to the marriage "market".) - Israel M Kirzner, The Driving Force of the Market: Essays in Austrian Economics
Regarding David's dinner ...is there a seating arrangement that would have provided the maximum amount of value?  Well...it stands to reason that no two seating arrangements are equally valuable.  David can't possibly derive the same exact amount of value from two different people.  Therefore, some arrangements are more valuable than other arrangements.  But the only way to determine the most valuable arrangement is to give people the opportunity to determine how much value they derive from each and every person there.  With this in mind...I support David's new dining custom.  And I'm not just supporting it because I want David to endorse pragmatarianism.  Nope.  Not even a little bit.

Noah Smith vs Austrians

Comment on:  How the New Classicals drank the Austrians' milkshake

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Eh. It's kinda surprising that you dedicated an entire post to Austrian economics. But it's not surprising that you didn't touch on the opportunity cost concept. LOL
First, economics is all about individuals. That is because economics is all about choice. We can’t have everything, so we have to choose which things are most important to us: would we prefer a new car, for example, or a summer holiday? To go out with friends, or to relax at home? Invariably, we have to give up one thing (an amount of money or time and effort, say) to get another (such as a new pair of shoes or a tidy garden). These are economic decisions – even when no money is involved. They are questions of how we juggle scarce resources (cars, holidays, company, leisure, money, time, effort) to best satisfy our many wants. They are what economics is all about. - Eamonn Butler, Austrian Economics
That entire PDF is worth reading if you're genuinely interested in learning about Austrian economics. It also touches on heterogeneous activity. Heterogeneous activity is obviously the opposite of homogeneous activity. Homogeneous activity is where you tie all the kids together and then send them to go find the Easter Eggs. It's a centralized, top down approach. It's saying "public infrastructure is a SURE investment! We don't need to create a market in the public sector because I know exactly where the Easter Eggs are. I wear a large electric purple turban that makes me omniscient!"

Also quite good are Rothbard's The Myth of Neutral Taxation and Toward a Reconstruction of Utility and Welfare Economics

And...
Because of the coercive nature of government activity, two additional results come forth. First, by voluntarily purchasing an item on the market, an individual demonstrates that he values the item more than the money price. But in paying taxes, he makes no such demonstration. The government does not know, as a business does, the value individuals place on its activity. Since government cannot obtain the information and incentive by demonstrated preferences of individuals, they cannot efficiently serve individuals. - Jeffrey Herbener, Austrian Methodology: The Preferred Tax Type
Austrians acknowledged that it's a problem that we don't know what the demand is for public goods. You and your electric purple turban wearing posse think otherwise. Please take your turban off. It really doesn't make you omniscient...it just fills you up with hubris.

Sunday, February 2, 2014

Join The Tax Choice Party! Let's Unbundle Government!

Did you know that the Canadian government has mandated the unbundling of cable channels?  If you think this is a pretty darn great idea...then you should really love the Tax Choice Party!  This brand new party supports the unbundling of public goods.

If it doesn't make sense to be forced to purchase a bundle of channels...then it makes far less sense to be forced to purchase a bundle of every public good.  At least with cable the items in the bundle are all in the same category...television.  But with the government the only thing the bundled items have in common is that they are all public goods.  It's not like you purchase a bundle of public education...or a bundle of environmental protection...or a bundle of welfare...you purchase a bundle of all the goods in the public sector.

If it makes sense for pacifists to have war put in their shopping carts...then it should also make sense for vegetarians to have steak put in their shopping carts.  The latter would certainly make sense to cattle ranchers...just like the former does make sense to the billion dollar "defense" industry.

Once public goods are unbundled...and taxpayers can pick and choose which public goods they put in their shopping carts...then we will learn what the actual demand is for public goods.

Think about it...if we unbundled cable then people would spend their money on the channels that they valued most.  Would this information be of any use?  Of course!  This information would serve as a treasure map for producers...

Consumers: Yoohoo...this is something we really truly value!
Producers: Woohoo...now we know where the gold is, let's rush over there!

Do we want producers to know which public goods we value most?  Yes!!!  This information will incentivize them to focus their efforts, resources, creativity, talent, skills, brilliance and genius on improving the public goods that are truly important to us.

Can you imagine what would happen to the quality and variety of private goods if we had to purchase all of them in a bundle?  It's really easy to imagine because all you have to do is look at the public sector.  The lack of quality and variety of public goods is the logical consequence of preventing consumers from shopping for themselves.

We don't exist for public goods...public goods exist for us.  Therefore, they should match our preferences.  Shopping is the process by which we communicate our preferences and circumstances to producers.  If we can't shop for ourselves...then it's a given that the supply of public goods won't match our preferences.

So please like the Tax Choice Party on facebook and encourage your friends and family to do the same.

Now I'm sure that you have some concerns and questions.  Honestly at first I thought the idea was outlandish.  But the more digging I did, the more sense it started to make.  Now it's our current system that seems outlandish.  Please check out the pragmatarianism FAQ to see if it addresses any of your concerns/questions.

Even if you aren't 100% sold on the idea...you should like the facebook page just to let the world know that we're really tired of only have two parties to choose from.

Saturday, February 1, 2014

What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You?

Reply to:  What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You?

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Well...I'm a pragmatarian...so clearly I think voluntary taxation is inferior. That's probably not the best way to put it though.

The important thing to consider is that we don't know what the demand for compulsory taxation truly is. Just like we don't know what the demand for war truly is.

In a pragmatarian system, people would be free to choose which government organizations they gave their own tax dollars to. This would reveal what the actual demand for public goods truly is.

What would the demand for compulsory taxation be? In other words, how much money would the IRS receive? How many taxpayers would choose to give their own tax dollars to the IRS?

Why would people choose to give their own hard-earned tax dollars to the IRS? Perhaps they don't trust that you would voluntarily spend enough money on public goods.

If you thought that voluntary taxation is better than compulsory taxation...then you could try and persuade the heck out of everybody to boycott the IRS. You could go door to door and tell people about the NAP...you could buy billboard space to show people that compulsory taxation is morally wrong...you can buy radio ads telling people that Rothbard proved that compulsory taxation is theft. You could tell people whatever you thought necessary to persuade them to not give any of their tax dollars to the IRS.

The thing is...you would be trying to tear down the IRS without putting anything in its place. You would be a knocker rather than a builder. If you didn't want to be a knocker...and wanted to be a builder instead...you could create a non-profit organization that would use non-violent means to persuade people to voluntarily spend enough money on public goods. In other words, you could try and provide people with a better option...a viable alternative.

If the non-profit you helped build was able to demonstrate results...if it did somehow effectively persuade people to contribute more to the common good...then it stands to reason that taxpayers who demanded this service would stop giving their taxes to the IRS. The less money the IRS received...the less coercion it could engage in.

It's entirely possible though that if the IRS was losing enough money because of your non-profit...they would get the hint and switch to non-violent methods of persuading people to spend enough money on public goods. The beauty of the market is that it's driven by consumer sovereignty.

While on the subject of knockers though...a perfect example are all those "bleeding heart" liberals who want to tear down sweatshops. People choose to work in less than desirable conditions because it provides them with an option that's more desirable than the alternatives (subsistence agriculture, prostitution, etc). Liberals are knockers because they just want to tear down the best option that those workers have. If the liberals were builders then they would start their own air-conditioned factories which would give workers a more desirable option. This would create value rather than destroy it.

So knockers destroy best options while builders create better options. When libertarians and anarcho-capitalists advocate tearing the government down...then they are being knockers. That's why I'm no longer a libertarian. As a pragmatarian I want people to be free to shop for themselves in the public sector...this will give them the opportunity to build up the government organizations that they consider to be the best options. And if you believed that our best government options were undesirable...then you would be free to build up more desirable options.