Tuesday, February 17, 2015

Pushing For A Pubmar

Reply to a reply.  Context: Is Pragmatarianism (Tax Choice) Less Wrong?

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It's really fine if you want to predict that pragmatarianism would cause great social upheaval. But you really have to appreciate that this prediction of yours is a double edged sword. You're essentially arguing that there's a huge disparity between the current supply of public goods and the actual demand for public goods. If you can convince me that there's absolutely nothing wrong with this disparity that you're predicting exists... then you completely take the wind from my sails.

Unlike yourself, I'm not extremely confident that this disparity does indeed exist. For all I know the guesses of congresspeople, for whatever reasons, are extremely good. If they are extremely good then there wouldn't be any great social upheaval if taxpayers could choose where their taxes go. Public education and public healthcare and defense would all receive pretty much the same amount of funding that they are currently receiving. No harm no foul. There wouldn't be millions and millions of public employees trying to learn how to do whichever public jobs were in greater demand.

Based on my research though... I really wouldn't be surprised if your prediction was correct. So let's predict that you're truly omniscient! You correctly foresee great social upheaval that would be caused by the correction of the massive disparity between public demand and supply. Are you really going to argue that this correction isn't worth it?

Fortunately, we aren't without precedent here. It's 1977 and I'm Deng Xiaoping and you're my biggest opponent. I'm arguing that we should create a market in China and you're arguing that doing so would cause great social upheaval. Well.... it turns out that we were both correct. Millions and millions and millions and millions of people migrated from their farming villages to the cities in order to work in a multitude of new factories that were started thanks to a massive inflow of foreign investment. As a result, millions and millions and millions and millions of people were lifted out of poverty and China quickly caught up to the US. For the extended version of this story please see... builderism.

To put it somewhat less scholarly... imagine that the government is paying somebody to kick you in the balls. If you derive benefit from this person's productivity... then, if we transitioned to a pragmatarian system, you'd allocate your taxes accordingly. If you want to predict that this guy who's kicking you in the balls would lose his job if we implemented pragmatarianism... then... you're arguing that he's doing something that nobody in their right mind would pay him to do.

Command economies misallocate resources... that's just what they do. Our government, with its hordes of lobbyists who represent diverse interests, isn't a perfect command economy but, given that taxpayers can't choose where their taxes go, it's close enough for me to strongly suspect that significant amounts of society's limited resources are being misallocated.

If your prediction is correct that pragmatarianism would cause a massive correction to the allocation of society's limited resources... then for sure it's terrible that so many people would lose their jobs... and I should hope that taxpayers would help support the smoothest possible reallocation... but you're going to have to come up with a pretty good argument to convince me that we're better off allowing massive amounts of society's limited resources to be majorly misallocated.

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Right now there aren't very many economists who are thrilled with the idea of creating a market in the public sector (pubmar).

To be fair, many free-market economists do some really wonderful and important work helping to educate the general public about how and why markets work.  Here's an excellent example...A Price is Signal Wrapped Up in an Incentive.  But what would happen if all these economists simultaneously attacked the government's Achilles heel?  In other words, what would happen if they all focused their intelligence and expertise on promoting a pubmar?  I'd sure like to find out!  Unfortunately... right now there's a very inefficient allocation of enthusiasm.

If market enthusiasts aren't thrilled with the possibility of a pubmar... then what are the chances that they would have been thrilled with Deng Xiaoping's idea of creating a market in the private sector (primar)?  Would they have jumped at the opportunity to focus their intelligence on promoting DX's proposed step in the right direction?  Would they have put their full intellectual weight behind the proposal?  Or, would they have perceived that the proposed step was too small to warrant their support?

Basically, how much credit would they have been able to take for China's incredible economic transformation?   If they wouldn't have been able to take much credit for millions of people being lifted out of poverty... then isn't it reasonable to wonder whether their market perspective has a blind spot?

Imagine your favorite living economist (FLE) on an Easter egg hunt with DX...

DX:  Look at this large EE that I found!  *points*   I'm pretty sure it's full of treasure!
FLE:  *nonplussed*
DX:  Want to give me a hand carrying it?  Not sure if I can carry it by myself.
FLE:  Naw, I think I'll continue carrying this roadkill instead.

If you didn't catch the reference then you should read... What Do Coywolves, Mr. Nobody, Plants And Fungi All Have In Common?

With perfect hindsight we know that DX's EE was full of treasure.  We can compare China during and after Mao Zedong and easily see that DX's small step towards freedom led to a genuinely great leap forward for China.

In theory, if somebody has an excellent grasp of markets then they will have x-ray vision that enables them to see the contents of any EE.  So why, when it comes to the possibility of a pubmar, aren't those with x-ray vision seeing lots of treasure?

Perhaps at first glance it might not seem like creating a pubmar would be as valuable as creating a primar.  On the primar side you have food... which might be a trump card... but on the pubmar side you have defense/offense.  As history has conclusively proved, you really don't want either one being controlled by the visible hand (exclusive valuation).

It wouldn't be a surprise, at least from my perspective, if creating a pubmar in the US would produce as much benefit as creating a primar in China did.  China's primar allowed them to quickly catch up to us.  If we created a pubmar... then we would quickly leave China in the dust... again.  Doesn't this seem really straightforward?  Evidently it isn't.  And it's not like I have much to go on as to why that is.

Here's what Arnold Kling wrote when I asked him about pragmatarianism...
I think that allowing taxpayers to allocate their taxes would be an improvement, but why stop with government organizations? Why not allow them also to choose from competing charitable organizations? That is what I propose in Unchecked and Unbalanced. - Arnold Kling, My Version of Race Against the Machine
What would he have wrote if DX had asked him about his proposal?  Maybe something like...
I think that creating four special economic zones in southeastern China would be an improvement, but why stop with southeastern China?  Why not turn China into one giant SEZ?  That is what I propose in China: Unchecked and Unbalanced.
What if China's first small step in the right direction had hinged entirely on Kling's full support?  If so, then the first small step wouldn't have been taken because Kling's support was allocated to bigger steps.  Here's the best illustration that I was able to come up with for this situation...




Who's S?

Hot Chip might argue that this is a coordination problem.  Well yeah.  It's a coordination problem but the solution, at least in this case, probably isn't government.  The solution is successful persuasion!  Which of course depends on accurate information.

Here are some pro-market names that are more or less recognizable...




Why are they pushing where they are pushing?  Why aren't they pushing where I'm pushing?  Am I pushing in the wrong place or are they?  How much credit would they have been able to take for China's incredible progress?  There are quite a few names that, in comparison to Kling, are pushing for much bigger changes.  It doesn't seem likely that they would have been able to take much credit for China's progress.    

According to Newton's Third Law... for every action there is an equal and opposite reaction.  If everybody on the list started pushing for a pubmar... then what would the equal and opposite reaction be?  How would Paul Krugman react?

Right now Krugman doesn't have to react to the possibility of a pubmar because there isn't enough intellectual support behind the idea.  How much intellectual support would it take in order for Krugman to react?  And what in the world would his reaction be?   Wouldn't you like to know?  If so, then ask your favorite economist to explain why they aren't pushing for a pubmar.  Let me know what they say.  

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