Wednesday, February 18, 2015

Show Me The Ignorance!

Here's yet another entry inspired by the discussion on this post... Is Pragmatarianism (Tax Choice) Less Wrong?

The following critique is fun to try and interpret...

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One obvious failure mode is things that the voters don't realize are important not getting enough money. Imagine if when people donated to charity they could choose how much went to overhead. Do you think they'd get enough overhead money to run efficiently?

There would also be problems with inconsistent budgets and all the different branches of government spending large amounts of money on advertising. - DanielLC

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DanielLC starts with concern about what "voters" don't know and finishes with concern regarding government organizations (GOs) spending a lot of money on advertising.

Here are two possible interpretations...

  1. Wasteful government spending - the second problem (advertising) wouldn't solve the first problem (ignorance).
  2. OpCost is too high - advertising would solve the problem of ignorance but all the money spent on advertising could have been put to more valuable uses.

Wasteful government spending

If GOs spend a lot of money on advertising, but this doesn't help people understand which GOs truly need more money... then the GOs wasted a lot of money.  If GOs flush money down the toilet... will taxpayers continue giving them money to flush?  I don't think so.  So any GOs that waste a lot of money on advertising probably won't be able to do so indefinitely.  That's how and why markets work.

With the current system, anarcho-capitalists (ACs) effectively blindfold taxpayers...




The point of advertising is to persuade consumers that their priorities are wrong.  In the above illustration I attempted to persuade ACs that their priorities are wrong.  Given that that they are ACs their priority is to eliminate the government.  Why do they want to eliminate the government?  The smart ones want to do so because they believe that GOs lack the incentive to provide consumers with the maximum possible value.  If smart ACs believe that this is truly the case then they should really want to allow taxpayers to shop for themselves in the public sector.  Consumers would clearly see with their own eyes just how little value the government gives them in return for their hard-earned money.  If GOs failed to change their wasteful ways, then taxpayers would boycott the IRS and/or congress.  Basically, if adding consumer choice to the public sector doesn't fundamentally fix the government... then ACs would quickly swell their ranks.  It's a win-win situation.

In my previous blog entry... Pushing For A Pubmar... I shared this illustration/advertisement...




Again with trying to convince pro-market enthusiasts that their priorities are wrong.  There's always more than one way to skin a cat and some ways are easier than other ways.

OpCost is too high

Perhaps the motto of pragmatarianism should be "show me the ignorance!"   If we created a market in the public sector then we'd see the breadth and depth of the public's ignorance.  Critics of pragmatarianism are under the impression that because this ignorance is so deep and wide that we'd be making a huge mistake by allowing people to choose where their taxes go.  But if the public's ignorance is truly a big problem... then is ignorance of ignorance truly bliss?

In a pragmatarian system DanielLC would be able to clearly see how taxpayers were allocating their taxes.  If he had reason to believe that their priorities were wrong... then would the opportunity cost of sharing his reasons/information be too high?

And just who are taxpayers anyways?  They are the people that DanielLC voluntarily gives his money to.  Why does he voluntarily give his money to them?  Because taxpayers aren't entirely ignorant of what's important to him.

Imagine that we created a list of all the people that DanielLC voluntarily gave his money to in 2014.  How long do you think this list would be?  Do you know of anybody who's created such a list?  If so, then please share your info... unless the opportunity cost is too high.

We can guess though that DanielLC's list, like most people's, would be pretty long.  How many people would you guess would be on his list?  To make it easier, I think an organization should only count as one person.  If I had to guess I'd say that there would be around 500 people on his list.

Each person on this list is largely ignorant of what's important to DanielLC.  For example, Ronald McDonald only knows how often his fish fillets are important to DanielLC... but he's largely clueless about everything else that's important to DanielLC.

In order to get a pretty good picture of what's important to DanielLC... we'd have to go around collecting a lot of different puzzle pieces.  The picture wouldn't be perfect though because the one piece of the puzzle that I have is that DanielLC spends some of his time on the Less Wrong website.  In other words, time is money.  If we add to the list all the organizations and people that DanielLC gives his time to then our list gets a bit longer.

We'd essentially be compiling a list of all of DanielLC's trading partners in 2014.  What should hopefully be clear is that any given trading partner doesn't know as well as the aggregate does what's important to DanielLC.

Would DanielLC be doing himself any favors by arguing that none of his trading partners should be allowed to shop in the public sector?  From my perspective, this is the equivalent of DanielLC shooting each one of his trading partners in the foot.  Why would he want to handicap his trading partners?  Why would he want to hamstring the people who use society's limited resources for his benefit?  Oh yeah, it's because their ignorance scares him.  Well... evidently it doesn't scare him that much.  If it did, then he probably wouldn't give them his valuable time and money.

By preventing his trading partners from shopping in the public sector, DanielLC destroys the benefit that he would have derived if he hadn't hamstrung them.  The question is... how much benefit did he destroy?  Let's try and imagine what we might do in order to harm DanielLC to the same extent that he's harming himself.

What if we prevented his trading partners from buying anything from California?  Would this harm DanielLC more or less than he harms himself by preventing his trading partners from shopping in the public sector?   What if we replaced California with China?  What if we replaced China with the the eastern hemisphere?  Or the northern hemisphere?  Or the southern hemisphere?  Or the western hemisphere?  What if we prevented his trading partners from shopping on Tuesdays and Thursdays?  What if we prevented his trading partners from trading with African Africans?  Or Asian Americans?  Or Mexican Americans?  Or Caucasians?  What if we prevented his trading partners from trading with women?  Or men?  Or gay people?  Or straight people?  Or liberals?  Or conservatives?  Or anybody over 30?  Or anybody under 30?

Which one of these restrictions is the closest to destroying as much of DanielLC's benefit as he himself destroys when he prevents his trading partners from shopping in the public sector?

Most people would agree that it would be entirely moronic to support any of these other restrictions... yet they also think it's moronic to suggest eliminating the restriction that prevents people from shopping in the public sector.

Is it me or does the public sector sound like that one tree from the bible?  From Genesis 2 ...
15 And the Lord God took the man, and put him into the garden of Eden to dress it and to keep it.
16 And the Lord God commanded the man, saying, Of every tree of the garden thou mayest freely eat:
17 But of the tree of the knowledge of good and evil, thou shalt not eat of it: for in the day that thou eatest thereof thou shalt surely die.
Well... so why can Elizabeth Warren shop in the public sector?  Oh wait, I remember why...
Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Frédéric Bastiat, The Law
I'm not sure how much longer it's going to take for more people to be suspicious of the fact that congresspeople have yet to show their titles.

If congresspeople really don't have these titles... then do we really want to wait around so long for more people to grow suspicious?  Not really.

The best way to motivate congresspeople to show their titles would be to give people the option to directly allocate their taxes.  If congresspeople don't want people to choose this option, then it would behoove them to show their titles.  It really wouldn't make sense for them to continue to hide their titles under a bushel.  If they did so despite the fact that more and more people chose to directly allocate their taxes then either the congresspeople were crazy or they didn't actually have any such titles.  Good thing we allowed people to directly allocate their taxes sooner rather than later.

Let's if I can't summarize what's going on here.  Perhaps the most succinct summary is like so... Lists vs Titles.  In a pragmatarian system, if Elizabeth Warren shows DanielLC her title one way or another, then he'll add her to his list.  If she doesn't show him her title, then he'll choose to directly allocate his taxes.

Right now Elizabeth Warren can shop in the public sector because enough voters were willing to assume that she has a title.  But if given the opportunity, will these same voters give Warren their taxes... or will they choose to directly allocate them?

What I'm saying is that I care more about who people dollar vote for than who they ballot vote for.  And clearly the opcost of sharing this information isn't too high!

On the Less Wrong forum... after I replied to DanielLC critique... gjm replied to my reply...

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When someone says "I don't like this proposal because I worry that important things will be underfunded", they do not mean "... because I worry that things will be funded less than people's willingness to pay indicates".

They mean, e.g.,

  • ... because I worry that people may (quite reasonably) be ignorant of things that, if they knew all about them, they would want to be funded
  • ... because I worry that such a scheme will give precedence to the interests of the rich (who pay more taxes and therefore have more power to affect what is done, overall, with tax revenues) but I don't actually care 100x more about someone who pays 100x more taxes and I don't think the government should either
  • ... because I worry that even if each individual taxpayer has sensible and coherent preferences, aggregating those preferences by simple addition might send money to the wrong places
  • ... because I worry that in order to make choices that actually serve their interests, individual taxpayers would have to put an inordinate amount of effort into learning and understanding the details of what the government does and what everything costs

Let's think a little more about the last of those. An obvious solution would be for there to be organizations that put in that effort so that individual taxpayers don't have to, and propose coherent allocations of tax revenues. Obviously any such organization's recommendations will be based (implicitly or explicitly) on potentially controversial opinions on facts or values, so we'd want there to be multiple organizations of this kind, each of which gives taxpayers some indication of what they care about and what they believe, and says what they think should be done with tax revenues.

You might notice that at this point we have approximately reinvented political parties. They would probably have some advantages and some disadvantages when compared with existing parties. It is certainly not obvious to me that they would be much better. The implied mechanism for combining "votes" is rather different (a sort of weighted averaging rather than picking a single favourite); again, it has advantages and disadvantages and might end up either better or worse.

What seems perfectly obvious to me is that you can't just say "importance is a function of opportunity cost, therefore whatever this system does is optimal by definition". Or, rather, you can and you did but you shouldn't. The kind of optimality guaranteed by Economics 101 is not the same thing as "getting what we actually prefer", and couldn't possibly be. - gjm

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... because I worry that people may (quite reasonably) be ignorant of things that, if they knew all about them, they would want to be funded
How about...
... because I worry that my children may (quite reasonably) not know that they should look both ways before crossing  the street (and I doubt it will be worthwhile for me to share my information with them)
Without the second part it's not a problem.  It's only a problem when a parent doesn't bother to share potentially life-saving info with their children.  Just like it's only a problem if taxpayers don't bother to share potentially life-saving info with other taxpayers.  Like so...
... because I worry that other taxpayers may (quite reasonably) not know that Godzilla is going to attack (and I doubt it will be worthwhile for me to share my information with them)
To be worried about specific ignorance logically implies that somebody has the specific information that other people do not.  Or else, how could they possible be worried?  Let me try this on for size...
.... because I worry that other people may (quite reasonably) not know that they shoot everybody in the feet when they prevent their trading partners from shopping in the public sector (and I doubt it will be worthwhile for me to share this information via blogging)
Oh wait!

Moving on to the next bullet...
... because I worry that such a scheme will give precedence to the interests of the rich (who pay more taxes and therefore have more power to affect what is done, overall, with tax revenues) but I don't actually care 100x more about someone who pays 100x more taxes and I don't think the government should either
Errr... you might want to review your list of trading partners.  If you want to start ignoring how much bang you get for your buck then feel free to give a bunch of your money to me instead.  You're certainly welcome to remove me from your list once I'm rich.

Next bullet...
... because I worry that even if each individual taxpayer has sensible and coherent preferences, aggregating those preferences by simple addition might send money to the wrong places
Again, "wrong" implies the ownership of information that either is, or isn't, worth the effort to share with others.  An allocation can't be that "wrong" if it's not worth it for you to share your information with others.

Next bullet...
... because I worry that in order to make choices that actually serve their interests, individual taxpayers would have to put an inordinate amount of effort into learning and understanding the details of what the government does and what everything costs
If Ronald McDonald wouldn't think it was worth it to figure out which public goods he needs more of... then he would always have the option to give his taxes to Elizabeth Warren...
There is nobody in this country who got rich on his own. Nobody.  You built a factory out there—good for you! But I want to be clear.  You moved your goods to market on the roads the rest of us paid for.  You hired workers the rest of us paid to educate.  You were safe in your factory because of police forces and fire forces that the rest of us paid for.  You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.  
But if Ronald doubts that Warren has more incentive and local knowledge than he does... then don't worry because I think that the transaction costs of acquiring and sharing information are going down... Information Symmetry.

See also - What Do Coywolves, Mr. Nobody, Plants And Fungi All Have In Common?

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