If you look above this blog entry you'll see a tab that says "Resources". That page has a list of over 50 links to some of the most important articles, blog entries, scholarly papers and books about economics. So far there is only one link to the jacobinmag.com website... Can We Criticize Foucault?
Have you read that article? It's pretty great. To be honest, I value it more than your own article...
Foucault article > your article
Which article do you value more? Which jacobinmag article do you value most? Does it matter?
Personally, I think that people's valuations really matter. So it's very troubling to me how many places there are where people aren't given the opportunity to share their valuations. In other words, I'm troubled by all the places that aren't markets.
Netflix, for example, is not a market. Each month Netflix decides how to divide my $10 dollars among all its products. This wouldn't be so problematic if Netflix was a mind-reader. Or my best friend forever. Or my lover. Or my brother. Or my mother. But Netflix is none of these things. It's just some company.
Vons is also just some company. But, unlike Netflix, Vons does give me the opportunity to decide for myself how I divide my money among all its products.
What difference would it make if Netflix subscribers could decide for themselves how to divide their dollars? I've already asked a few economists but they really didn't know. How could they not know what difference the Invisible Hand would make?
Do you know what difference the Invisible Hand would make?
The stage, and spotlight, they are all yours. Please make good use of them.
I'm a penguin. I do normal penguin things... like swimming and fishing. But I also appreciate Ronald Coase. So I took a break from my normal penguin activities and read Henry Farrell's recent blog entry... Why Coase’s Penguin didn’t fly. Who was Coase's penguin? Am I?
The entry has a couple of main characters in it... Alex and Pat. We don't actually know their gender. As a penguin I find this to be a problem. But it's easy enough to fix... Alexander and Patricia.
The couple wants to do something together. She would prefer to watch a movie while he would prefer to take a walk in the woods. Here's what does not happen in Farrell's entry. She gets her phone out, opens the relevant app, finds Alex, clicks on his name, clicks "New" and then enters the two options...
1. Movies
2. Walk
After doing so she clicks "Create". Alex's phone goes *bleeeling!* and he gets it out. He opens the app and decides how much he'd be willing to pay to have his way. She decides how much she'd be willing pay to have her way. When they are both finished the app displays the result...
1. Movies: $3
2. Walk: $7
Alex is willing to pay more. Therefore, the most valuable option is for them to go for a walk. Since Pat isn't getting her way the app doesn't transfer $3 from her account to his. But it does transfer $7 from his account to hers.
The couple bared their hearts to each other. This is Ronald Coase. He's a really great guy.
Admittedly, I do have a bird brain. So maybe I'm misunderstanding that the problem with social cost is that it's hidden. Maybe Coase didn't perceive that costs need to be seen and known in order for mutually beneficial decisions to be made. And maybe I can't fly.
I really love Kung Fu Hustle. In this scene, the main character doesn't want to fight an entire crowd. He figures his chances of winning are much higher if he fights one-on-one. Especially if he can choose a weak opponent. The problem is that he initially underestimates every opponent that he picks.
Several times a week, I go to my taekwondo school, put on a helmet, a chest protector, shin guards and arm guards, yell loudly, and spar with people who are half my age and sometimes twice my size.
Maybe Skwire would choose to spar with Bruce Lee, but would she choose to fight him? What about Goliath? There wasn't a single solder in the Israelite army that chose to fight Goliath. Everyone could clearly see that he was a beast. His challenge went unanswered for 40 days. Then a shepherd named David arrived at the camp to deliver some food. He accepted Goliath's challenge and beat him.
Maybe every solider in the leftist army is too scared to fight James Buchanan. If so, there are a few exceptions. At the top of the list is Nancy MacLean. But I'm pretty sure that she made the classic error of underestimating her opponent. Evidently his Nobel prize didn't effectively signal his intellectual strength.
$6,327.00 - I’m That Libertarian!
$5,200.00 - Building Bridges, Not Walls
$1,620.00 - Pro Choice on Everything
$1,377.77 - Empowering the Individual
$395.00 - The Power of Principle
$150.00 - Future of Freedom
$135.00 - Life, Liberty and the Pursuit of Happiness
$105.00 - Rise of the Libertarians
$75.00 - Free Lives Matter
$42.00 - Be Me, Be Free
$17.76 - Make Taxation Theft Again
$15.42 - Taxation is Theft
$15.00 - Jazzed About Liberty
$15.00 - All of Your Freedoms, All of the Time
$5.00 - Am I Being Detained!
$5.00 - Liberty Here and Now
Should FEE.org give donors the opportunity to use their donations to rank libertarian thinkers and their ideas?
The idea that taxation is theft seems to be pretty popular. This is what we can see. What we could not see was the true social importance of this idea. Thanks to the LP, we can all now clearly see that this idea isn't very important to society. How would it compare to the idea of the Invisible Hand? Unfortunately, the LP didn't include it.
How many leftists have overestimated the social importance of the idea that taxation is theft? Here's Matt Bruenig attacking this idea in 2012... Income taxes are voluntary. This fight did not benefit either side. It was an extremely stupid fight. It was the equivalent of Don Quixote tilting at windmills.
Here's what Bruenig wrote in a 2015 blog entry...
Every time you attack libertarianism, libertarians respond by saying you haven’t actually attacked libertarianism. You’ve only attacked one libertarian or one perspective, but that’s not the right one to look at it. You are engaging in a straw man argument. And so on. It never ends. You can’t ever deliver a square blow against it because your description of it is never correct, no matter what you say. - Matt Bruenig, #NotAllLibertarians: An Illustration
In a comment I responded...
If you're going to go after Rothbard.... then it's probably a good idea to attack his strongest argument... Football Fans vs Nature Fans... rather than his weakest one. Because, if you don't attack his strongest argument... then it appears that you're incapable of doing so.
Show me a single post where Quiggin, Krugman or any other liberal economist has shredded the opportunity cost concept. If they aren't shredding the opportunity cost concept...then they aren't shredding libertarian economics. If they aren't shredding libertarian economics...then what are they shredding? Their own straw men? How is that competent?
"If they aren't shredding the opportunity cost concept...then they aren't shredding libertarian economics"
You're obviously in the market for my book (in early draft) Economics in Two Lessons, which aims to cover a wide range of public policy issues in two points
1. Opportunity cost is what matters
2. Sometimes market prices reflect opportunity costs and sometimes they don't
If you regard Point 2 as being "libertarian economics", then we are on the same page.
Fourth, while I don’t see much, if any, benefit in engaging with actually existing conservatism, that doesn’t mean that we should ignore conservative, and libertarian, ideas. You don’t have to be an unqualified admirer of writers like Burke, Popper or Hayek to concede that they made valid criticisms of the progressive ideas of their day, and to seek a better way forward. Some examples of the kind of thing I have in mind
Popper’s critique of historicism. After thirty years in which teleological claims of inevitable triumph have been the stock in trade of Fukuyama and his epigones, the left should surely have been cured of such ideas, but their centrality is evident in the very use of terms like “progressive”. It’s important to recognise that beneficial change is not an automatic outcome of “progress”
Burke and his successors on the need for beneficial reform to be “organic”, in the sense that it reflects the actual historical evolution of particular societies, rather than being based on universal truths that are applicable in all times and places
Hayek on the impossibility of comprehensive planning. No planner can possess all relevant information or account for all possible contingencies. We need institutions that respond to local information and that are robust enough to cope with unconsidered possibilities. In some circumstances, but certainly not all, markets fit the bill. - John Quiggin, After the dead horses
***********
The multitude of thinkers on both sides have produced many ideas. But all these ideas, and their producers, aren't equally important to society. Their true social importance has to be determined and known in order to facilitate the most beneficial battles.
Correctly determining the social importance of thinkers and their ideas obviously must involve society. This is because no planner, or committee, can have all the relevant information about the social importance of anything. The larger the group, the more information it will have, and the closer it will get to determining the true social importance of ideas/individuals.
The question is... should social importance be determined by voting or spending?
Reddit is based entirely on voting. We can go to the libertarian group and sort the ideas/individuals by votes. My verdict is that lots of libertarians will vote for stupid things. Why not? It doesn't cost them anything to do so. Bringing (opportunity) cost into the equation is the only way to maximize intelligence. Libertarians will fully utilize their brains when, and only when, they are given the opportunity to divide their limited dollars among the unlimited libertarian ideas/individuals.
The market works because consumers decide how to divide their limited dollars among their unlimited desires. The LP used the market to rank its potential convention themes. The donors decided how to divide their limited dollars among the different themes.
FEE should give donors the opportunity to decide how to divide their limited dollars among the unlimited libertarians ideas/individuals. How donors divide their dollars between Buchanan and Rothbard would signal how they want leftists to divide their forces between the two economists. This would minimize the chances of unintentionally attacking strawmen. We would all know the social importance of Rothbard and his ideas. So if Bruenig attacked the least important idea, it's not like he could claim ignorance of importance.
In my blog entry about Evonomics I mentioned that leftists are the first to love the fact that Thomas Piketty's book was a bestseller. They believe that this provides conclusive evidence that his ideas about inequality are very important to society. So they might accept the validity of ideas/individuals being ranked by donors.
It's rather fascinating to compare the two ranking systems. Both systems are markets... but they are different types of markets. With the book market, the consumers are purchasing the book. Doing so doesn't necessarily mean that they believe that its ideas are important. But with the bee market, the consumers wouldn't purchase the book. Instead, they'd spend their money to help determine the social importance of its ideas. Doing so would obviously mean that they believe that the ideas are important.
Deirdre McCloskey read Piketty's book. She might have purchased it. If she did, her purchase clearly doesn't count as an endorsement of his ideas. She strongly disagrees with his ideas. This means that she wouldn't make a donation to help improve their social standing.
So as far as determining the true social importance of ideas/individuals... the bee market would be far more trustworthy than the book market.
I suppose "bee market" probably isn't the best term. I'm not referring to the buying and selling of bees. The context should have made that obvious. But without the proper context, the term "bee market" might cause a bit of confusion. Then again, just how much discussion is there about the buying and selling of bees anyways?
Just in case you haven't read my post about Evonomics, I use the term "bee market" because bees spend their precious calories in order to signal the importance/profitability/value/relevance of flower patches. The longer and harder a bee dances, the more calories it burns, the more important the flower patch. The bees don't buy a valuable flower patch. They spend their calories to help direct more attention to it. It's essentially crowdfunded advertising.
The efficient allocation of society's attention depends on knowing the social importance of things. Right now we don't really know the true social importance of Buchanan and his ideas. We know that he produced many books and even more papers. We know that he won a Nobel prize. But we certainly have no idea how society would divide its donations between all the Nobel prize winners. Therefore, we don't know the true social importance of Buchanan and his ideas.
From my perspective, MacLean made quite a few mistakes. But her target choice was not one of them. Buchanan is an intellectual beast. Right now it's pretty much her versus him. It's a one-on-one fight. Should it be? I don't think so. I think it should be a many-on-one fight. All the liberals in the world should attack Buchanan. It's a numbers game. The more liberals that attack him, the greater the chances that the modern day equivalent of a shepherd will use the intellectual equivalent of a slingshot to defeat him.
However, it's entirely possible that my perspective is wrong. Maybe I'm overestimating Buchanan's importance. This is why it's so important to correctly determine his social importance. FEE should give libertarians the opportunity to do so. Will Quiggin want to participate? Well I'm not sure if he'd want to donate to FEE. What's the left equivalent of FEE? Jacobin?
To be honest, I don't necessarily see Jacobin creating a market anytime soon. I'd guess that Crooked Timber would do so way before Jacobin. I was actually rather surprised by what Henry Farrell and Steven Teles wrote about MacLean. My impression of Farrell is him being way more leftist. Perhaps he was really balanced by Teles?
The LP already created a market to rank some ideas. It was an ephemeral market... but I think it's a given that other libertarian organizations will start to create bee markets. Hopefully they'll do so sooner rather than later. When they do so, pro-market resources will be far more efficiently allocated. Leftists will finally appreciate what markets are good for. Then again, it's entirely possible that I'm overestimating the importance of markets.
Plume, I agree with other commenters here. From now on, for my post, can you limit yourself to one comment per post per day.
Catching up on some of his blog entries I just discovered another attempt by Quiggin to weed his garden. In the comment section of Locke’s Road to Serfdom he wrote...
Brett, you were banned some time ago. I don’t want my discussion threads derailed by debates with you. Could other commenters refrain from responding to Brett, please.
Some weeds are hard to get rid of! Clearly Quiggin doesn't value Plume's and Brett's contributions as highly as he values other people's contributions. Just like I don't value all the different plants in my garden equally. "Weeds" are the plants that I value the least. I'd be happy if my garden didn't have any weeds in it! In fact, I'd love to have a magic wand that would instantly turn each and every weed in my garden into an orchid! How awesome would that be? I would just wave the wand over a weed and voila! It would be instantly transformed into an orchid! Then my garden would provide me with much more value!
Quiggin definitely wants his blog's comment section to provide him with much more value. He also definitely opposes slavery. But honestly I'm not quite sure why he opposes slavery. I don't think that I've ever read a blog entry of his that he's dedicated to explaining why, exactly, he opposes slavery.
What's wrong with slavery? Let's take Brett for example. Right now he's a weed in Quiggin's garden. From Quiggin's perspective... all the space that Brett takes up in Quiggin's garden could be allocated to far more valuable plants. In other words... the opportunity cost of Brett is too high. What if Quiggin could wave his magic wand and transform Brett into an orchid? Wouldn't that be a good thing? And isn't slavery a magic wand that would do the trick? Then Brett would do whatever Quiggin wanted him to do.
Crooked Timber and Australia are two different spaces. The first is a virtual space and the second is a physical space. Both spaces have Quiggin in common and it stands to reason that he would like to derive the maximum value from both of his spaces.
Apart from the direct effect of lower investment, there’s a strong case that infrastructure investment increases the returns from private investment in general and therefore stimulates growth.
Quiggin wants the Australian government to spend more money on infrastructure. Evidently he perceives a positive correlation between growth and infrastructure spending. Just like he perceives a negative correlation between growth and war spending.
Does Quiggin want to rely on slavery to ensure that people spend more of their money on infrastructure? Well...
Let's say that Brett is in the US. This means that, no matter how much money the Australian government spends on infrastructure, none of that money would be taken from Brett's labor. Brett wouldn't be forced to do something that makes Quiggin happy. Brett wouldn't be Quiggin's slave.
But what if Brett moved to Australia? Then more of Brett's labor/life would be spent/sacrificed to infrastructure. Brett would be Quiggin's partial slave. Brett would be forced, in some part, to do something that makes Quiggin happy. "Partial slave"? Errr... part-time slave?
It would make me happy if Quiggin addressed the topic of full-time vs part-time slavery. What if I had a magic wand that would force Quiggin to stop whatever it was that he is doing and spend an hour or two... or three... or four... writing a blog entry on the topic of full-time vs part-time slavery? Would I wave my wand? Probably... not. It would be very presumptuous of me to do so. I have absolutely no idea what Quiggin is doing now! Maybe what he's doing now is more important/valuable than what I want him to do. Yet, Quiggin has no problem waving his magic wand (voting) trying to force millions of his fellow Australians to spend more of their money on infrastructure. As if it's very unlikely that any of them have more important public goods to spend their money on.
Quiggin has accused Locke of hypocrisy for speaking out against slavery while profiting from the slave trade. Is it hypocritical for Quiggin to criticize Locke while fully endorsing part-time slavery?
Personally, as a pragmatarian, I have absolutely no problem with people being forced to pay taxes. My problem is when people are prevented from choosing where their taxes go. Does it make me a hypocrite that I oppose slavery but support taxation? Well...
The reason that I oppose slavery is because I support difference.
Progress is a function of difference. Slavery limits progress because it diminishes difference. Less difference means less progress. More difference means more progress. Sexual reproduction is superior to asexual reproduction because the outcome of sexual reproduction is more difference... which means more progress.
Giving people the freedom to choose where their taxes go would inject a massive amount of difference into the public sector. This massive amount of difference would yield a massive amount of progress.
Is Brett's difference diminished when he's forced to spend some of his dollars on public goods? Nope. Everybody needs public goods just like everybody needs private goods. The incredibly obvious and fundamentally important yet intensely unappreciated aspect is that we don't all need the same exact amount of public or private goods at the same exact time. Our preferences and circumstances are incredibly diverse! This is why markets are just as necessary for public goods as they are for private goods. And it's why the absence of a market in the public sector is directly responsible for diminishing Brett's difference. Brett can't shop for himself in the public sector. He can't decide for himself whether more defense or more infrastructure will maximize the value he derives from the public sector. Brett is a slave to the extent that he can't decide for himself how his own resources are allocated. And Quiggin supports slavery to the extent that he supports preventing Brett from deciding for himself how his own resources are allocated.
Part of the problem is the opaqueness of the part-time slavery mechanism. If Brett lived in Australia then Quiggin probably wouldn't go to Brett's home and force him to spend more of his dollars on infrastructure and less of his dollars on defense. Instead, Quiggin votes for representatives who might be elected and might spend more of Brett's dollars on infrastructure and less of his dollars on defense. Just because the mechanism is so indirect and imprecise doesn't change the fact that Brett can't choose for himself which public goods he spends his dollars on.
Admittedly, accusing anybody of supporting any amount of slavery generally isn't the best way to make friends and influence people. But as I've pointed out numerous times before... Quiggin is my second favorite liberal. I'm confident that he will assume good faith and correctly perceive that my criticism is entirely constructive. It's a very important topic and it's entirely possible that my logic is fatally flawed. Maybe Brett isn't a part-time slave?
Well... while I'm at it... perhaps I should address the very popular topic of equality from the perspective of difference. Let's say that Brett is super poor and Quiggin is super rich. This means that Quiggin allocates a lot more resources than Brett allocates. Quiggin and Brett are both different... but, because of the disparity in their wealth, Quiggin's difference has far more weight than Brett's difference. Compared to Quiggin... Brett's difference is vanishingly small. Given that my basic premise is the importance of difference.... wouldn't there be greater progress if a good chunk of Quiggin's wealth was given, in some form, to Brett?
For some time now Quiggin has been working on a book about opportunity cost. Do you think it's awesome that he's writing a book about opportunity cost? I sure do! This means that I plan to purchase his book as soon as it's published. When I do so I will be expressing my difference. My difference is my interest in the topic of opportunity cost. This difference of mine will be made manifest by my choice to allocate my money, a limited resource, to the purchase of Quiggin's book on opportunity cost.
With this in mind... it should be readily apparent that the redistribution of Quiggin's wealth to Brett would diminish my difference and the difference of everybody else who's going to purchase Quiggin's book. There would most definitely be a net loss of difference. Which would mean less progress.
Eh, of course I don't know for a fact that this specific loss of difference would result in less progress! Nobody can possibly know! Nobody has a crystal ball! Hence the value of difference. We cover more ground when people are free to buy, or not buy, Quiggin's book when it comes out. And by covering more ground we learn more and make more progress.
So it's not that any given different path will certainly be correct. It's that the freedom to go down different paths is how we maximize discoveries and hedge our bets as a society. Perhaps Quiggin is correct that spending more money on infrastructure is the right path to take. But nobody can know this with enough certainty to prevent people from choosing different paths. Every stagnation/recession/depression that we suffer from is caused by the widespread belief that part-time slavery doesn't have any adverse consequences. There will always be adverse consequences when too many eggs are placed in too few baskets.
Here are some relevant passages...
Regarding slavery as a continuum...
When, as among the ancients, the slave-market could only be supplied by captives either taken in war, or kidnapped from thinly scattered tribes on the remote confines of the known world, it was generally more profitable to keep up the number by breeding, which necessitates a far better treatment of them; and for this reason, joined with several others, the condition of slaves, notwithstanding occasional enormities, was probably much less bad in the ancient world, than in the colonies of modern nations. The Helots are usually cited as the type of the most hideous form of personal slavery, but with how little truth appears from the fact that they were regularly armed (though not with the panoply of the hoplite) and formed an integral part of the military strength of the State. They were doubtless an inferior and degraded caste, but their slavery seems to have been one of the least onerous varieties of serfdom. Slavery appears in far more frightful colours among the Romans, during the period in which the Roman aristocracy was gorging itself with the plunder of a newly-conquered world. The Romans were a cruel people, and the worthless nobles sported with the lives of their myriads of slaves with the same reckless prodigality with which they squandered any other part of their ill-acquired possessions. Yet, slavery is divested of one of its worst features when it is compatible with hope; enfranchisement was easy and common: enfranchised slaves obtained at once the full rights of citizens, and instances were frequent of their acquiring not only riches, but latterly even honours. By the progress of milder legislation under the Emperors, much of the protection of law was thrown round the slave, he became capable of possessing property, and the evil altogether assumed a considerably gentler aspect. Until, however, slavery assumes the mitigated form of villenage, in which not only the slaves have property and legal rights, but their obligations are more or less limited by usage, and they partly labour for their own benefit; their condition is seldom such as to produce a rapid growth either of population or of production. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
Regarding taxation as slavery....
Taxation of earnings from labor is on a par with forced labor. Some persons find this claim obviously true: taking the earnings of n hours labor is like taking n hours from the person; it is like forcing the person to work n hours for another’s purpose. Others find the claim absurd. But even these, if they object to forced labor, would oppose forcing unemployed hippies to work for the benefit of the needy. And they would also object to forcing each person to work five extra hours each week for the benefit of the needy. But a system that takes five hours' wages in taxes does not seem to them like one that forces someone to work five hours since it offers the person forced a wider range of choice in activities than does taxation in kind with the particular labor specified. (But we can imagine a gradation of systems of forced labor, from one that specifies a particular activity, to one that gives a choice among two activities, to ... ; and so on up.) Furthermore, people envisage a system with something like a proportional tax on everything above the amount necessary for basic needs. Some think this does not force someone to work extra hours, since there is no fixed number of extra hours he is forced to work, and since he can avoid the tax entirely by earning only enough to cover his basic needs. This is a very uncharacteristic view of forcing for those who also think people are forced to do something whenever the alternatives they face are considerably worse. However, neither view is correct. The fact that others intentionally intervene, in violation of a side constraint against aggression, to threaten force to limit the alternatives, in this case to paying taxes or (presumably the worse alternative) bare subsistence, makes the taxation system one of forced labor and distinguishes it from other cases of limited choices which are not forcings.
The man who chooses to work longer to gain an income more than sufficient for his basic needs prefers some extra goods or services to the leisure and activities he could perform during the possible nonworking hours; whereas the man who chooses not to work the extra time prefers the leisure activities to the extra goods or services he could acquire by working more. Given this, if it would be illegitimate for a tax system to seize some of a man’s leisure (forced labor) for the purpose of serving the needy, how can it be legitimate for a tax system to seize some of a man’s goods for that purpose? Why should we treat the man whose happiness requires certain material goods or services differently from the man whose preferences and desires make such goods unnecessary for his happiness? Why should the man who prefers seeing a movie (and who has to earn money for a ticket) be open to the required call to aid the needy, while the person who prefers looking at a sunset (and hence need earn no extra money) is not? Indeed, isn’t it surprising that redistributionists choose to ignore the man whose pleasures are so easily attainable without extra labor, while adding yet another burden to the poor unfortunate who must work for his pleasures? If anything, one would have expected the reverse. Why is the person with the nonmaterial or nonconsumption desire allowed to proceed unimpeded to his most favored feasible alternative, whereas the man whose pleasures or desires involve material things and who must work for extra money (thereby serving whomever considers his activities valuable enough to pay him) is constrained in what he can realize? - Robert Nozick, Anarchy, State, and Utopia
Regarding the value of difference...
I have suggested a different model and metaphor. The world is not a single machine. It is a complex, interactive ecology in which diversity -- biological, personal, cultural and religious -- is of the essence. Any proposed reduction of that diversity through the many forms of fundamentalism that exist today -- market, scientific or religious -- would result in a diminution of the rich texture of our shared life, a potentially disastrous narrowing of the horizons of possibility. Nature, and humanly constructed societies, economies and polities, are systems of ordered complexity. That is what makes them creative and unpredictable. Any attempt to impose on them an artificial uniformity in the name of a single culture or faith, represents a tragic misunderstanding of what it takes for a system to flourish. Because we are different, we each have something unique to contribute, and every contribution counts. A primordial instinct going back to humanity's tribal past makes us see difference as a threat. That instinct is massively dysfunctional in an age in which our several destinies are interlinked. Oddly enough, it is the market -- the least overtly spiritual of concepts -- that delivers a profoundly spiritual message: that it is through exchange that difference becomes a blessing, not a curse. When difference leads to war, both sides lose. When it leads to mutual enrichment, both sides gain. - Rabbi Jonathan Sacks, The Dignity of Difference
John Quiggin is my second favorite liberal. He's writing a book about opportunity cost! How cool is that? Over at Crooked Timber he's been sharing excerpts from his book so that people can share their feedback. This is also really cool.
Even though I love the general topic... his treatment is missing something. The word "lackluster" comes to mind. So does "drab". But what, exactly, is it missing? It's one thing to taste some soup and realize that there's something missing. It's another thing entirely to be able to specify the missing ingredient. Actually, nearly every dish could use more garlic!
As I was quickly scrolling through the comments... I noticed quite a few from a reader named Plume. This is nothing new. He is a very frequent commenter. His comments boil down to "socialism good, capitalism bad".
What was new though was that Plume received some significant pushback from another commenter...
I know that I, at least, would be very glad if every thread even remotely related to economics didn’t devolve into an extended discussion of Plumism, or Pluminomics, or whatever it is we keep getting long dissertations on. There are lots of good topics here to be discussed, but I don’t see this as one of them. I’m almost certain that I’m not alone. I believe that it’s still free to start a blog, and perhaps starting a new one devoted just to Plumism would be a good choice for those interested in the subject. - Matt
Somewhat surprisingly... a few comments later... Quiggin wrote...
Plume, I agree with other commenters here. From now on, for my post, can you limit yourself to one comment per post per day.
This is the missing ingredient! In fact, it's not just one ingredient... it's two ingredients...
Missing ingredient #1: People do different things with society's limited resources... and different people value different things differently. This fundamentally basic but incredibly important concept is largely, or entirely, missing from Quiggin's analysis. But there it is plain to see in the comments section! How can any conclusion regarding the distribution/redistribution of society's limited resources possibly be correct when it doesn't take into account this essential economic truism?
Missing ingredient #2: Accessible scenarios that help convey the relevant economic concepts! I'm pretty sure that I've read every excerpt that Quiggin has shared... and I don't think that he's ever offered an accessible scenario. Then again... my memory isn't that great. Then again... a really good scenario is really hard to forget!
For example...
Following a three-hour time-off-for-personal-exploration period, an excited Sylvia returns to the campsite and announces: "I've stumbled upon a huge apple tree, full of perfect apples." "Great," others exclaim, "now we can all have apple sauce, and apple pie, and apple strudel!" "Provided, of course," so Sylvia rejoins, "that you reduce my labour burden, and/or furnish me with more room in the tent, and/or with more bacon at breakfast." Her claim to (a kind of) ownership of the tree revolts the others. - G.A. Cohen, The Socialist’s Guide to Camping
It's a very simple and accessible story that wonderfully illustrates Cohen's point. Of course I don't agree with his point... but I really admire how well he conveyed it.
Quiggin's book is the liberal sequel to Hazlitt's book... Economics In One Lesson... which was all about Bastiat's beautiful essay... What Is Seen and What Is Not Seen. When it comes to accessible economic scenarios... nobody holds a candle to Bastiat. He really set the standard that every economist should strive to meet.
When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even. But when James Goodfellow hands over a hundred sous to a government official to receive no service for it or even to be subjected to inconveniences, it is as if he were to give his money to a thief. It serves no purpose to say that the official will spend these hundred sous for the great profit of our national industry; the more the thief can do with them, the more James Goodfellow could have done with them if he had not met on his way either the extralegal or the legal parasite. - Frédéric Bastiat, What Is Seen and What Is Not Seen
A few other people have shared some noteworthy scenarios...
Now suppose that Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction. (Also suppose contracts run only for a year, with players being free agents.) He signs the following sort of contract with a team: In each home game, twenty-five cents from the price of each ticket of admission goes to him. (We ignore the question of whether he is "gouging" the owners, letting them look out for themselves.) The season starts, and people cheerfully attend his team’s games; they buy their tickets, each time dropping a separate twenty-five cents of their admission price into a special box with Chamberlain’s name on it. They are excited about seeing him play; it is worth the total admission price to them. Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain winds up with $250,000, a much larger sum than the average income and larger even than anyone else has. Is he entitled to this income? Is this new distribution D2 unjust? If so, why? There is no question about whether each of the people was entitled to the control over the resources they held in D1; because that was the distribution (your favorite) that (for the purposes of argument) we assumed was acceptable. Each of these persons chose to give twenty-five cents of their money to Chamberlain. They could have spent it on going to the movies, or on candy bars, or on copies of Dissent magazine, or of Monthly Review. But they all, at least one million of them, converged on giving it to Wilt Chamberlain in exchange for watching him play basketball. If D1 was a just distribution, and people voluntarily moved from it to D2, transferring parts of their shares they were given under D1 (what was it for if not to do something with?), isn’t D2 also just? If the people were entitled to dispose of the resources to which they were entitled (under D1), didn’t this include their being entitled to give it to, or exchange it with, Wilt Chamberlain? Can anyone else complain on grounds of justice? - Robert Nozick, Anarchy, State, and Utopia
Quiggin will probably disagree with Nozick's point like I disagree with Cohen's point... but perhaps Quiggin will appreciate how well this scenario conveys Nozick's point. And if Quiggin wants to argue in favor of redistribution... it would behoove him to explain, preferably by using an equally accessible scenario, how doing so does not subvert the true will of the people as revealed by the decisions that they make as consumers.
Here's another one...
Consider the following analog to Block's gardening problem. Let there be an island that contains all the known stock of Austrian Pure Snow trees. The island is inhabited by a religious sect, the first to mix their sweat and blood with the island's soil, thus satisfying Rothbard's principle of "original ownership." They worship these trees as if they were God. Never would they let them be tampered with in any way. Unknown to anyone, these trees contain an ingredient that is a sure cure for cancer, and when this is discovered a question of the ownership of this ingredient, unavailable elsewhere, arises. The religious sect will in no way, for any compensation, allow that ingredient to be extracted. Is it "evil and vicious" to believe that it would be preferable for someone else to own the right to this ingredient, requiring instead that the religious sect purchase the inviolability of this ingredient? Might not "our most cherished and precious property rights" be still more cherished and precious if the private ownership of this new resource was not confined to those who own the rest of the island? Would the answer be much different if this ingredient not only was known to the island dwellers, but was precisely that part of the trees that they worshiped? Would the answer be different if the islanders were very poor? - Harold Demsetz, Ethics and Efficiency in Property Rights Systems
As a nature lover... I appreciate all the trees in this scenario. And, as an economics lover... I appreciate the ownership dilemma. Although... the scenario falls apart a bit when we consider the fact that trees have seeds. It's hard to imagine that some group wouldn't be willing to sell one seed for any price.
Here's the most recent noteworthy scenario that I've run across...
If Robinson Crusoe and Friday are on an island, and Crusoe grows seven pumpkins and Friday grows three pumpkins, Crusoe hasn’t grabbed a bigger piece of (pumpkin?) pie. He has simply created more wealth than Friday, leaving Friday no worse off. It is dishonest to say Crusoe has “taken” 70 percent of “the island’s” wealth. - Don Watkins, Turning the Tables on the Inequality Alarmists
My favorite recently-dead economist James Buchanan wasn't exactly known for his scenarios... and perhaps this is part of the reason that he is so incredibly under-appreciated. Consider this scenario...
At some basic psychological level of choice, the demand of the citizen for more police protection by the municipality reflects the same drive as his demand for additional door locks from the local hardware store.
Even with such a simple analogy, however, care must be taken lest the similarities be pushed too far. The person who wants to purchase a new lock goes to the local hardware store, or to several stores, surveys the array of alternatives offered for sale, along with the corresponding array of prices, makes his purchase, and is done with it. It should be evident that the person’s act of implementing his demand for additional police protection is quite different. The citizen must communicate his desires to his elected political representative, his city councilman, who may or may not listen. If he does listen, the councilman must then take the lead in trying to convince a majority of his colleagues in the representative assembly to support a budgetary adjustment. But what about quality and price? Almost anyone would desire more police protection of high quality if this should be available to him at a zero price. At one level of reaction, the citizen must understand that additional public services can be secured only at the price of either reductions in other services or increases in taxes. How can he indicate to his political representative just what quantity-quality-price mix is most preferred? And how can his political representative, in trying to please his constituents, determine this mix? - James Buchanan, Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes
The scenario works... but it doesn't exactly stick. Buchanan didn't even give the person a name!
Ok, so what is Quiggin's book missing? Based on the drafts that Quiggin has shared... his book is missing two things. First, it doesn't really address the fact that people value things differently. Second, it doesn't have any accessible scenarios/stories. My dollar vote is for a scenario involving Australia's wonderful epiphytic orchids.
While I'm at it... I should point out that the solution to the comment problem really isn't to limit Plume's comments. The solution is to create a market in the comment section! Quiggin could spend his pennies on whichever comments he values most. Everybody else could do the same. Then, if people wanted to, they could sort the comments by their value. The most valuable comments would be at the top of the comment section and the least valuable comments would be at the bottom of the comment section.
If we think of Quiggin's blog entry as a home... then the comment section would be the garden. Plume is a weed that grows everywhere in the garden. He takes up way too much space in the garden. The thing is... it's a really big garden... and not all the space is equally valuable. The most valuable space is closest to the house. So the problem really isn't that Plume is taking up too much space... the problem is that he's taking up too much valuable space. All the valuable space that Plume takes up could be used for far more valuable plants. Sure, Quiggin could manually limit the amount of valuable space that Plume occupies... but a far more effective approach would be for Quiggin to give more water, food and love to the plants that he values most. They would grow more vigorously and, as a result, they would crowd out Plume and all the other weeds. Pretty soon all the most valuable space in the garden would be occupied entirely by the most valuable plants. The garden would still have weeds... but they would be located in the most remote part of the very big garden.
This is how and why markets work. Consumers can't pull weeds... but they can help nourish the most beneficial plants. The logical result of consumer choice is that resources are unevenly distributed among the unequally beneficial plants. Redistribution might seem fair... but it simply provides more valuable space to less valuable plants.
Nobody truly benefits when society's limited resources are placed in less beneficial hands. In other words, the opportunity cost of fairness is way too high.
My second favorite liberal, John Quiggin, recently shared another draft segment from his upcoming book... TISATAAFL. Contrary to market economists... Quiggin argues that there is such a thing as a free lunch. The basic problem with Quiggin's argument is that he incorrectly defines the original saying.
When an economist says that there's no such thing as a free lunch... he's saying that everything has an opportunity cost. But "everything" doesn't truly mean "everything". "Everything" means every allocation of a resource. Every allocation of a resource has an opportunity cost. This is fundamentally true because there isn't a single resource that can be allocatedonly one way. Every resource can be allocated a gazillion different ways. Because there isn't any resource that can be in two places at the same time, or used and unused at the same time...allocating a resource one way means that you must sacrifice the opportunity to allocate that same exact resource another way.
For example... right now I'm allocating my time to writing this blog entry. Is there an opportunity cost? Of course! I'm sacrificing every single alternative use of my time. Perhaps if I wasn't allocating my time to this blog entry I'd be allocating my time to attaching epiphytes to trees. But here I am instead! Evidently... right here right now... in this unique set of circumstances... a hot lazy summer sunny Saturday SoCal afternoon... my valuation of x is greater than my valuation of y.
x > y
This is really straightforward. Yet, Quiggin gets this really wrong...
In this section, I’m working on Lesson 1, leading up to the point (my restatement of what’s usually called the First Fundamental Theorem of Welfare Economics) that an ideal competitive equilibrium is one in which there are no unexploited potential gains from technical improvements or mutually beneficial exchange. For reasons I’ve spelt out already I don’t want to use the term “Pareto-optimal” to talk about this. I also want to confine “efficient” to its normal meaning of “technically efficient” and avoid the common economist practice of extending this to cover various definitions of “market efficiency”. So, I’m talking about “free lunches” or, more formally, benefits with no opportunity cost.
According to Quiggin, there is such a thing as a free lunch because there are some benefits that do not have an opportunity cost. Benefits that don't have an opportunity cost?! Ack. He then goes on to build his argument on top of this extremely flawed foundation. The logical result is a continuation of confused comments.
So Quiggin is confusing... but he is in the right ball park at least! Which is a big part of the reason that he's my second favorite liberal.
There's a lot more that I could say on the subject. But circumstances have changed. The sun went down... and the drought tolerant epiphytes that are growing on my trees are pretty thirsty. Therefore...
Towards the end of the blog entry I shared this picture...
This picture inspired me to address the topic of a procreation license. It's an interesting enough topic to warrant its own blog entry. Plus, it has plenty of positive externalities. So here we are.
Yesterday those Crooked Timber liberals stole a chuckle from me. It's the third time that they've done so. Here are the first two times...
1. An Economy Based on Wife Swapping. Should we have to organize a wife-swapping party every time we need to purchase a blanket? The Crooked Timber liberals say "no". But I think that they are protesting a bit too much.
2. Ouch, My Most of Me!! David Graeber takes a Great White shark bite out of Henry Farrell.
A publisher, Lawrence & Wishart, forced the folks running marxists.org to remove protected material. Scott McLemee writes...
Somehow it has not occurred to Lawrence & Wishart that, by enlarging the pool of people aware of and reading the Collected Works, the archive is actually expanding the audience (and potential market) for L & W’s books, including the somewhat pricey MECW volumes themselves, available only in hardback at $25-50 per volume. I’m stressing the bottom line here, given that the press’s decision is rational only on the narrowest conception of it. But a piece of synchronicity involving another CTer underscores just how much the left can learn from, of all things, the sectarian right:
About the time the Marxist Internet Archive announced that it would be taking down all the MECW material, Corey and I both, by coincidence, were availing ourselves of radically under-priced materials from the enemy’s publishing apparatus. He’d received an order containing dirt-cheap copies of Bastiat from the Liberty Fund, while a day earlier I had downloaded free digital editions of the major Austrian School books on theory of value and the socialist-calculation debate from the Mises Institute website. There’s more to neoliberal hegemony than loss-leader pricing, but as ideological combatants those people know what they’re doing.
Did you chuckle?
Hey Scott McLemee...sing along with me!
This little Marx of mine
I'm going to let him shine
Oh, this little Marx of mine
I'm going to let him shine
This little Marx of mine
I'm going to let him shine
Let him shine, all the time, let him shine
All around the neighborhood
I'm going to let him shine
All around the neighborhood
I'm going to let him shine
All around the neighborhood
I'm going to let him shine
Let him shine, all the time, let him shine.
Hide him under a bushel? No!
I'm going to let him shine
Hide him under a bushel? No!
I'm going to let him shine
Hide him under a bushel? No!
I'm going to let him shine
Let him shine, all the time, let him shine.
Don't let Satan [blow] him out!
I'm going to let him shine
Don't let Satan [blow] him out!
I'm going to let him shine
Don't let Satan [blow] him out!
I'm going to let him shine
Let him shine, all the time, let him shine
Yeah, for sure don't let Satan shrink the pool of people exposed to Marx/Engels...
But the peculiar evil of silencing the expression of an opinion is, that it is robbing the human race; posterity as well as the existing generation; those who dissent from the opinion, still more than those who hold it. If the opinion is right, they are deprived of the opportunity of exchanging error for truth: if wrong, they lose, what is almost as great a benefit, the clearer perception and livelier impression of truth, produced by its collision with error. - J.S. Mill, On Liberty
What's wrong with Marx? He believed that it was beneficial to hide Scott McLemee under a bushel. That's what socialism is. Input doesn't flow...it's blocked.
Right now we have socialism in the public sector. Scott McLemee can't shop for himself in the public sector. He can't choose where his taxes go. He can't boycott war. McLemee's deep input is blocked. His light is hidden under a bushel. As a result, the public sector is dimly lit.
Should McLemee be hidden under a bushel? No! We have to let him shine. Giving McLemee the freedom to directly allocate his taxes would help illuminate the public sector.
If everybody could shop in the public sector...then the public sector would be brilliant. It would be brighter than the sun.
Bushels be gone! Satan be gone! Socialism be gone! Darkness be gone!
Let the sunshine in!!!
For goodness sake let the sunshine in...
Here the contrast between the past and the present is tremendous. You will recall the wonderful image at the beginning of the seventh book of Plato's Republic: those enchained cavemen whose faces are turned toward the stone wall before them. Behind them lies the source of the light which they cannot see. They are concerned only with the shadowy images that this light throws upon the wall, and they seek to fathom their interrelations. Finally one of them succeeds in shattering his fetters, turns around, and sees the sun. Blinded, he gropes about and stammers of what he saw. The others say he is raving. But gradually he learns to behold the light, and then his task is to descend to the cavemen and to lead them to the light. He is the philosopher; the sun, however, is the truth of science, which alone seizes not upon illusions and shadows but upon the true being. - Max Weber, Science as a Vocation
It is yet more monstrous, then, to see how frequently governments, not content with squandering the substance of the people in folly and absurdity, instead of aiming at any return of value, actually spend that substance in bringing down upon the nation calamities innumerable; practise exactions the most cruel and arbitrary, to forward schemes the most extravagant and wicked; first rifle the pockets of the subject, to enable them afterwards to urge him to the further sacrifice of his blood. Nothing, but the obstinacy of human passion and weakness, could induce me again and again to repeat these unpalatable truths, at the risk of incurring the charge of declamation. - J.B. Say, A Treatise on Political Economy
It may help to see this point if we think of a modern phenomenon which can be compared with child sacrifice, that of war... But once it had broken out (or even a little bit earlier) it became a "religious" phenomenon. The state, the nation, national honor, became the idols, and both sides voluntarily sacrificed their children to these idols.... The fact that, in the case of child sacrifice, the father kills the child directly while, in the case of war, both sides have an arrangement to kill each other's children makes little difference. - Erich Fromm, The Anatomy of Human Destructiveness
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, Roads from Past to Future
It is worth recalling that Thyssen was one of only two leading industrialists to support the Nazi Party before it became the most powerful party on the political scene. - Germa Bel, Against the mainstream: Nazi privatization in 1930s Germany
To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.- Thomas Jefferson
It would seem to be a blatant injustice if someone should be forced to contribute towards the cost of some activity which does not further his interests or may even be diametrically opposed to them. - Knut Wicksell
Individuals who have particularly negative feelings concerning a publicly provided good (e.g. Quakers on military expenditures, Prolifers on publicly funded abortions) have also at times suggested that they should be allowed to dissent by earmarking their taxes toward other public uses. - Marc Bilodeau, Tax-earmarking and separate school financing
The distinguishing characteristic of [public] goods is not only that they can be consumed by everyone, but that there is no escape from consuming them unless one were to leave the community by which they are provided. Thus he who says public goods says public evils. The latter result not only from universally sensed inadequacies in the supply of public goods, but from the fact that what is a public good for some - say, a plentiful supply of police dogs and atomic bombs - may well be judged a public evil by others in the same community. It is also quite easy to conceive of a public good turning into a public evil, for example, if a country's foreign and military policies develop in such a way that their "output" changes from international prestige to international disrepute. - Albert O. Hirschman, Exit, Voice, and Loyalty
Unquestionably Mr. Spencer has the courage of his opinions; for in a chapter entitled The Right to Ignore the State he actually contends that the citizen may properly refuse to pay taxes, if at the same time he surrenders the advantages which State aid and State protection yield him! But how can he surrender them? In whatever way he maintains himself, he must make use of sundry appliances which are indirectly due to governmental organization; and he cannot avoid benefiting by the social order which government maintains. Even if he lives on a moor and makes shoes, he cannot sell his goods or buy the things he wants without using the road to the neighboring town, and profiting by the paving and perhaps the lighting when he gets there. And, though he may say he does not want police guardianship, yet, in keeping down footpads and burglars, the police necessarily protect him, whether he asks them or not. Surely it is manifest—as indeed Mr. Spencer himself elsewhere implies—that the citizen is so entangled in the organization of his society that he can neither escape the evils nor relinquish the benefits which come to him from it. - Herbert Spencer, An Autobiography
Of course just because everyone can be made better off by taxation does not mean that everyone will be made better off. Some people want more national defense, some people want less, pacifists want none. So, taxation means that some people will be turned into forced riders, people who must contribute to the public good even though their benefits from the public good are low or even negative. - Tyler Cowen, Alex Tabarrok, Modern Principles of Economics
A second point of broad consensus among critics stresses that publicness in consumption must not necessarily mean that all persons value a good’s utility equally, Mendez (1999), for example, illustrates this point by examining peace as a PG. Some policy-makers might opt for increased defense spending in order to safeguard peace. However, this decision could siphon off scarce resources from programmes in the areas of health and education. Other policy-makers might object to such a consequence and prefer to foster peace through just the opposite measure -- improved health and education for all. Especially under conditions of extreme disparity and inequity, the first strategy could indeed provoke even more conflict and unrest, securing national borders by unsettling people’s lives. - Inge Kaul, Public Goods: Taking the Concept to the 21st Century
Only the free market, then, can determine different qualities or degrees of a service. Second, and even more important, there is no indication that for a particular taxpayer, the government is supplying a "service" at all. Since the tax is compulsory, it may well be that the "service" has zero or even negative value for individual taxpayers. Thus, a pacifist, philosophically opposed to any use of violence, would not consider a tax levied for his and others' police protection to be a positive service; instead, he finds that he is being compelled, against his will, to pay for the provision of a "service" that he detests. In short, equal pricing on the market reflects demands by consumers who are voluntarily paying the price, who, in short, believe that they are gaining more from the good or service than they are giving up in exchange. But taxation is imposed on all people, regardless of whether they would be willing to pay such a price (the equal tax) voluntarily, or indeed whether they would voluntarily purchase any of this service at all. - Murray Rothbard, The Myth of Neutral Taxation
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired would occur more rarely, and be of shorter continuance. Those, on the contrary, during which the ability was in the highest vigour would be of much longer duration than they can well be under the system of funding. - Adam Smith, Wealth of Nations
Current practice rising from that conviction leads to strange tactics in allocating benefits from certain public expenditures: Defense is always seen as a good, even in a country embarking on a disastrous war which brings untold suffering. Typically, in studies of expenditure incidence, households are seen to value services for police, and administration at cost, even though they have not the slightest idea as to the amount or costs of resources used on their behalf in these services. Under such circumstances, would not value equal to costs be an extremely unlikely outcome even in those few countries with representative government? And what about those residents of a country who are actively or passively in opposition to the status quo? Do they really benefit from expenditure on internal and external security as the empirical studies always assume? Is it clear that such expenditures even enter into household utility functions? Of consider further: If the community spends twice as much on diplomacy and administration while reducing education expenditures pari passu, is it obvious that there has been no change in total economic value as measured in the national accounts? Extreme assumptions are the usual way to deal with the problems suggested by these situations. But the fact that the assumptions are extreme, suggests that there is something wrong with the usual techniques in allocating benefits from certain general expenditures. - Jacob Meerman, Are Public Goods Public Goods?
The Nobel laureate economist James M. Buchanan passed away yesterday. Two days before he passed away, my favorite Crooked Timber Liberal, John Holbo, posted an unintentional pre-tribute in his blog entry...Shirky, Udacity and the University...
Here’s a slightly more concrete way to cash out ‘story’: we tend to operate with notions of the proper form and function of the university that are too closely tied to pictures of the ideal college experience that are, really, too atypical to function as paradigms. ‘We’ meaning pretty much everyone still: academics, our students, their parents. Shirky’s idea is that MOOCs are going to unbundle a lot of stuff. You don’t have to buy the 4-year package to get some learning. It’s pretty obvious there’s more unbundling to come – it’s gonna make buying individual tracks on iTunes seem a minor innovation – and it will put pressure on current higher education’s strong tendency to bundle a lot of functions together to the point of indistinguishability (teaching, research, socialization, credentialing).
The prediction that "there’s more unbundling to come" is one that Buchanan, more than any other economist, would have appreciated. Here's what he wrote in 1967...
General-fund financing is analogous to a market situation where the individual is forced to purchase a bundle of goods, with the mix among the various components determined independently of his own preferences. The specific tie-in sale is similar to general-fund financing, that is, nonearmarking. - James Buchanan, Earmarking Versus General-Fund Financing
Don't get bundled! Your preferences really do matter!
If the individual can make separate fiscal choices for each public-goods program, which a structure of earmarked taxes conceptually allows him to do, directly or indirectly, he is informed as to the alternatives that he confronts, at least to the extent that the payment institutions allow, and subject, of course, to all of the qualifications noted in previous analysis. The uncertainty that he faces is clearly less than that which is present in the comparable decision on a “bundle” of public goods or services, with the mix among the separate components in the bundle to be determined in a separate decision process or through the auspices of a delegated budget-making authority. If this mix is not announced in advance to the voter-taxpayer, he must try to predict the outcome of another decision process, in which he may or may not participate, a process that need not exist at all in the more straightforward earmarking model where all revenue sources are specifically dedicated. - James Buchanan, Earmarking Versus General-Fund Financing
Like I said in my comment...James Buchanan was far closer to the actual problem and the actual solution than any other economist.
I'll leave you with a few of my favorite passages by Buchanan...
Before taxes could be levied on the people, representative bodies were given the right to grant their approval. No consideration was given to the spending side of the account because public expenses were assumed to benefit primarily the royal court, at least in the early days of constitutional monarchy. Taxes were viewed as necessary charges on the people, but they were not really conceived as any part of an “exchange” process from which the people secured public benefits. It was out of this conception of the fiscal process that both the modern institutions and the modern theory of public finance developed. - James M. Buchanan
This greater complexity of political choice is compounded by an inability to gain from any investment in knowledge. In a market setting, a person can gain by storing food during the boom periods; it is a simple task to profit directly from knowledge. In a political setting, however, even if a person has acquired knowledge about the more complex question of "why," there is no way that he can profit from his knowledge because a change in policy will take place only after a majority of people have come to the same conclusion. Consequently, it is rational to be considerably more ignorant about general policy matters than about matters of market choice. - James M. Buchanan
Good things come at a cost, whether they be provided by the government or the grocery store. - James M. Buchanan
The introduction of the debt alternative to taxation makes the bridge between cost and benefit more difficult for the individual to construct. - James M. Buchanan
Over time, any individual in the community will expect this rule to produce unfavorable results in particular instances, results that run counter to his own preferences. Public-goods projects which he urgently desires may not be undertaken because a majority of his fellow citizens does not agree with his evaluation. Or, conversely, he may be required to contribute to the costs of projects that he considers to be worthless. - James M. Buchanan
The motivation for individuals to engage in trade, the source of the propensity, is surely that of "efficiency," defined in the personal sense of moving from less preferred to more preferred positions, and doing so under mutually acceptable terms. - James M. Buchanan
The answer to the whole highway problem lies in “pricing” the highway correctly. The existence of congestion on our streets and highways is solely due to the fact that we do not charge high enough “prices” for their use. This is one of the main functions of price in our free enterprise economy... [p]rice relieves potential congestion around our meat counters, our motels, and our models. Why do we shun its usage in the case of highway services? - James M. Buchanan
The state did, indeed, become God. - James M. Buchanan
The entry and exit options provided by the market serve as the omnipresent frontier open to all participants. And economists could well have done more to exploit the familiar frontier experience by instancing the analogue here. Their failure to do so illustrates the point made above, that adherents of classical liberalism, and especially economists, have not been sufficiently concerned with preaching the gospel of independence. Classical liberalism, properly understood, demonstrates that persons can stand alone, that they need neither God nor the state to serve as surrogate parents. But this lesson has not been learned. - James M. Buchanan
But what if Nietzsche is right? What if God is dead? What happens to the person who is forced to recognize that the ordering presence of God is no longer real? What if God cannot be depended on to clean up the mess, even in some last resort sense? Who and/or what can fulfill the surrogate parent role? Who and what is there beyond the individual that can meet the yearning for family-like protectiveness? Who and what will pick us up when and if we fall? Who and what can provide the predictability that God and his agency structures seemed to offer? - James M. Buchanan
In short, persons are afraid to be free. As subsequent discussion will suggest, socialism, as a coherent ideology, has lost most of its appeal. But in a broader and more comprehensive historical perspective, during the course of two centuries, the state has replaced God as the father-mother of last resort, and persons will demand that this protectorate role be satisfied and amplified. - James M. Buchanan
For those of you who haven't been following along at home...John Holbo is a liberal philosopher over at the Crooked Timber website. He's kind of a tricky guy...but in a fun way. For example...he tricked me into believing that he supported allowing people to sell their votes. It turned out that he really didn't support the idea...but I enjoyed our discussion nonetheless...especially when he shared his critique of pragmatarianism.
Holbo's most recent trick was to pretend that he was a Bleeding Heart Libertarian (BHL)...I’m a bleeding-heart libertarian! He didn't trick me this time though because I had already read on the BHL website that he was planning on doing a guest post. Learning that he was scheduled to write a guest post was the highlight of my day. Not trying to take credit here...but a while back I had encouraged him to write a post on the BHL project. Unfortunately, I can't really say it was the highlight of my day when I finally got a chance to read it.
Did he go in there with guns blazing? Yes...very yes. Holbo was spraying snarky bullets everywhere. Fortunately, he stuck around to respond to many of the comments and the subsequent discussion was far more constructive. You can read more of the discussion on Jacob Levy's really admirable response...Further to Holbo.
Despite the snark, I gotta give Holbo props for jumping into the lion's den...so to speak. But the fact that he was invited to write a guest post in the first place...reflects extremely well on the BHL project. And honestly...I would be willing to bet $20 that the Crooked Timber blog would not invite Peter Boettke, Steven Horwitz, Gary Chartier, Andrew J. Cohen, or Jessica Flanigan to write a guest post there. This came to mind when I read this comment in response to Holbo's post on the Crooked Timber website...
While I agree with the cheering here, it was a great minefield over there. I kinda agree with the commenter there that says something about guests pooping on our doorstep. So… I am looking forward to the upcoming Libertarian guests here on CrookedTimber. - seth
Ok, so enough back story...and onto my response to Holbo's critique. I'm not going to pull any punches...it was light on specifics and heavy on paranoia. This makes it a bit difficult to respond to. So I've just been gathering a bunch of passages from here and there...and I honestly kind of doubted that I'd really ever organize them and it would just end up as one of my many unpublished drafts.
Today though, a liberal shared this comment in response to a post of mine...
We know what causes recessions (at least big ones). The income gap produces a small class of very wealthy people who engage in high risk nonproductive "investing", also called bubbles, leading to inevitable collapse, especially if there is little regulation.
See Reich's "Aftershock". It goes into detail - head of joaquin
My response used pretty much the same passages that I had gathered for Holbo. So the content is the same but my style and tone would be different. Before I copy and paste my response though...here are a few comments from Holbo that were somewhat specific...
That's an excellent way to put it. Libertarianism as device for locking in your gains. Like regulatory capture. Nice. - John Holbo
Hume22, there are really two separate issues here: one, being consistent in my hermeneutics of suspicion; two, being consistent about justice. Frankly, I'm better at one than two. You can question my motives all you like. I can take it! But I tend to be a hypocrite regarding the high bar of justice. Like most American liberals, I worry more about the American middle-class than about impoverished Africans. It's hard for me to justify that. (I could say something about 'politics is the art of the possible' but that wouldn't fool you, would it? Didn't think so.) - John Holbo
So here's my response. What I personally say isn't as important as the sources themselves. Hopefully Holbo will take the opportunity to read each of them thoroughly...Lachmann's essay is especially great for understanding how markets redistribute wealth, Mitchell's paper is the best in terms of understanding regulatory capture and Krugman's article is outstanding for understanding the race to the top.
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We take 10 steps forward...and then one step back...and you use that one step back as an excuse for government intervention. Does the government prevent us from taking one step back? Sure...but it also prevents us from taking 10 steps forward. That's not a recipe for progress.
... an increase in the power of the State ... does the greatest harm to mankind by destroying individuality which lies at the heart of all progress... – Gandhi
How do you become wealthy?
In other words, people will start buying something in large numbers if it solves a big problem for them. But most first-world problems—needing an easier way to record your favorite TV programs or keep track of what’s in your fridge—just aren’t that pressing. In developing countries, on the other hand, technology can transform lives. - Christopher Mims, How a $20 tablet from India could blindside PC makers, educate billions and transform computing as we know it
You're blaming the wealthy for the income gap here in America but you tragically fail to understand that they are narrowing the gap between America and developing countries...
These improvements have not taken place because well-meaning people in the West have done anything to help--foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better. - Paul Krugman, In Praise of Cheap Labor
Rising wages in emerging markets and higher shipping costs are also closing the cost gap between developing markets and the United States. - Scott Malone and Ernest Scheyder, Outsourcing Losing Its Allure As China Costs Soar
Do you think Americans are the only ones who benefit from American innovation? The world benefits from American innovation just like we will benefit from the world's innovations. And you'll be able to thank the greedy capitalist pigs. Except...who these people are is constantly changing...
These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on “social” grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called “the circulation of elites.” Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Lachmann, The Market Economy and the Distribution of Wealth
As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism
But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! - Nietzsche
The problem is that you're not thinking things through...
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers. - Paul Krugman, In Praise of Cheap Labor
If you think things through then you'll understand that any step back in the private sector can be offset by 10 steps forward in the public sector. How? Simply by allowing taxpayers to use their own taxes to reward the government organizations that are doing new and better things with society's limited resources.
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Let me add a few more things...
In Krugman's article he begins by talking about people scavenging on garbage heaps. Here's a photo I took in Afghanistan of a mother and her son on such a garbage heap...
...which ties into...
Women employed in factories are the only women in the labouring rank of life whose position is not that of slaves and drudges; precisely because they cannot easily be compelled to work and earn wages in factories against their will. For improving the condition of women, it should, in the contrary, be an object to give them the readiest access to independent industrial employment, instead of closing, either entirely or partially, that which is already open to them. - J.S. Mill
The basic idea is that an entrepreneur could set up a factory in Kandahar and offer the Afghan mother one new option. If her new option, working in a factory, is better than her currently best option, scavenging, then it stands to reason that she would choose to work in the factory.
As well might it be said, that of two trees, sprung from the same stock one cannot be taller than another but from greater vigor in the original seedling. Is nothing to be attributed to soil, nothing to climate, nothing to difference of exposure - has no storm swept over the one and not the other, no lightning scathed it, no beast browsed on it, no insects preyed on it, no passing stranger stripped off its leaves or its bark? If the trees grew near together, may not the one which, by whatever accident, grew up first, have retarded the other's development by its shade? Human beings are subject to an infinitely greater variety of accidents and external influences than trees, and have infinitely more operation in impairing the growth of one another; since those who begin by being strongest, have almost always hitherto used their strength to keep the others weak.- J.S. Mill, The Negro Question
Much of Holbo's paranoia surrounded racism...but a sound understanding of how markets work...the idea of solving problems and offering people better options...dispels any basis for such concern...
The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another. – Milton Friedman
Let's imagine that a person who was racist against everybody but Canadians discovered a cure for cancer. Therefore, he would only employ Canadians and only sell the cure to Canadians. It does sound less than ideal...but however you spin it...it's still progress. The Canadians who are employed were given a better option and the Canadians with cancer had a big problem solved. And yes, I know that Canadians aren't a race of people.
The basic idea is that we can't say that John Holbo has an obligation to solve any problems...big or small...and he doesn't have an obligation to offer the Afghan mother a better option. Really understanding that we don't have these obligations is key to appreciating it when entrepreneurs (in the broadest sense of the word) actually do solve problems...for any amount of people...and offer any amount of people better options.
The question is...how many Canadians with cancer would engage in ethical consumerism and boycott the company?
Even if right now some dude said 'I'm going to say a bunch of racist stuff but afterwards I'll give you a biscuit' I’d be like that’s a weird deal but I'll take it. Because I hate racism...but I love a good biscuit. - Aziz Ansari
