The Visible Hand vs the Invisible Hand

Created this awesome (hah) picture to try and help illustrate a point that I'm struggling to make in this discussion over at the Ron Paul Forums... NAP, Utilitarianism, and Natural Law: Differentiating Morality, Practicality, and Legality.  The fellow that I'm having a discussion with, ProIndividual, wants to know what the end result would be of pragmatarianism.  How could I possibly know the end result of 150 million self-interested taxpayers determining the distribution of public funds?  

Tax choice is a means to end.  The "means" are the tax allocation decisions of 150 million self-interested, utility maximizing, purposefully acting taxpayers.  Are the "means" perfect?  Definitely not.  But they might as well be when you compare them to our current "means" of 538 congresspeople spending 150 million people's taxes.

Would allowing the invisible hand to determine the distribution of public funds drive us to pragma-socialism or anarcho-capitalism or somewhere in between?  Who knows?  Who cares?  Once you understand that perspectives matter...then you'll understand the value of allowing the perspectives of 150 million taxpayers to help shape the public sector.

So let's get this Magna Carta Movement started.

The Magna Carta Movement

In this post...Consequentialist Discussion - Ron Paul Forums...I suggested that anybody who appreciates consequentialist discussion should take a look on the 9th page of this thread...Where Do Ron Paul's Ideas Come From?

Yesterday, helmuth_hubener responded to my post in that thread.  As I mentioned in my blog entry, you won't be able to read the thread unless you're a member of the Ron Paul Forums.  This is because the owner of the forum has all anarcho-capitalist discussion moved to the Political Philosophy category in order to avoid giving Ron Paul any negative publicity.

Here's my response to helmuth_hubener...and my attempt to tie everything together using the concept I discussed in my last post...Perspectives Matter - Economics in One Lesson.

The Conceptual Foundation for a Magna Carta Movement.

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helmuth_hubener, I spent an hour listening to Ralph Raico's first lecture...History: The Struggle for Liberty.  You guessed correctly that I would find it very enjoyable and enlightening.  If you haven't already done so, please do me a favor and carefully read this post of mine...Perspectives Matter - Economics in One Lesson.  It should take a lot less time than an hour to carefully read.

The thing is... Raico's first lecture strongly supports my argument.  So I can't quite figure out why you're considerably more enthusiastic for secession than you are for tax choice.  Admittedly, I didn't listen to the second lecture...but felt it was worthwhile to first compare some notes to see if we might not be saying the same thing in different ways.

Here's what you said...

More pragmatic than your tax-earmarking plan -- which I'm not against mind you -- is to advocate for smaller polities. Political breakup. Secession. Nullification. 10th Amendment. Any movement toward the radically decentralized tiny polities that existed in the Western European situation that was so stunningly, unprecedentedly, shockingly, thunderingly successful. Your tax-earmarking plan I put in kind of the same category as the "Read the Bills" plan -- a nice idea, sure let's have Congress pass that, I'm all for it. Is Congress going to pass it? No. So in the meantime, let's do other things which are proven to work. Political decentralization has a track record like nothing else ever -- its track record is that it completely transformed an entire world and made us all rich.

...and here's what Ralph Raico said...

...it was taxpayers who were represented in these different assemblies.   So when people talk about let's say the democractic factor...in the Dutch cities or in the the Italian city states it's not to be understood in the sense of present day democracy.  It's not mass democracy by any means...it's democracy of the taxpayers.  And that's what was involved in these assemblies.  Now, mentioned representative assemblies...there was also the general scholastic philosophy of natural law, and I mentioned the different charters granted by rulers and acting as sets of limitations on their power.  The most famous is the Magna Carta in English history.  Not famous to my students.  Who I think, they aren't that bad, they're just kind of average.  They've all heard of a lady called Harriet Tubman.  Many many fewer of them... virtually none of them know who Martin Luther King was named after.  And as for things like the Magna Carta, well, it's pretty much a mystery... - Ralph Raico, History: The Struggle for Liberty

Err?  You don't think that tax choice...aka pragmatarianism...aka the Magna Carta Movement would work.  So you suggested we try something that has been proven to work.  In order to help me better understand exactly what that is...you provided a link to Ralph Raico's lecture...where he attributed the success of Western Europe to a "democracy of the taxpayers"...which was made possible by the Magna Carta.

Isn't tax choice just the modern version of a "democracy of the taxpayers"?   Here's a passage that Raico quoted in his lecture...

Almost everywhere in Latin Christendom the principle was, at one time or another, accepted by the rulers that, apart from the normal revenues of the prince, no taxes could be imposed without the consent of parliament … By using their power of the purse [the parliaments] often influenced the rulers policies, especially restraining him from military adventures. A.R. Myers, Parliaments and Estates in Europe to 1789 

Compare it to the passage on the Wikipedia article on tax choice...

To guard against despotic royal rule, parliament sought to limit the kings’ powers to impose taxes so as to curtail their ability to maintain a standing army beyond times of war and immediate external threat - The evolution of parliament's power of the purse

Why did the Magna Carta work?  Because it decentralized power and control.  It transferred the power of the purse from one person to many people.  Why would tax choice work?  Because it would transfer the power of the purse from many people to a multitude of people.

Would secession achieve the same results?  Well...let's take a closer look...

Within this system, it was highly imprudent for any prince to attempt to infringe property rights in the manner customary elsewhere in the world. In constant rivalry with one another, princes found that outright expropriations, confiscatory taxation, and the blocking of trade did not go unpunished. The punishment was to be compelled to witness the relative economic progress of one's rivals, often through the movement of capital, and capitalists, to neighboring realms. The possibility of "exit," facilitated by geographical compactness and, especially, by cultural affinity, acted to transform the state into a "constrained predator" - Ralph Raico, The European Miracle

It would be great if you could read my post on the Dialectic of Unintended Consequences.  Here's a brief overview.  In the 50s and 60s, when unions were at the height of their power...they demanded such high wages that it became economically sound for companies to move their production overseas...aka "exit".  Where did the companies go?  Well...they couldn't go to China because Chairman Mao had blocked China completely off.  So the companies went to countries that were open to foreign investment...Hong Kong, Singapore, South Korea and Taiwan.  Those countries developed and then sent their own foreign investment into China.  They were able to do so because Deng Xiaoping had opened China up to foreign investment.

Why is it a good idea to be open to foreign investment?  Why is it a bad idea to be closed to foreign investment?  Do we have to push for secession to help people understand this concept?  Let's consider it on the individual level.

A while back I was banned from the Bleeding Heart Libertarian website.  Check out this screenshot from Matt Zwolinski's website...

The screenshot is part of Steve Horwitz's article Hating the State and Loving Liberty.  On the top of the screenshot it says, "The more we talk about loving liberty, the more we will recognize impediments to liberty in all of their forms, and the more likely we are to persuade others who claim to love liberty but perhaps don't see all its implications".  On the bottom it says, "The site has blocked you from posting new comments.  Showing 0 comments."

All too often we do on the individual level what Mao Zedong did on the national level.  We close ourselves off to foreign investment.  We close ourselves off to new ideas.  We block people and concepts that we do not agree with.  We ban other people's perspectives.

What happens when we close ourselves off to different perspectives?  What happened when Mao Zedong closed China off to foreign investment?  What happens when our government closes the public sector off to the perspectives of 150 million taxpayers?   We invariably suffer from a fatal conceit that has negative consequences.  

Here's what you posted about Deng Xiaoping...

Right, excellent example, and interesting that he is a hero of yours. Certainly his actions caused a great increase in the well-being of hundreds of millions of people, something which is more than most of us can say about our lives.

In context, he was saying that to justify his adoption of more-or-less free market ideas and tossing communism in the garbage heap. One European economic paradigm, that of Karl Marx and Frederich Engels, got tossed out because it didn't work, and another, the European or Western-style free market, got brought in. He was saying: guess what, guys? The free market works. It catches mice.

I think it's almost certain that Deng Xiaoping wouldn't have been able to accomplish what he did manage to accomplish if he had suggested tossing communism in the garbage can.   In a nation full of indoctrinated communists...that probably wouldn't have gone over too well.  He was also, after all, largely responsible....if not primarily responsible...for Tiananmen square.  When I lived in China I wasn't able to access Wikipedia... so... yeah... by no means did Deng Xiaoping suggest abolishing communism.

Of course...if you're not a member of this forum, then you wouldn't be able to access this Political Philosophy category.  Why is that?  Because the forum owner decided it might not be in Ron Paul's political interests to be associated with anarcho-capitalism.

The owner of the Ron Paul Forums and Deng Xiaoping both acted pragmatically.  What's the opposite of being pragmatic?  It's being dogmatic.  Both Mao Zedong and Murray Rothbard were dogmatic.

As I'm sure you're aware, Rothbard hated the state so much that if there had been a button that would have instantly and entirely abolished the state...then he would have pushed that button until his thumb blistered.  But by pushing that button he would have disregarded the multitude of people who, from their perspectives, believe that the state is absolutely necessary to ensure our survival and prosperity.  It doesn't mean that they are right...but it definitely means that Rothbard would have been wrong to completely disregard their perspectives.

As I argued in my post...Perspectives Matter - Economics in One Lesson...it's fundamentally important that we solely rely on persuasion to try and change people's minds.  

As far as I know, given that we live in a nation full of statists, you're not going to get anywhere by advocating that we abolish the state.  I might be wrong...but from my perspective, it's completely unnecessary to advocate abolishing the state or seceding from the state.  What we need to do is focus on promoting the idea that perspectives matter.

The basic idea is that two heads are better than one.  This is simply because we all have extremely limited perspectives.  I didn't know about Ralph Raico's lecture...but you did.  Why did you make the effort to share your partial knowledge with me?  Because you wanted to persuade me.  As a direct consequence of listening to the lecture I ran across this...

I now return to the fundamental question with which I began this article:  What is the difference between a just king and a great robber? For Aquinas, the difference is that the just king provides a public good: peace.  By diligently defending justice in the community, he shows himself worthy of his keep in the form of tolls and tributes limited by the fundamental law of the land, and he does not extract more than the maintenance his state requires. - Christopher Todd Meredith, The Ethical Basis for Taxation in the Thought of Thomas Aquinas

and this...

Thus, considered in themselves, in their own nature, in their normal state, and apart from all abuses, public services are, like private services, purely and simply acts of exchange. - Bastiat, Private and Public Services

and this...

The distinction between just taxation and legal plunder therefore hinges on the question of whether the taxpayer receives sufficiently valuable services in exchange for his payment. As Bastiat explains, “The state can put its taxes to either a good or a bad use. It puts them to a good use when it performs services for the public equivalent to the value it receives from the public. It puts them to a bad use when it squanders its revenues without giving the public anything in return.” - Christopher Todd Meredith, Taxation and Legal Plunder in the Thought of Frédéric Bastiat

and this...

Public taxes, even with the nation's consent, are a violation of property rights, since they can be levied only on values that have been produced by the land, the capital, or the industry of private individuals. Thus, whenever they exceed the indispensable minimum necessary for the preservation of society, they may justly be considered as an act of plunder. - Jean-Baptiste Say

and this...

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good. - Bastiat, Justice and Fraternity

and this...

In other words...this is a case of commerce producing tolerance, producing harmony, producing a willingness to interact of course for mutual benefit. - Ralph Raico, History: The Struggle for Liberty

Out of all these insightful passages...this one by Bastiat is perhaps the most relevant to the idea that perspectives matter..."There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it."

How long ago did we pass that point in the road?  As Ralph Raico said in his lecture...his students have all heard of Harriet Tubman...but the Magna Carta is a mystery to them.  Our focus shouldn't be on abolishing the state...or worrying about the tax rate...or worrying about whether something is or isn't a legitimate public good.  Instead, our focus should be on helping people understand the value of opening our government up to "foreign" investment.  In other words...we should focus on trying to persuade people that's it's extremely valuable to integrate the combined foresight of 150 million taxpayers into the government.

In my post on a taxpayer division of labor...I discussed the idea of 150 million taxpayers each with their unique perspectives focusing on the areas that concern them.  Here's a pretty terrible illustration of the idea of 538 congresspeople blocking the perspectives of 150 million taxpayers.  A sword was easy to draw...but my girlfriend didn't quite grasp the concept until I explained it to her.

It's not just dangers that we might miss...but it's also opportunities that we might miss as well.  This is the Seen vs Unseen concept.

Of all people, you should be pretty aware that I'm not having much success doing this on my own.  So let's start a Magna Carta Movement!   In any case...you should really start your own blog.

Perspectives Matter - Economics in One Lesson

Does your perspective matter?   Your perspective represents your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge.  Does all that matter?  Here are your options...

1. No, your perspective does not matter
2. Yes, your perspective does matter

Let's consider both possibilities.

1. No, your perspective does not matter

If your perspective does not matter then one use of your limited resources is as good as any.  Therefore, it shouldn't matter if congress uses your taxes to clog toilets.

2. Yes, your perspective does matter

If your perspective does matter, then one use of your limited resources is not as good as any.  Therefore, it's entirely up to you to decide whether it matters if congress uses your taxes to clog toilets.

Here's the paradox.  You can't choose which government organizations you give your taxes to.  Therefore, your perspective does not matter.  In order to resolve this paradox you have to figure out why your perspective matters in the private sector but not in the public sector.  Why would the "best" use of your limited resources matter in the private sector but not in the public sector?  Why would economics, otherwise known as the study of scarcity, matter in the private sector but not in the public sector?  Either economics matters...or it does not.  Either your limited resources matter...or they do not.  Either your perspective matters...or it does not.

Too Many Eggs in One Basket

Let's consider a situation where people's perspectives did not matter at all...socialism.  A committee of government planners tried to determine the "best" uses of an entire nation's resources.  The result?  Epic fail.  Why though?  Simply because putting too many eggs in one basket minimizes rewards and maximizes risks.  We all have unique perspectives...yet we all make mistakes...aka fallibilism.  This is why it's not a good idea to put too many resources in the hands of government planners.

What about our system though?  Our system is a mixed economy.  We have two sectors...the private sector and the public sector.  In the private sector your perspective matters...you can determine the best use of your limited resources.  In the public sector, however, your perspective does not matter...you cannot determine the best use of your limited resources.  In essence, we follow the rules of economics in the private sector but not in the public sector.  What do you think the results are of disregarding the rules of economics in the public sector?  What do you think the consequences are of disregarding 150 million taxpayer's unique perspectives?

The consequences are substantial fails, depressions and recessions, which represent the misallocation of substantial resources.  Think about it on the individual level.  Let's say that you make a mistake and gamble your home on a failed business idea.  What are the results of putting all your eggs in one basket?  What are the consequences of misallocating your resources?  You lose your home.  But do any of your neighbors suffer from the consequences of your mistake?  Nope.

It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors.  This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah, Fallibility in Human Organizations and Political Systems

Individuals and corporations simply do not control enough resources to cause substantial failures.  On the other hand, our committee of government planners, aka congress, does.  If the tax rate is 25% then we can imagine that 538 people control 1/4 of our nation's resources.  That is too many eggs in one basket.  Our mixed economy is part socialism...and we understand exactly why socialism fails...so why is it any surprise when our system substantially fails?  Yet, what happens when substantial failures occur?  Each party conveniently blames the other party.  And guess what?  You believe them and the pattern repeats itself.

As long as we disregard 150 million taxpayer's unique perspectives, we will have to deal with substantial failures.

Humility vs Conceit

The best analogy of economics, that I know of, is Buddha's parable of the blind men and the elephant.  Each blind person was touching a different part of the elephant.  We all have access to an essential part of the truth...which is our own unique perspective.  Economics, the study of scarcity, only has meaning in terms of our perspectives.

The trick is understanding that our perspectives, while unique, are extremely limited.  It requires humility for us to appreciate just how limited our perspectives truly are.  People that fail to appreciate just how limited their perspective truly are, can be said to suffer from conceit.  These conceited people erroneously believe that other people's perspectives do not matter.

In order to understand the dynamic between humility and conceit, let's consider Frederic Bastiat's perspective and then compare it to Elizabeth Warren's perspective.  Here's Bastiat's perspective...

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." -  Frederic Bastiat, The Seen vs the Unseen

What difference do the results make?  That depends entirely on your perspective.

 In the first place, justice always suffers from it somewhat. Since James Goodfellow has sweated to earn his hundred-sou piece with some satisfaction in view, he is irritated, to say the least, that the tax intervenes to take this satisfaction away from him and give it to someone else. Now, certainly it is up to those who levy the tax to give some good reasons for it. We have seen that the state gives a detestable reason when it says: "With these hundred sous I am going to put some men to work," for James Goodfellow (as soon as he has seen the light) will not fail to respond: "Good Lord! With a hundred sous I could have put them to work myself." -
Frederic Bastiat, The Seen vs the Unseen

What are some good reasons for taxes?   That depends entirely on your perspective.

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. - Frederic Bastiat, The Seen vs the Unseen

Which brings us to Elizabeth Warren's perspective.  As I mentioned in my post on the opportunity costs of public transportation...she provides a perfect example of somebody who is conceited.  Here's the famous bit from her speech...

I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!  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.  Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.  But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along. - Elizabeth Warren

Do you think that Elizabeth Warren knows better than James Goodfellow what is and isn't essential for the successful operation of his business?  Why would anybody want their business to fail?  Why would anybody want their country to fail?  If Goodfellow has to pay taxes anyways...then why wouldn't he spend his taxes on the public goods which benefit his business the most?  If we have to pay taxes anyways....then why wouldn't we spend our taxes on the public goods which benefit our country the most?

If our perspectives do not matter then our country does not matter.  Value only has meaning in terms of our  perspectives.  We can maximize our country's value by allowing 150 million taxpayer's unique perspectives to determine the distribution of public funds.

Personal Shoppers

Congress functions as our personal shoppers for public goods.  Unlike in the private sector however, we do not have the option to shop for ourselves.  If you believe that congress is wasting your taxes then you should have the option to directly allocate your own taxes.  There's absolutely nothing wrong with having public personal shoppers...as long as taxpayers have the freedom to skip the middlemen and directly give their taxes to the government organizations that produce the "best" results.

What About Fairness?

Fairness is wonderful and admirable and desirable...but it does not trump certain failure.  Ignoring the rules of economics always results in failure.  If you want to support fairness...then it has to be with your own taxes.  No matter how you spin it...supporting fairness with other people's hard-earned taxes is nothing more than conceit.  You're assuming that your perspective is not as limited as somebody else's perspective.  We all have limited perspectives, which is exactly why we should strive to tolerate, if not respect, other people's perspectives.  Here's what Milton Friedman strongly emphasized...

If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it.

If we can't persuade other taxpayers that fairness is desirable...then we shouldn't impose our perspective on them even if we had the power to do it.  This is because it's entirely possible that we might be wrong.  Therefore, we should hedge our bets by incorporating a multitude of unique perspectives into the public sector.

What About Information?

Persuasion isn't just valuable in terms of tolerance...it's also valuable in terms of the exchange of information.  In order to try and persuade other taxpayers that fairness matters...you would have to share your partial knowledge with them.  In order to try and persuade you that perspectives matter...I have to share my partial knowledge with you.  In order for government organizations to try and persuade us that their responsibilities matter...they would have to share their partial knowledge with us.  This is how we solve problems and make significant progress.

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich Hayek, The Use of Knowledge in Society

What is the total amount of information contained within the perspectives of 150 million taxpayers?  Does congress even know your name...let alone your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge?  All that information is not conveyed by voting.  It can only be conveyed by allowing you to choose which government organizations you give your limited resources to.

It's important to be really clear on this...so here's a bit of redundancy.  Taxpayers should not serve the government...the government should serve taxpayers.  We should not exist to satisfy the demands of the government...the government should exist to satisfy our demands.  The government should not shape the perspectives of taxpayers....the perspectives of taxpayers should shape the government.  The government should not be the sculptor and taxpayers should not be the medium   The relationship between taxpayers and the government should not violate the rules of economics.  The longer that the government disregards our perspectives...the longer that we'll have to suffer the economic consequences.

Conclusion

Hedging our bets by allowing taxpayers to directly allocate their taxes minimizes the risk and maximizes the reward for our country as a whole.  It shouldn't matter whether an organization is public or private...what matters is whether it produces results.  Results only have meaning in terms of your perspective, which is exactly why you should have the freedom to choose which government organizations you give your limited resources to.  Sacrifice without reward is waste...and nobody wants their taxes wasted.

What is the value of 150 million taxpayers, each with their own unique perspective, striving to ensure that their sacrifices are not in vain?   From my perspective, the value of pragmatarianism is 150 million times greater than the value of 538 people spending money that they did not toil, strive, labor, sweat and sacrifice to earn.

The question then remains...does your perspective matter?

Anarcho-capitalism and Pragmatarianism

Anarcho-capitalists can be divided into two groups...consequentialist and deontological.  The consequentialist anarcho-capitalists believe that the private sector can do everything better than the government.  For example, anarcho-capitalists like David Friedman and Peter Boettke make economic arguments for eliminating the government.  Perhaps they might say that their favorite political philosopher was Adam Smith.

Deontological anarcho-capitalists...more commonly known as "natural rights" anarcho-capitalists...make moral arguments for eliminating the government.  For example, the "taxes are theft" argument is an argument that "natural rights" anarcho-capitalists would make.  They'll also frequently use words like "aggression" and "violence" and "rape"...and "hate".  If "natural rights" anarcho-capitalists had to choose one of their favorite political philosophers chances are really good that they'd choose Murray Rothbard...Do You Hate the State?

Personally, I've never heard a consequentialist anarcho-capitalist make the "taxes are theft" argument...but plenty of deontological anarcho-capitalists have no problem making consequentialist arguments.  In theory though...a "natural rights" anarcho-capitalist should support abolishing the government no matter what the consequences would be.  Just like a consequentialist anarcho-capitalist should support a little government if it can be proven that the consequences are better than abolishing government.

When it comes to pragmatarianism...so far, all the "natural rights" anarcho-capitalists that I've proposed the idea to have vociferously rejected it.  On the other hand, only two consequentialist anarcho-capitalists have had anything to say about it.  James E. Miller seemed open to the idea while David Friedman did not see the value....

I don't think that letting taxpayers allocate their taxes among options provided by the government solves the fundamental problems of government. - David Friedman

Unfortunately, that's all he said.  He never substantiated his claim...and the suspense is killing me.  Well...not quite...but I would really love to hear his critique.  Some thing with Peter Boettke!  Any other consequentialists...anarcho-capitalist or otherwise...are certainly welcome to share their critique of pragmatarianism as well.

In the meantime...I'll try and figure out what's going on with all these "natural rights" anarcho-capitalists.  For example, when I posted my libertarian pudding image on the Ron Paul Forums...one of the anarcho-capitalists who wrote this critique of pragmatarianism...modified my image in a way that made his opinion on pragmatarianism quite clear.

Here was my response...

Anarcho-Capitalist, if the government is truly shit...then wouldn't allowing taxpayers to directly allocate their taxes help them understand that the government is shit? Most of the people I talk to fanatically believe that the government is not shit. They believe that the government helps flush shit down the toilet.  

Both sides of the debate can't be 100% correct. What I don't understand is...if you're so dogmatically certain that your perspective absolutely reflects reality...then why wouldn't you tirelessly promote allowing taxpayers to see exactly how their own, individual, hard-earned taxes are being spent? What else could more effectively open their eyes? You say that their money is just being flushed down the toilet yet you don't want them to open their eyes. It just doesn't follow. 

The other side believes that you're nuts...and you believe that they're nuts...so why not just empower 150 million self-interested, utility maximizing, purposefully acting, psychic profit seeking taxpayers to use their hard-earned taxes to prove which side is truly nuts? What are you afraid of? The more you fight against pragmatarianism the less credible your position becomes.

With that in mind, here's the illustration that I came up with.  Feel free to disseminate it and modify it

Here's a snippet of what I had written earlier over on the libertarian forum...Taxes Are Not the Problem...

The goal of pragmatarianism is to highlight the folly of committees determining funding. You can think whatever you want about taxes and still agree with the fundamental premise of pragmatarianism. Anarcho-capitalists, minarchists and libertarians can argue for days about whether taxes are truly necessary...but they should all be able to support the key premise of pragmatarianism: it's a myth to believe that a committee can determine the optimal level of funding for an organization. If you believe that a committee can determine the optimal level of funding for any organization...then that is the same thing as believing in socialism.

Pragmatarianism is something that we should all be able to support.

Libertarian Pudding Tastes Good!!

All pictures are not worth a thousand words.  Take, for example, these tax choice pictures that I created using MS PowerPoint...

It's two versions of the same picture.  Which one do you like better?  Yeah yeah...I won't give up my day job!  If anybody thinks they can illustrate the concept better than I did...well...they are probably right.  But, I'd definitely like to see some proof!  Because, after all, the proof is in the pudding.  Feel free to post these images around and modify them however you like.

For a while now I've thought about trying to illustrate this concept...but what finally motivated me to do so was this epic debate between liberals and libertarians... Does The Libertarian Movement Embody The Worst of Human Traits?

As usual...the debate centered around the proper scope of government.  Why invest so much time and energy into debating the proper scope of government?  I get that liberals might want to argue over the proper scope of government...but what excuse do libertarians have?  It seems pretty clear that the large majority of libertarians do not understand that if an individual or a committee can truly know the proper scope of government then socialism is a viable concept.

Why isn't socialism a viable concept? Because it's impossible for a king...or a committee...to determine the optimal level of funding for an organization.  This is because funding can only be determined by demand. And what is demand? Demand is the aggregate of priorities.  For some reason people think that voting reveals their priorities.  The truth of the matter is that priorities can only be revealed when people spend their own time/money.

Therefore, in order to determine the proper scope of government (taste the pudding) we should just allow taxpayers to directly allocate their taxes...aka pragmatarianism.  For example, at anytime throughout the year you could visit the Environmental Protection Agency (EPA) website and submit a payment. The EPA would then notify the IRS that you had submitted a payment.

Consider tax choice from the perspective of Frédéric Bastiat...

It is quite true that often, nearly always if you will, the government official renders an equivalent service to James Goodfellow. In this case there is no loss on either side; there is only an exchange. Therefore, my argument is not in any way concerned with useful functions. I say this: If you wish to create a government office, prove its usefulness. Demonstrate that to James Goodfellow it is worth the equivalent of what it costs him by virtue of the services it renders him. - What Is Seen and What is Unseen

A useful function for one person might be a useless function for another person.  Which is why it's useless to debate the proper scope of government.  

One thing that libertarians tend to ask is how the tax rate would be determined.  Congress would still determine the tax rate but it seems reasonable to say that the tax rate would reflect the scope of government.  If taxpayers only decided to fund congress, the IRS and Dept of Defense...then it wouldn't make any sense for congress to set the tax rate at 50% or 75% or 100%.  So...the tax allocation decisions of millions and millions of utility maximing taxpayers would determine the scope of government...and the scope of government would determine the tax rate.  The more things the government does...the greater the justification for raising taxes.  The less things the government does...the greater the justification for lowering taxes.

This is all painfully obvious to me...but, unfortunately, I fail miserably at conveying this concept to others.  For example...consider this exchange that I had with a libertarian...

Xerographica

I didn't ask about lowering taxes...so your answer isn't quite clear. Let's try this another way. If you had to choose between A) allowing taxpayers to directly allocate their taxes and B) your form of libertarianism...then which would you choose?

RabidAlpaca

What kind of a stupid question is that? "Would you like my way, or yours?" Clearly I would prefer my way, where the tax rate is as low as possible, only high enough to fund the necessary services for the government to protect our natural rights. My original answer was perfectly clear as to how I stand.

If there are options as to where to allocate your taxes, as you suggest, then there is absolutely no reason that whatever the options are can't be accomplished by the free market. The government should only be there for common goals, such as national defense, the police, the fire department, and the judicial system, just as I stated before.

Xerographica

Naw, it wasn't a stupid question...you just failed to predict the follow up question. Which is...why wouldn't my way reveal the truth of your way? You say that the private sector is BETTER at accomplishing everything except for national defense, the fire dept and the judicial system...so why wouldn't the tax allocation decisions of 150 million self-interested, utility maximizing taxpayers (aka consumers) reflect the truth of your assessment? Why would they pay the government to do something that the private sector is CLEARLY better at doing?

If you truly understand how scarce resources are efficiently allocated...then you'd understand that my way is the "put your money where your mouth is" version of your way.

RabidAlpaca 

I see exactly what you're getting at, but it doesn't make any sense as to how it pertains to what I'm saying.

I see people keeping more of their paycheck as a way to best allocate funds, through the free market. People will spend money on what is dear to them. You seem to support some bastardized version where we all pay the substantial taxes into the government that we do now, but somehow directly vote as what to spend it on. This is not only inefficient, but also makes zero sense.

As to what Turtledude was replying to you:

"The state is the great fiction by which everybody seeks to live at the expense of everybody else." ~ Frederic Bastiat

Xerographica

I don't understand your response at all. You say that the private sector is clearly better at supplying cheese whiz. My response was to ask you why taxpayers would choose to spend any of their taxes on government cheese whiz. What's inefficient about this system? Do you think Bastiat would disprove? Why would he? In this system you would only be able to spend your own, individual taxes.

Why worry about the tax rate? The tax rate merely reflects exactly how many things the government does. In other words...the tax rate reflects the scope of government. If nobody purchases government cheese whiz...then the government would no longer supply cheese whiz. This would narrow the scope of government and the tax rate would decrease accordingly.

RabidAlpaca

I've answered you at least 3 times, in clear and plain english, and you continue to not understand. You seem to be trying to convince me of something, but doing a poor job of actually formulating it. There are certain government services, like the ones I mentioned, that are not optional, because they support every single citizen (for the fourth time: national defense, police and fire departments, and the justice system) This would require an extremely minimal tax rate. Everything else can be handled by the free market, to include cheese whiz. I've stated more than once that I don't like or understand the need for your a-la-carte tax system, and that's the last time I'll say it.

Xerographica

So...rather than allowing 150 million taxpayers to determine the proper scope of government...you'd prefer it if everybody just trusted that your perspective was correct. We are all just blind men touching different parts of an elephant...except for you. You're the only person that can see.

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich Hayek, The Use of Knowledge in Society

Evidently Hayek didn't know how exceptional you are. That makes sense though...because, like the rest of us blind people, he only had partial knowledge.

RabidAlpaca

Your'e an idiot if you think F. A. Hayek didn't support a free market, that was his baby. He argued very strongly against government control of the economy. I believe in a republic, not a democracy. "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." ~ Ben Franklin

In a democracy the majority can vote to take the rights from the minority. In a republic, everyone is protected equally under the law.

It's not my perspective, I'm a constitutionalist, it's the perspective of our forefathers, and what this country was founded on.

Xerographica

Oh, it's not your perspective...it's the perspective of a committee of government planners. Well...if a committee of government planners can truly know the proper scope of government then I don't know what possible objections you might have with socialism.

Of course I know that Hayek was a champion of free-markets. Do you think I just pulled that passage out of thin air? Hayek's partial knowledge concept and Bastiat's opportunity cost concept are the two economic justifications for allowing taxpayers to directly allocate their taxes.

According to Einstein...I'd have to be insane to try and promote the same type of libertarianism that has been promoted for the past couple hundred years. Nope...count me out...you go ahead. A while back I figured out that the same exact thing could be achieved by applying market principles to the public sector. Well...assuming that libertarians correctly guessed the proper scope of government.

Priorities in Peril

David Friedman is a bit skeptical regarding the evidence shared by those who are concerned with global warming.  Here are a couple of my comments on his global warming entries.

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Nordhaus on Global Warming

Speaking of partial knowledge. My guess is that none of you know the significance of my username. It refers to an epiphytic species of plant in the bromeliad family (ie pineapples)...Tillandsia xerographica.

For as long as I can remember I've been fascinated with epiphytes. Epiphytes, unlike parasites (ie mistletoe) do not derive any nutrients from their hosts, which is why they can grow on rocks as well as on trees and in quite a few instances...on cacti even!!! How cool is that? Talk about a marvelous adaptation in the ever constant conquest of space.  (Nerd alert - read the short Environmentalism and Ecology section for the Wikipedia article on Frank Herbert's classic sci-fi novel Dune)

The Orchidaceae, with around 30,000 species, is probably the largest plant family. It also has the greatest number of epiphytic species. What's unique about the orchid family is that their seeds are so tiny that they do not contain enough nutrients to germinate on their own. In order for the seed to germinate...it has to be penetrated by a certain species of fungus. The seed then manages to derive enough nutrients from the fungus to germinate. The fungus persists in and out of the roots of the orchid...and as far as I can tell...the orchid roots help the fungus colonize the tree that it is growing on...which is a mutually beneficial relationship.

Here we can see the opportunity cost concept. The orchid seed forgoes the weight of a "pack lunch" in order for the wind to carry it greater distances away.

The orchids that I study are the epiphytic, eurythermal, xerophytic species. In other words...they grow on trees/cactus/rocks and can tolerate wide fluctuations in temperature as well as extended periods of drought. This group represents perhaps anywhere from 1,000 to 3,000 species of orchids...depending on where you draw the line.  These species of plants make do with ridiculously limited resources. Relatively speaking...how many resources...nutrients/moisture...can there be on the surface of a cactus?  Economics is the study of scarcity...so if you want to study economics then you should study xerophytic epiphytes!

On the other end of the tolerance continuum...you'll find the species of orchids that have exact and extremely narrow temperature/moisture requirements. Some of them only grow in one valley...at a specific elevation...in a very specific microhabitat. These are the kinds of orchids that I have no interest in trying to grow outdoors here in Southern California.

That being said, it's bad enough that countless numbers of undiscovered species are lost from deforestation...but to lose species as a direct result of our impact on the climate only compounds the problems of unintended consequences. No species is an island...it's all a complex web of interdependent relationships.

We all have ridiculously limited perspectives...just like it's a fatal conceit for planners to try and impose their priorities on the use of limited resources...it's also a fatal conceit for us to impose our priorities on the environment. Both can have fatal and unseen and unintended consequences.  Should we err on the side of development or conservation?  What should our priorities be?

As I've mentioned before...my big picture solution is to allow taxpayers to directly allocate their taxes. This would give people the ability to allocate their individual taxes according to their partial knowledge and opportunity costs (priorities/values). Of course we're going to make mistakes...aka... fallibilism...which is exactly why we shouldn't put all our eggs in one basket.

David Friedman...the problem has never been with the taxing...it's always always always been with the spending. Of course...I might be wrong! Hopefully some day you'll see some value in making the effort to try and prove me wrong :D

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Richard Lindzen on Global Warming

Can't really contribute much in the way of critical analysis...but it really tugs at my heartstrings to see the polar bears sitting on tiny rapidly shrinking slabs of ice slowly drifting away. I think that's what they are going to do to me when I get old...if not sooner.

Oh wait...I thought of some critical analysis. We should always be very wary of the fatal conceit and unintended consequences. We overestimate our own intelligence if we think we can truly grasp the impact our activities have on the planet. Therefore, if we do err, it should be on the side of caution.

Then again, I might just be saying that because I'm biased towards polar bears. Then again...I REALLY hate the cold. When I spent a month doing military training up in the Andes...it was the worst. There was no water pressure so taking a shower was pretty much like standing naked under an icicle that was slowly melting. That being said, one of my fondest memories was when I took a break from chopping wood and I briefly saw an Andean condor soaring high up in the clouds.

Well...my point was that my biases probably cancel each other out...but then I started to talk about nature again...so I guess that they really do not.

Daniel Kuehn's Critique of Pragmatarianism

Daniel Kuehn just shared his critique of pragmatarianism.... Thoughts on "tax choice": is it just anarcho-capitalism?  His critique is really interesting because Kuehn kinda seems like a libertarian...but all his concerns were of a liberal nature.  So I wonder which label he goes by...not that it really matters though.

What's neat about his entry is that it illustrates all but one of the five most common responses to pragmatarianism.

1. The ostrich response (~ 85%)
2. The coordination problem response (~ 9%)
3. The taxes are theft response (~3%) 
4. The rich people are evil response (~ 2%)
5. Other (~1%)

1. The Ostrich Response (aka no response)

At first I thought it was a really dumb idea - then after he clarified some stuff I'm somewhat more positively disposed.   

I wonder what percentage of non-responders fall into this category.  First impressions are pretty darn important so it would be great to figure out how to make the tax choice idea not appear so dumb at first glance.

2. The Coordination Problem Response (Information Problems)

For some reason I was kind of surprised to see this concern.  I guess because I see him occasionally comment over at Peter Boettke's blog...Coordination Problem.  Also, the name of Kuehn's blog is "Facts and Other Stubborn Things".   The first thing that comes to mind when I think about "Facts" is my favorite passage from Hayek....

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Hayek, The Use of Knowledge in Society

Pragmatarianism is the solution to the information problem.  I discuss this in more detail in my post on partial knowledge and opportunity costs.  Kuehn wrote...

But I don't think I have nearly enough information to allocate my taxes properly across all these functions even the ones that I find perfectly legitimate (which to be honest is most of them). Others are going to struggle with this too. And that information problem could come up with some perverse results. You may get a massive EPA budget, far beyond what makes sense, because people can't really grapple with all these trade-offs but they know they want to "protect the environment". What does that really help? You probably stop doing the environment much good pretty quickly, you suck funds away from other uses, and you're probably going to hurt the economy if you beef up the EPA's regulatory capacity.

This passage fit nicely into my collection of coordination problem responses...Unglamorous but Important Things.

3. The Taxes are Theft Response

This was the one argument he didn't make.

4. The Rich People Are Evil Response

Basically, the public goods that will get provided are the public goods that rich people like. In this sense, the system isn't democratic at all - it's hardly "one person one vote".

I should really start a collection dedicated to this type of response.  Here are a few of the places where I've addressed it...

My discussion with the liberal John Holbo - Selling Votes - I challenged him to show me a correlation between wealth and values.  Also, quite a few times I brought up personal responsibility in terms of ethical consumerism......Dude, Where's My Ethical Consumerism.

My discussion with the liberal Linda Beale - Other People's Values - It's a hasty generalization to say that the wealthy are evil.

My discussion with a communist - A "Hard Times" Milestone  "Yes, the more taxes people pay the more power they have...but I can't see how this power to fund public "goods" can possibly be used for evil purposes."

My discussion with the libertarian Matt Zwolinski - Fallibilism vs Fairness - People should be able to put their taxes where their hearts are...aka ethical consumerism.   Also, fairness should never trump the efficient allocation of scarce resources.

Tax Choice - A Strategy for the Occupy Movement - Again with the idea of ethical consumerism...you can't give corporations the middle finger with one hand and your money with the other hand.

To summarize...

1.  There's no correlation between wealth and values
2.  Fairness should never trump the efficient allocation of scarce resources
3.  The 99% has a personal responsibility to put their money where their hearts are

5.  Other (The Free-rider Problem)

As I discussed in my post on Libertarianism and the Free-rider problem...the possibility of the free-rider problem is partly what motivated me to reject libertarianism.

Kuehn's Conclusion

You don't see the government funding indisputably private goods here, and you don't see a complete lack of rhyme or reason to how things are allocated. The things that bug Xerographica are real - but I think we should take it as an opportunity to make further tweaks - namely to push some democratization and devolution. That I could get behind. But "tax choice" seems to me like a dud.

Heh, his first impression was "dumb" and his second impression was "dud".  That's progress...isn't it?

What's funny is that I can imagine back in the day...the people who defended regular human sacrifice would say...we haven't had a drought in years, we've been winning all our battles, the volcano hasn't erupted, the sun hasn't fallen from the sky and the demons haven't stolen our children.

It's a total myth that 538 congresspeople can efficiently allocate the taxes of 150 million taxpayers.  There's just no way that a committee of any sort can determine the optimal level of funding for any organization.