Incentivizing Honest Preference Revelation for Public Goods

You have written elegantly but doesn't address the public good problem. I was hoping more of some link to mechanism design literature that can explain why it's incentive compatible. - urnbabyurn, Reddit Discussion on Public Finance

Let's review.  The reason that taxation isn't voluntary is because people would have an incentive to lie about how much they value public goods.

EPA: How much is environmental protection worth to you?
Erin: Around $400 a year
EPA: Please pay us $400 a year
Erin: Oh, in that case...it's only worth $100 a year

Here it is from the horse's monkey's mouth...

One could imagine every person in the community being indoctrinated to behave like a "parametric decentralized bureaucrat" who reveals his preferences by signalling in response to price parameters or Lagrangean multipliers, to questionnaires, or to other devices. But there is still this fundamental technical difference going to the heart of the whole problem of social economy: by departing from his indoctrinated rules, any one person can hope to snatch some selfish benefit in a way not possible under the self-policing competitive pricing of private goods; and the "external economies" or "jointness of demand" intrinsic to the very concept of collective goods and governmental activities makes it impossible for the grand ensemble of optimizing equations to have that special pattern of zeros which makes laissez-faire competition even theoretically possible as an analogue computer.

And here as well...

However no decentralized pricing system can serve to determine optimally these levels of collective consumption. Other kinds of "voting" or "signalling" would have to be tried. But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Lindahl, now it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has, etc. I must emphasize this: taxing according to a benefit theory of taxation can not at all solve the computational problem in the decentralized manner possible for the first category of "private" goods to which the ordinary market pricing applies and which do not have the "external effects" basic to the very notion of collective consumption goods. - Paul A. Samuelson, The Pure Theory of Public Expenditure

"departing from his indoctrinated rules" = lying
"give false signals" = lie

If Erin lies about how much she values the environment...then she can pay less money while still receiving approximately the same amount of benefit.  If everybody else does the same thing, then the EPA would receive far less money than it should.  As a result, people who value the environment would be worse off.

The common solution is to force people to pay taxes.  Unfortunately, the government doesn't just force people to pay taxes...it also spends their taxes for them.  We give our money to the IRS...and the IRS gives it to congress...and congress decides how to divvy up the money among the various government organizations.

The problem is that there's no real plausible way for congress to determine how much Erin values the environment.  Samuelson the monkey tried to get around this by assuming that congresspeople are omniscient.

As a pragmatarian, my argument is that we should drop this fundamentally absurd assumption and allow taxpayers to choose where their taxes go.  How Erin allocates her taxes will reveal how much she values public goods.  If the cost is a foregone conclusion, then it's in her selfish interest to get her money's worth.

It's like going to an all you can eat buffet.  The cost is a foregone conclusion.  It's fixed.  What's variable is the amount of benefit you derive...which depends entirely on the selections you make.  Therefore, it's in your selfish interest to pick the dishes that you find most deeeelish.  In other words, you have an incentive to pick the items that most closely match your preferences.

Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his "true" preferences for public goods. - James M. Buchanan The Economics of Earmarked Taxes

Yet, as you can see from urnbabyurn, there's still some concern regarding a lack of honesty in a pragmatarian system.  This primarily stems from people's mistaken belief that our system adequately gauges people's preferences for public goods.  It secondarily stems from the fact that few of the goods supplied by the government are actually public goods.  Most are simply private goods with beneficial spillovers (positive externalities).  So some public goods are more collective than others.  Therefore the argument is that people will have an incentive to pay for the individually beneficial public goods while hoping that others will pick up the tab for the collectively beneficial public goods.

It boils down to who would lie about your preferences more...you or congress.  If you would lie about your preferences more than congress would...then we'd be worse off in a pragmatarian system.  Here's how I've illustrated this...

If you would place yourself at a 6...but congress would have placed you at a 5...then if this was the only factor, we'd be worse off in a pragmatarian system.

As Adam Smith wrote in the passage in the picture, "every single piece has a principle of motion of its own...".  In a pragmatarian system...how far would you deviate from your own principle of motion?

With our current system pacifists are forced to pay for war.  This is a huge deviation from their own principles of motion.  They wouldn't deviate nearly as much in a pragmatarian system.  The same could be said of people who support the legalization of drugs.  Shutting down the Silkroad would probably be the last thing that they'd want their taxes spent on.

In the current system people are forced to fund things they are diametrically opposed to.  Conservatives are forced to fund liberal public goods and liberals are forced to fund conservative public goods.  In a pragmatarian system however, the forced rider problem would be limited to those who didn't want to pay taxes.  But at least they wouldn't be forced to fund the IRS.  Of course there would be far less people who didn't want to pay taxes, given that studies show that people are more inclined to pay taxes when they actually value what their taxes are being spent on...

We find that allowing earmarks more than doubles both contributions and the likelihood of giving to government organizations. Participants give on average $1.68 from a $20 initial payment for general purposes, compared to $5.52 for cancer research and $4.04 for disaster relief; the likelihood of giving increases from 30 percent for general purposes to 66 percent for cancer research and 61 percent for disaster relief. - Sherry Xin Li et al, Do Earmarks Increase Giving to Government?

The important thing to consider here is that everybody has their own principle of motion.  This means that it's unlikely that any two individuals are going to put exactly the same things in their shopping carts.  When people are free to shop for themselves...the quality/quantity of products/services will reflect the diversity of people's preferences.

In 1978 when Deng Xiaoping started to help China transition from a planned economy to a mixed economy...the quality/quantity of products/services available reflected the fact that people had not been free to shop for themselves.  Their principles of motion were designated by government planners.

Apart from their other characteristics, the outstanding thing about China's 600 million people is that they are "poor and blank". This may seem a bad thing, but in reality it is a good thing. Poverty gives rise to the desire for changes the desire for action and the desire for revolution. On a blank sheet of paper free from any mark, the freshest and most beautiful characters can be written; the freshest and most beautiful pictures can be painted. - Mao Zedong

The people were essentially marionettes.  They were unable to dance to the beat of their own drum.  This homogenization/standardization of preferences invariably prevents the diversification of products/services.

Once people were given more freedom...as some of the strings were cut from the marionettes ...their own principles of motion began to bear fruit.  The quality/quantity of products/services now available in China is infinitely greater than it was 35 years ago.  

If we created a market in the public sector...then in 35 years from now the quality/quantity of public goods available will be infinitely greater than it is now.

So even in the extremely unlikely situation that some collective public goods received less funding than they really should...the greater quality/quantity of those public goods will more than make up for the less than optimal funding.

Basically, it's a given that all government organizations can do far more with significantly less.

The only way to maximize the incentive for government organizations to do better things with society's limited resources is to allow taxpayers to choose which government organizations they give their taxes to.  If the carrot on a stick is not held by consumers...then it's a given that the government will not be a servant of the people.  Nothing limits progress more than having the government be our master. In order to guarantee a government for the people and by the people...in order to ensure maximum responsiveness...people must have the freedom to give their positive feedback (tax dollars) to the most beneficial government organizations.

In closing, here are some supporting arguments in other people's words...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, The Theory of Moral Sentiments

Within the market society each serves all his fellow citizens and each is served by them. It is a system of mutual exchange of services and commodities, a mutual giving and receiving. In that endless rotating mechanism the entrepreneurs and capitalists are the servants of the consumers. The consumers are the masters, to whose whims the entrepreneurs and the capitalists must adjust their investments and methods of production. The market chooses the entrepreneurs and the capitalists, and removes them as soon as they prove failures. The market is a democracy in which every penny gives a right to vote and where voting is repeated every day. - Ludwig von Mises, Omnipotent Government

There are two basic and diametrically opposed views of taxation.  Those who favor the ability to pay approach view the state as a master, who extracts tribute from its subjects on the basis of how much they are able to pay.  Those who take this first approach often also view the state as a benevolent father figure, who distributes tax benefits on the basis of need.  In Karl Marx's words, "From each according to his abilities; to each according to his needs." 

Those who take the cost-benefit approach view the state as the servant of the people.  Government provides services and taxpayers pay for the services.  Those who benefit the most from the services should pay the most.  And those who do not use a particular government service should not be forced to pay for it. - Robert W. McGee, The Philosophy of Taxation and Public Finance

The fundamental difference between decision-makers in the market and decision-makers in government is that the former are subject to continuous and consequential feedback which can force them to adjust to what others prefer and are willing to pay for, while those who make decisions in the political arena face no such inescapable feedback to force them to adjust to the reality of other people’s desires and preferences. - Thomas Sowell, Intellectuals and Society

The second common feature relates to the joint professional belief that the value asymmetry will disappear in a market-like environment.  A market-like environment will accomplish the role of providing both incentives to accurately state demand and learning opportunities to the individual.  The first important attribute of the market-like environment is the incentive property; specifically, the design of a public good allocation process which provides the greatest possible incentive for truthful revelation of value.  Once truthful values are obtained, any sources of bias which lead to the asymmetry should then disappear. Additionally, the market-like environment is important because recurrent and reversible transactions can take place in a market. The importance of these transactions lies in the fact that attitudes toward losses may change as the individual becomes familiar with the experience of obtaining a public good and then giving it up. After a period of time, what is given up will be perceived as an opportunity cost, rather than a loss. The loss-aversion phenomenon can then be expected to become a less predominant factor in the valuation measurement process. - David S. Brookshire and Don L. Coursey, Measuring the Value of a Public Good

The second argument for the use of market based frames relates to the opportunities provided by markets for repeated choice and learning in an environment where sub-optimal choice is punished (by a failure to achieve maximum utility).  It is a preference-revelation-based argument in that these are usually considered to be exactly the kinds of conditions most likely to uncover preferences.  Consequently the decisions made in markets yield good outcomes in the sense that they are true to any underlying preferences. - Alistair Munro, Bounded Rationality and Public Policy: A Perspective from Behavioural Economics

Individuals express preferences about changes in the state of the world virtually every moment of the day.  The medium through which they do this is the market place.  A vote for something is revealed by the decision to purchase a good or service.  A vote against, or an expression of indifference, is revealed by the absence of a decision to purchase.  Thus the market place provides a very powerful indicator of preferences. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

Using dollars in open markets muffles the rhetorical din and forces persons to reveal honestly the strength of their preferences in a common medium understood by all.  "Put your money where your mouth is" is a coarse reminder of a high philosophical truth.  If the tax collector cannot measure utility straight up, neither can the regulator who is all too likely to succumb to the demands of local residents (and voters) and to overlook or undervalue the preferences of outsiders.  Direct political measurements of utility tend to destroy utility itself.  The wealth proxy has a lot to commend it in straight utilitarian terms. - Richard A. Epstein,  Mortal Peril: Our Inalienable Right to Health Care?

The economic approach stresses the fact that any expenditure always has an opportunity cost, i.e. a benefit that is sacrificed because money is used in a particular way.  For example, since biodiversity is threatened by many factors, but chiefly by changes in land use, measures of value denominated in monetary terms can be used to demonstrate the importance of biodiversity conservation relative to alternative uses of land.  In this way, a better balance between 'developmental' needs and conservation can be illustrated.  To date, that balance has tended to favour the conversion of land to industrial, residential and infrastructure use because biodiversity is not seen as having a significant market value.  Economic approaches to valuation can help to identify that potential market value, whilst a further stage in the process of conservation is to 'create markets' where currently none exist. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

Were the Pyramids a Smart Investment?

Yes, the Egyptians could have used the resources to build steam engines or a moon rocket or any number of things. They didn't, however, and the results still helped stabilize the Egyptian culture for millenia. It worked, and the fact that the Egyptians were probably quite happy to help their god-king in the afterlife by building funerary complexes like pyramids is only a bonus. That simple act of being a net positive, historically, is what matters. - Avenio

Here's my response...

The simple act of not having to eat your children, historically, is what matters...

This eyewitness account comes from Abdel-Latif Al-Baghdadi, a physician/scholar from Baghdad who was in Egypt from 1194 to AD 1200. He reported that people emigrated in crowds and that those who remained habitually ate human flesh; parents even ate their own children. Graves were ransacked for food, assassinations and robbery reigned unchecked and noblewomen implored to be bought as slaves. Al-Baghdadi's account is almost an exact copy of that recorded by Ankhtifi, more than 3000 years earlier. - Fekri Hassan, The Fall of the Egyptian Old Kingdom

Yes, the Egyptians could have used the resources to build steam engines or a moon rocket or any number of things. - Avenio

Any given Egyptian could have used his resources to produce any number of things. He could have produced something and taken it to the market. Would other people have bought whatever it was that he produced? Perhaps? If yes...then he could have hired other Egyptians to help him produce his useful product. If no...then he could have worked for other Egyptians to help them produce their useful products.

A famine in Egypt obviously meant that there was a shortage of food in Egypt. But does that mean that they had a shortage of goods that they could have traded with other countries for food? In the case of ancient Egypt...yeah. They spent their nation's limited resources building the pyramids which had absolutely no trade value. They couldn't eat the pyramids and they couldn't trade the pyramids for food.

Here's an insight into the mentality of a conceited ruler...

Apart from their other characteristics, the outstanding thing about China's 600 million people is that they are "poor and blank". This may seem a bad thing, but in reality it is a good thing. Poverty gives rise to the desire for changes the desire for action and the desire for revolution. On a blank sheet of paper free from any mark, the freshest and most beautiful characters can be written; the freshest and most beautiful pictures can be painted. - Mao Zedong

During the Great Leap Forward...Mao used China's limited resources to try and help China catch up with the rest of the world. Rather than acknowledge and protect the unique information that was already written in each person's mind...he overwrote their information with his own information. The result was an artificial famine which led to the deaths of 20-40 million people.

Carefully and thoroughly read over this passage by Adam Smith...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, Theory of Moral Sentiments (1759)

Do you see how this ties into Mao's belief that each of the 600 million Chinese person was a blank page? Mao completely failed to understand the fundamentally important concept that each person has their own principle of motion. Good thing for China though that somebody did understand this fundamentally important concept...the pragmatic consequentialist Deng Xiaoping. The result? Millions and millions of Chinese people were lifted out of poverty.

We've completely fetishized the idea of freedom but few people truly understand its inherent value. Freedom means that nobody prevents you from using your limited resources. If you choose to use your limited resources to produce something that I value...then I will choose to give you some of my own limited resources. The market process is constantly redistributing resources to the people who use society's limited resources for society's maximum benefit.

So what would have happened If Egyptian taxpayers could have chosen which government organizations they gave their taxes to? They would have given their taxes to whichever government organization was producing the maximum benefit for society. Would the Egyptian taxpayers have agreed? When does everybody always agree on everything?

But do we really want all the taxpayers to agree on how our society's limited resources should be used? Do we really want to put all our eggs in one basket? Or do we want to hedge our bets?

We're all unique individuals with our own perspectives. Freedom allows us to use different approaches to tackle different problems. One of Deng Xiaoping's famous sayings was "cross the river by groping for stepping stones." If we want to cross rivers...if we want to successfully overcome obstacles...then we shouldn't limit the expression of our individuality.

 ... 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

Our individuality is the source of innovation, ingenuity and resourcefulness. Markets work because we all have the freedom to give our own limited resources to the people who are using society's limited resources for our benefit.

The capitalist society is a democracy in which every penny represents a ballot paper. - Mises 

We all want more for less which is why the market process leads to an abundance of what we, as a society, value.

Our Mixed Economy - Capitalism vs Socialism

Here in America we have a mixed economy. We have capitalism in the private sector and socialism in the public sector. In other words...resources are allocated by the invisible hand in the private sector and by the visible hand in the public sector...

In this diagram I've illustrated that the invisible hand determines how $11 trillion dollars are spent in the private sector.  This is also known as a market economy and is best illustrated by Deng Xiaoping.  On the other side I've illustrated that the visible hand determines how more than $3 trillion dollars are spent in the public sector.  This is also known as a command economy and is best illustrated by Mao Zedong.

Deng Xiaoping represents humility while Mao Zedong represents conceit (see The Dialectic of Unintended Consequences). Here's how Hayek described the idea of conceit..."The curious task of economics is to demonstrate to men how little they really know about what they can imagine they can design." The idea of conceit can be traced back to the founder of modern economics...Adam Smith...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, 1759

The idea of conceit is much older though.  For example...it was the point of Buddha's parable of the blind men touching different parts of an elephant.  Somebody who suffers from conceit fails to appreciate just how limited their perspective truly is.  As a result...they have no problem resorting to taking rather than solely relying on trading.  Taking forms the basis of the visible hand while trading forms the basis of the invisible hand.

The invisible hand works because it incorporates the perspectives of the individuals who engage in trade.  The buyer wants to purchase a product/service at the lowest possible price while the seller wants to sell a product/service at the highest possible price.  They both want to maximize the return on their labor so they engage in a bargaining process...which incorporates their unique perspectives.  If they can find a price that is worth their labor...then they will trade.

The visible hand does not work because it fails to incorporate the perspectives of all the members in a society.  If I resort to taking your resources...then I prevent you from applying your unique perspective to them.  Here's a diagram I created to help illustrate this concept...

How we use resources depends on our perspectives...which is why our perspectives are our most valuable resource.

When economists say, “We will never run out of resources,” what they often mean is that faced with increasing scarcity of one resource, we will always find new solutions to the problem that that resource originally solved. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources. - Steven Horwitz, Economists and Scarcity

In the past we allowed the perspective of one king to shape the public sector.  Now we allow the perspectives of 538 congresspeople to shape the public sector.  But in the future we will allow the perspectives of millions and millions of taxpayers to shape the public sector.

What will the outcome be of allowing millions and millions of taxpayers to choose which government organizations they give their taxes to?  We can't know the specifics.  All we can know is that wasting limited resources has negative consequences.  Allowing 538 congresspeople to prevent 150 million taxpayers from trading their taxes in the public sector has negative consequences because it partially destroys the perspectives of 150 million of our most productive citizens.

We all understand this concept on the individual level...because we all inherently understand that a mind is a terrible thing to waste.  All the invisible hand says is that, if it's a terrible thing to waste one mind, then it's a catastrophic thing to waste millions of them.  We can avoid this catastrophic waste by allowing the people who labored, toiled and sweated to earn their money to choose which public goods are worth their effort.

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 

Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat 

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

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat

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.

********************************************************

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.

Government Efficiency

Last month Tad DeHaven wrote an article on government efficiency... ‘Government Efficiency’

The article was based on the premise that "government cannot operate like a business because it isn’t a business." True or false?

False! Government can easily operate more like a business simply by allowing tax payers to decide which public goods they "purchase" with their taxes. Because of free-riders we can't allow people to choose whether they pay taxes but we can allow people to choose which public goods their taxes help fund. This would force government organizations to compete for our taxes and the result would be greater government efficiency.

In the aftermath of Mao Zedong's devastating policies Deng Xiaoping led China from a command economy to a market economy. His most famous saying was that he didn't care if a cat was black or white...as long as it caught mice. In other words...results matter more than rigid adherence to ideology. This is the foundation of pragmatarianism.