Is Anarcho-capitalism The Promised Land?

Context: Progress Depends on Freedom

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No, markets are considered efficient where there are voluntary transactions considered mutually beneficial ex ante. This does not concern coerced transactions, where a majority (or even a better capitalised minority) can afford to coerce others into doing its bidding, which is precisely why arbitration and security exist: to prevent and, where applicable, rectify coerced losses of welfare. More demand means you can potentially charge a higher price for your good or service, and not that a demand for coercing others into doing your bidding somehow magically leads to positive sum, Pareto-efficient outcomes. You're correct that departments for which there is greater demand will attract more resources under pragmatarianism, which I am not disputing, but if we're discussing the relative efficiency of this system versus full blown voluntaryism, the demand to initiate coercion against others is detrimental to the achievement of positive sum economic exchanges, as by definition the coerced will be forced to engage in (trans)actions which they would rather have not. - Jon Irenicus

As I've said over and over...I have absolutely no problem with the assumption that anarcho-capitalism is Pareto optimal and pragmatarianism is not.  But in order for this to have any sort of relevance...you have to explain why pragmatarianism wouldn't lead us to anarcho-capitalism.

Imagine we're at a train station.  You want to go to the promised land and so do I.  A train pulls into the station.  The conductor is the invisible hand.  I go to board the train and you tell me that it's not going to the promised land.  Ok, so where is it going?  Why wouldn't the invisible hand take us to the promised land?  Would it take us half way and then run out of steam?

Pragmatarianism would create a market in the public sector.  Just like in the private sector...consumers would exchange less valuable options for more valuable options.  Is congress a more or less valuable option?  Is the IRS a more or less valuable option?

What are your options?

1. You can say that these options are more valuable...but then this would mean that anarcho-capitalism is NOT Pareto optimal.  Why not?  Because it would be missing more valuable options.

2. You can say that these options are less valuable...but that consumers would choose them anyways.  If consumers consistently fail to choose more valuable options...then markets really wouldn't work.  People would choose to starve rather than buy food.

Do you have another option?  I don't see one.  If people are willing to spend their money on watermelons... then an outcome without watermelons really wouldn't be Pareto optimal.  If people are willing to spend their money on congress and the IRS...then an outcome without these options really wouldn't be Pareto optimal.

So in order for your point about pragmatarianism being a suboptimal outcome to have any relevance...you need to explain why this would continue to be the case.

I agree that the first day of pragmatarianism the outcome would be extremely suboptimal.  The options would still largely reflect the preferences of government planners rather than consumers.    But the second day...the outcome would be marginally more optimal.  Same thing with the third day...and the fourth day...and so on.  Why do you perceive that this trend wouldn't continue?  If each day the outcome becomes more optimal (because consumers choose more valuable options)...then why wouldn't the outcome eventually become optimal?

Going back to the train analogy.  Imagine we board the train conducted by the invisible hand.  Just as soon as we sit down you say...

Irenicus: Our location is extremely suboptimal
Xero: Well...yeah...we're still at the station

A second after we leave the station you say...

Irenicus: Our location is still very suboptimal
Xero: Well...yeah...we just left the station

An hour later you say...

Irenicus: We're going the wrong way.  The promised land is in the opposite direction.
Xero: How can we be going the wrong way when the conductor is the invisible hand?

You reply...

The Danger of Homogeneous Activity in the Public Sector

My response to PrometheeFeu from our discussion over on Daniel Kuehn's blog entry...A Quick Thought on Voting...

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Scenario 1, I send money to the EPA. Scenario 2, I do not send money to the EPA. What is different between the two scenarios? Nothing of consequence.

Scenario 1, you buy asparagus.  Scenario 2, you do not buy asparagus.  What is different between the two scenarios?  Nothing of consequence.  Nothing of consequence?  Somebody prevented you from buying asparagus...and you would consider it to be inconsequential?  I thought you liked asparagus?  What if they did the same thing to me and everybody else who wanted to buy asparagus?  The little consequences would add up to the big consequence that the demand for asparagus would not determine the supply of asparagus.  Therefore, there would be a significant disparity between supply and demand.

My whole tax bill could not pay an extra secretary at the EPA, much less significant regulatory activity.

Just like your entire income could not pay for a new field of asparagus.  Or maybe it could?  Could you really eat that much asparagus though?  What about the opportunity cost?

So your scheme suffers from the same weakness as voting: your incentive is not to reveal your policy preferences.

But here's what you wrote earlier.

If a socialist came to me and argued that my purchases don't count because my single purchase can't possibly affect the price level, I would not respond that I have a duty to keep markets working. I would point out that I wanted chicken and asparagus for dinner and that's why I went to buy them and that's why my true preferences were aggregated.

Why would buying asparagus and chicken be any different from donating to the Red Cross or the World Wildlife Fund or paying taxes to the EPA or the Dept of Education?  You either want more of those things...or you don't.  The supply of those things is either determined by demand...or it isn't.  If it isn't determined by demand...then clearly there's going to be a disparity between supply and demand which represents a misallocation of scarce resources.  We'd be getting too much of one thing and not enough of another.  Without consumer's opportunity cost decisions the allocation would not even be close to being Pareto Optimal.

I support giving tax-payers having the freedom to choose which government organizations they give their taxes to because it is more morally correct and it would make me feel good to not send money to certain programs.

We currently allow 538 congresspeople to spend 1/4 of our nation's revenue which comes out to roughly $3.5 trillion dollars...yet you support applying market principles to the public sector for moral reasons?  Well...it's kinda hard to complain when most people don't support the idea for any reasons.

But surely there have to be some significant economic consequences for allowing 538 congresspeople to spend 1/4 of our nation's revenue?  As far as I can tell it's the primary cause of recessions/depressions.

On the individual level you will experience a severe recession/depression if you gamble your home on a failed business idea...right?  You misallocated a significant portion of your limited resources.  That's why most entrepreneurs pitch their ideas to venture capitalists.  And what do venture capitalists do?  They hedge their "bets".  Every decision to spend your money/time is a gamble...which is why VCs don't put all their eggs in one basket.  They spread their capital over numerous start-ups.  If they are good at picking winners then they'll increase their capital.  But they certainly don't ultimately determine whether a start-up is a winner or loser...we do.  We use our wallets to indicate whether a VC's allocation was a misallocation or a profitable allocation.

If heterogeneous activity makes sense on a smaller scale...then it should make even more sense on a larger scale.  And every single socialist experiment provides empirical evidence that this is the case.  If heterogeneous activity makes sense for a small amount of resources...and it makes sense for an entire nation's resources...then please explain why it doesn't indicate that there's a clear and present danger to allowing 538 congresspeople to allocate 1/4 of our nation's revenue among government organizations.  It would be one thing if taxpayers were able to choose exactly which congressperson they gave their taxes to...and that congressperson would have sole discretion how they spent "their" taxes in the public sector...but all 538 congresspeople have to agree on how 1/4 of our nation's revenue is spent.  Spending activity doesn't get more homogeneous than that.  

If there truly are winners in the public sector...which we can only guess at...then the tax allocation decisions of 150 million taxpayers who all want more for less will reveal exactly who the winners are.  These public sector winners will help offset any possible shortage of private sector winners.  This will help hedge our bets against recessions/depressions.  If, on the other hand, it turns out that there are very few winners in the public sector...and assuming the losers fail to adapt...then the scope of government will shrink...the tax rate will decrease accordingly...and resources will be freed-up for winners in the private sector.

Giving people the freedom to choose how they spend their money guarantees heterogeneous activity because we have extremely diverse interests, values, tastes, preferences, concerns, hopes and dreams.  Our diversity is our greatest strength...which is why failing to apply this fundamental fact to the public sector is our Achilles Heel.