Persuading Puppets Is Pointless

My reply to Adam Gurri

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You're correct that it's a huge leap!  But you really don't need to leap the chasm... there's a perfectly functional bridge.  It's called "diversity".  Markets are inherently diverse.  Let's say that an asteroid destroys our planet tomorrow.  Who do we blame for humanity's extinction?  Alex Tabarrok?  Nope...

http://marginalrevolution.com/marginalrevolution/2015/06/planetary-defense-is-a-public-good.html

Maybe we blame Mark Lutter?  Nope...

"With humanity concentrated on earth, an errant asteroid could wipe out civilization. Nuclear war could end human life. Rogue AI could eliminate humanity. Colonizing other planets limits the destructive potential of such threats. If life on earth is wiped out, Mars would still thrive. Private space exploration literally has the potential to save humanity."

https://medium.com/@marklutter/building-autonomous-for-profit-cities-4533f668a591#.kvfru0rm2

Of course we don't blame these two individuals.  Do we blame the market then?  Well no... contrary to Lutter's argument for private space exploration... we're talking about a public good here.  Therefore... the not-market would be entirely to blame for human extinction.  Centralization, by definition, limits the variety of the very different paths that individuals would be naturally inclined and incentivized to take.   Centralization, by definition, puts far too many eggs in far too few baskets.

If people were free to choose where their taxes go then we would have a market in the public sector.  As a result, public goods would be just as diverse as private goods.  This is because the demand for ALL goods is inherently diverse.  You and I wouldn't put the same exact public goods in our shopping carts just like we don't put the same exact private goods in our shopping carts.

Progress is a function of difference.  Sexual reproduction is all about difference and voila!  Here we are!

Regarding Schumpeter's "corrections"... any such thing is the logical, but extremely detrimental, consequence of centralization.  With the current system there are public "shepherds" who are so confident in their information that they are very eager to limit the natural diversity of markets.

Don't get me wrong... we need rules/regulations to protect diversity.  But nearly all of our rules/regulations do the very opposite.

Regarding the physicists... you seem to appreciate the benefit of persuasion.  So do I!   Persuasion is a function of choice though.  Take away people's choices and it becomes entirely unnecessary to persuade them.  If people are marionettes... then it's pointless to try and persuade them.  If you want marionettes to behave differently... then you're going to have to try and persuade whoever is pulling the strings.

Allowing people to choose where their taxes go would cut all the strings.  So we'd have infinitely more persuasion than we currently have.

For me it's not difficult to cleanly separate not-market factors from market factors.  You're an intelligent guy.  And you can't choose where your taxes go.  If the economy struggles in any way... then it's because your difference (creativity/intelligence/knowledge/foresight) and Tabarrok's difference and Lutter's difference and the difference of millions and millions of other people has been and continues to be squandered to a significant extent.

Our system needs to be less like Hitler and more like Churchill...

"Since the Germans drove the Jews out and lowered their technical standards, our science is definitely ahead of theirs." - Winston Churchill

Overvaluing Frank The Artichoke Farmer's Productivity?

Reply to reply: Are you confident in congress's competence?

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You are making erroneous conclusions because you do not think through the economic impact that follows, when low-end salaries are enhanced. And which is not at all the same consequence when high-end salaries are increased - whereupon people simply bank their additional salaries (or speculate with the money), which does nothing intrinsically to enhance the economy. - Lafayette

Let's say that I'm hungry.  I go to the farmer's market where I find Frank the farmer selling artichokes.  Which is great because I really love artichokes!  What do you think happens next?  Do you think I simply hand Frank my money in exchange for his artichokes?  Of course not.  First I look at the prices... and if the prices seem reasonable... then I carefully inspect the artichokes.  If I'm happy with the quality of the artichokes... I pick out the best ones and put my money into Frank's hand.  

This is where you, the well-intentioned liberal economist, step in.  Before Frank can put the $3 dollars that I gave him into his pocket... you take $1 dollar out of Frank's hand.  Except, since I'm the one who just gave him that money... you essentially took the money out of my hand.  What do you do with the $1 dollar that you took out of my hand?  You put it in the hands of Frank's employees.

The thing is... the money that I gave Frank was my valuation of his productivity.  But, evidently, you're certain that I overvalued Frank's productivity.  Not only are you certain that I overvalued Frank's productivity... but you're also certain that I undervalued his employees' productivity.

I overvalued Frank's productivity?  I undervalued his employees' productivity?

First... who in the world are you to say that I've overvalued Frank's productivity?  Are you my son?  Are you my father?  Are you my brother?  Are you my best friend?  Are you my lover?  Are you the customer waiting behind me?  Of course not!  You're some random economist who doesn't even know me or Frank.  Yet, despite the fact that you don't know me or Frank... you're stupidly certain that I overvalued his productivity.

Second... I didn't even valuate the productivity of Frank's employees.  Why in the world would I valuate their productivity?  I'm not their boss... Frank is!  He's the one who employs them.  I don't employ them.  I don't even know them.  I have absolutely no idea whether they are the most productive workers in the world or the least productive workers in the world.  Given that I'm entirely clueless about the productivity of Frank's employees... it would be utterly nonsensical and completely detrimental for me to even try and valuate their productivity.  Yet... you're stupidly certain that I undervalued Frank's employees.

This isn't what you're telling me of course.  What you're telling me is that I'm not thinking things through.  From your perspective... the money that you took from my hands and put into the hands of Frank's employees will be quickly spent.  How will it be spent?  It doesn't matter.  It doesn't matter if the money isn't spent on producing a greater abundance of artichokes... what matters is that the money will be spent on something.  Which is a good thing because any and all spending will "enhance" the economy.  As if the reason that the sluggish economy needs stimulation has absolutely nothing to do with your mindless meddling and everything to do with inadequate demand.

When you read the Bible story about the prodigal son... does it make you happy or sad when he quickly squanders his inheritance?

Does it make you happy or sad that Esau sold his inheritance to Jacob for a bowl of soup?

Does it make you happy or sad when lottery winners quickly squander their new found wealth?

Does it make you happy or sad when natural disasters force people to spend their savings in order to rebuild their lives?

Does it make you happy or sad when you forget to back-up your work and a disaster forces you to start all over again?

Does Adam Smith make you happy or sad?

Capitals are increased by parsimony, and diminished by prodigality and misconduct. - Adam Smith, Wealth of Nations

Does Ludwig von Mises make you happy or sad?

Now one of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs. Profit and loss are the instruments by means of which the consumers pass the direction of production activities into the hands of those who are best fit to serve them. Whatever is undertaken to curtail or to confiscate profits impairs this function. The result of such measures is to loosen the grip the consumers hold over the course of production. The economic machine becomes, from the point of view of the people, less efficient and less responsive. - Ludwig von Mises, Planning for Freedom

Does Ludwig Lachmann make you happy or sad?

Moreover, what is a resource today may cease to be one tomorrow, while what is a valueless object today may become valuable tomorrow. The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. — Ludwig Lachmann, The Market Economy and the Distribution of Wealth

Does J.B. Say make you happy or sad?

Taxes upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, that can make the most of it. Why does one man sell his land? But because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? But because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income. — J.B. Say, A Treatise on Political Economy

Obamerate - To Destroy Individual Foresight

Individual foresight is the information that each person has regarding future events/circumstances/situations.  This information determines how we allocate our resources.  If we aren't free to allocate our resources then our individual foresight will be destroyed...useful information will be rendered useless.

My own individual foresight leads me to believe that we, as a society, will benefit from the creation of words that are dedicated to the communication of this concept.  So I've allocated my limited resources accordingly...

Obamerate (verb): to destroy a person's individual foresight
Obamertine (noun): anything used to obamerate people

Grammatical usage is the same as...

Decapitate (verb): to cut off a person's head
Guillotine (noun): a device used to decapitate people

Example usage of "obamerate"...

By shifting massive amounts of society's limited resources to the construction of the pyramids...the pharaohs obamerated the people.  The consequence was that millions starved during famines because they could neither eat the pyramids nor trade them for food.  If the people had not been obamerated...then massive amounts of valuable products would have been created and sold/traded for food during times of famine.

Some examples of obamertines: genocide, slavery, taxation, theft, concentration camps and minimum wages

Why Barack Obama?

Barack Obama

The Recovery Act and subsequent jobs measures also contained a large number of provisions that were aimed at strengthening long-term growth. In designing the Act, the Administration believed that it was not just the quantity of the fiscal support that mattered, but the quality of it as well. In this sense, the Administration took to heart a lesson that has been pointed out by many but can be traced back as early as the 19th century to a French writer and politician named Frederic Bastiat. Bastiat (1848) wrote of a shopkeeper’s careless son who broke a window in the storefront. When a crowd of onlookers gathered to inspect the damage, Bastiat took objection to the discussion that ensued: “But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, ‘Stop there!’”

For this reason, the Recovery Act was designed not just to provide an immediate, short-term boost to the economy, but also to make investments that would enhance the economy’s productivity and overall capacity even after the direct spending authorized by the Act had phased out. The Act’s investments in expanding broadband infrastructure and laying the groundwork for high-speed rail, to take two examples, are a far cry from the broken window in Bastiat’s parable because they do so much more than simply restore things to how they once were. Rather, these types of investments will raise the economy’s potential output for years to come, from a rural school that can now offer its students and teachers high-speed Internet access, to a business that has a new option to transport its goods more quickly.

As shown in Table 8, the Recovery Act included $300 billion of these types of investments in areas such as clean energy, health information technology, roads, and worker skills and training.  Figure 12 suggests that the timing of these investments was relatively more spread out than some of the Act's other measures, consistent with the longer-term focus of these projects. - White House, The Economic Impact Of The American Recovery and Reinvestment Act Five Years Later

Frederic Bastiat

But there is something else that is not seen. It is that the fifty millions spent by the state can no longer be spent as they would have been by the taxpayers. From all the benefits attributed to public spending we must deduct all the harm caused by preventing private spending—at least if we are not to go so far as to say that James Goodfellow would have done nothing with the five-franc pieces he had fairly earned and that the tax took away from him; an absurd assertion, for if he went to the trouble of earning them, it was because he hoped to have the satisfaction of using them. He would have had his garden fenced and can no longer do so; this is what is not seen. He would have had his field marled and can no longer do so: this is what is not seen. He would have added to his tools and can no longer do so: this is what is not seen. He would be better fed, better clothed; he would have had his sons better educated; he would have increased the dowry of his daughter, and he can no longer do so: this is what is not seen. He would have joined a mutual-aid society and can no longer do so: this is what is not seen. On the one hand, the satisfactions that have been taken away from him and the means of action that have been destroyed in his hands; on the other hand, the work of the ditch digger, the carpenter, the blacksmith, the tailor, and the schoolmaster of his village which he would have encouraged and which is now nonexistent: this is still what is not seen. - Frederic Bastiat, The Seen vs the Unseen

Bastiat championed the protection of individual foresight...

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.

Clearly the destruction of individual foresight was anathema to Bastiat...which is why it's extremely twisted for Obama to use Bastiat to try and support replacing individual foresight with governmental foresight.  This alone is sufficient for Obama to symbolize the destruction of individual foresight.

Given how important individual foresight is...I sincerely hope that the use of these new words will catch on.  As a reference point...

"Obamerate": six search results...0 relevant uses
"Obamertine": zero search results

The more we use these words, the more likely it is that individual foresight will be protected rather than destroyed.

Along these lines...

Reply to: Demand Clarity Would Eliminate Corporate Welfare

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It's even worse than that. You're just covering benign ignorance; people who mean well but just don't have enough data to make the informed choice. You just barely touched on hostile ignorance. - Sdaeriji

If you allocate your resources without enough information to make an informed choice...are you going to gain resources or lose resources? You're making the criticism that taxpayers leap without looking...but it really does not follow. If you're an entrepreneur and you go to the bank for a loan to start a business...is the bank likely to lend you the money without asking any questions? Can you guess what sort of questions the loan officer might ask you? Do you think loan officers who loan without looking will keep their jobs for long?

There will be enough of a free rider problem with people who have good intentions just badly guess on how much everyone else is contributing to a given program without considering that there will be enough people who consciously choose to not care whether other programs get sufficient funding and just elect to contribute their entire amount to beaver mating call research or something to drastically effect department budgets. Local projects will be awash in over-funding as everyone cares more about fixing the old Main St. bridge rather than launching a new aircraft carrier. - Sdaeriji

Taxpayers are the people you voluntarily give your money to. Why do you voluntarily give your money to them? Is it completely random? Do you randomly distribute your money...and time? Are you randomly spending your time in this thread?

And then there's the problem with active indifference. There will be a not-insubstantial amount of people who simply forget or refuse to designate how their taxes should be spent. Assuming the government will still take their money, there will have to be decisions made about how to allocate those funds.

Because, realistically, they will. People who owe on their tax filings wait until April 15 to file so they can hold onto the money as long as possible. Why wouldn't everyone do that in your scenario? - Sdaeriji

Congress would still be there. If you didn't want to shop for yourself then you could just give your money to congress. Why would anybody take the time and make the effort to shop for themselves? It would have to be worth it for them to do so.

If you have a personal shopper in the private sector...then how "wrong" would your personal shopper's spending decisions have to be before you decided it was more beneficial to shop for yourself?

It would really really really behoove us to figure out how many taxpayers would take the time and make the effort to shop for themselves in the public sector. If congresspeople are spending our taxes close enough to our preferences...then most people will not see the benefit of bothering to shop for themselves. If many or most people do see the benefit of bothering to shop for themselves then it stands to reason that congresspeople are not spending our taxes close enough to our preferences. That's a problem...unless you believe that the spending decisions of congresspeople are far superior to our own. If that's what you believe then you should strongly advocate for the elimination of all markets.

There is literally no way an intelligent person could consider this idea for more than a few minutes and conclude it is a good idea. - Sdaeriji

Hah, I had to add this one to the tax choice facebook page.

Is it about intelligence?

Can somebody be intelligent and not appreciate the implications of fallibilism? It's one thing to put all of your eggs in one basket...but it's another thing entirely to force society to put all of its eggs in one basket.

Let's build a pyramid? That's putting a lot of eggs in one basket. When there's a famine...you can't trade a pyramid for food.

Centralism is folly...it's hubris...it's conceit...perhaps there's some degree of intelligence. But there's not enough intelligence to realize the value of not destroying the individual foresight of so many other people who also strongly desire prosperity.

I'm one of the very few people on this forum who clearly sees the prosperity that pragmatarianism would create. Maybe my vision is wrong...but you have to have a high degree of conceit to force me to allocate my resources to your vision rather than to my own. You have to be really certain that I'm wrong. But what if I'm right?

Can you really be that intelligent if you fail to grasp the stupidity of absolute certainty? Like Noah in the bible...I have enough certainty to board my own boat...but I don't have enough certainty to force you to join me. It's really not intelligence if you force me to board your boat.

Just like it's really not intelligent to tie all the kids together for an Easter Egg hunt. It might seem intelligent if you know exactly where the Easter Eggs are. But in life nobody can know exactly where the Easter Eggs are located. That's why we cover more ground and find more Easter Eggs when the kids are free to go in their own directions. When you tie all the kids together...or limit the amount of kids that can look for Easter Eggs...then you decrease the chances of finding Easter Eggs and you increase the damage should one of them step on a landmine.

How much intelligence does it take to realize just how limited your perspective truly is?

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. - Milton Friedman, Milton Friedman on Libertarianism

On the one hand, I regard the basic human value that underlies my own beliefs as tolerance, based on humility. I have no right to coerce someone else because I cannot be sure that I am right and he is wrong. - Milton Friedman, Milton Friedman on Libertarianism and Humility

There is a basic philosophical explanation, which begins with the fact that the number of possible theories of any given phenomenon is enormous, if not infinite. Of these, all but one are false. So given just the information that T is a theory, the probability that T is correct is approximately zero. However, naive thinkers have often failed to realize this, because the theories that a typical human being can think of to explain a given phenomenon (and that will seem plausible to that person) are typically very few in number. It is not that we consider the truth and reject it; in the overwhelming majority of cases, when we first start thinking about how to explain some phenomenon, the truth is not even among the options considered. The ancient Greeks, for example, did not reject quantum mechanics; they just did not and could not have considered it. - Michael Huemer, In Praise of Passivity

The government, by engaging in coercive taxation...steals the resources from a myriad of different visions...and allocates them to a far smaller quantity of visions. It's conceit. It's a recipe for failure.

Pragmatarianism would allow so many different people to shape the government to reflect what's common to, but absent from, their visions.

Like a bunch of people have different recipes in mind. Even though the recipes are all different...there's some overlap in required ingredients. What are the required ingredients that are not adequately supplied by the private sector? It's easy enough to find out...and it would behoove us to find out. Because the vast majority of the dishes that we find so delicious are not our own creations. We will immensely benefit when so many other people can use their tax dollars to indicate what the government needs to supply more of.

As shown in Table 8, the Recovery Act included $300 billion of these types of investments in areas such as clean energy, health information technology, roads, and worker skills and training. Figure 12 suggests that the timing of these investments was relatively more spread out than some of the Act's other measures, consistent with the longer-term focus of these projects. - White House, The Economic Impact Of The American Recovery and Reinvestment Act Five Years Later

Are these truly the ingredients that are most commonly missing from most recipes? If so, then like I've said so many times before, then we really do not need a market. We just need the government, in all its superior wisdom, to supply the dishes that will provide us with the most nourishment.

But the reality was so clearly pointed out so long ago...

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. - Adam Smith, The Wealth of Nations

Folly...presumption...conceit...hubris...these are the things you embrace when you oppose pragmatarianism.

You're capable of correcting your mistakes...and so is society. Hopefully it will happen sooner rather than later.

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HT: Scott Sumner - Bastiat just rolled over in his grave

Noah Smith vs Austrians

Comment on:  How the New Classicals drank the Austrians' milkshake

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Eh. It's kinda surprising that you dedicated an entire post to Austrian economics. But it's not surprising that you didn't touch on the opportunity cost concept. LOL

First, economics is all about individuals. That is because economics is all about choice. We can’t have everything, so we have to choose which things are most important to us: would we prefer a new car, for example, or a summer holiday? To go out with friends, or to relax at home? Invariably, we have to give up one thing (an amount of money or time and effort, say) to get another (such as a new pair of shoes or a tidy garden). These are economic decisions – even when no money is involved. They are questions of how we juggle scarce resources (cars, holidays, company, leisure, money, time, effort) to best satisfy our many wants. They are what economics is all about. - Eamonn Butler, Austrian Economics

That entire PDF is worth reading if you're genuinely interested in learning about Austrian economics. It also touches on heterogeneous activity. Heterogeneous activity is obviously the opposite of homogeneous activity. Homogeneous activity is where you tie all the kids together and then send them to go find the Easter Eggs. It's a centralized, top down approach. It's saying "public infrastructure is a SURE investment! We don't need to create a market in the public sector because I know exactly where the Easter Eggs are. I wear a large electric purple turban that makes me omniscient!"

Also quite good are Rothbard's The Myth of Neutral Taxation and Toward a Reconstruction of Utility and Welfare Economics

And...

Because of the coercive nature of government activity, two additional results come forth. First, by voluntarily purchasing an item on the market, an individual demonstrates that he values the item more than the money price. But in paying taxes, he makes no such demonstration. The government does not know, as a business does, the value individuals place on its activity. Since government cannot obtain the information and incentive by demonstrated preferences of individuals, they cannot efficiently serve individuals. - Jeffrey Herbener, Austrian Methodology: The Preferred Tax Type

Austrians acknowledged that it's a problem that we don't know what the demand is for public goods. You and your electric purple turban wearing posse think otherwise. Please take your turban off. It really doesn't make you omniscient...it just fills you up with hubris.