Why Would Anybody Want To Shrink The Government?

Comment on: Economic arguments as stalking horses

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Basically, he's saying that he adopts an anti-Keynesian stance not because be thinks stimulus actually fails to fight recessions, but because he wants to shrink the size of the government in the long term.

Why does he want to shrink the government though? It's because he doesn't trust the government's allocation decisions. But what's stimulus? Just another allocation decision by the government.

If the government is good at fighting recessions... then it's good at allocating resources. And if the government is good at allocating resources... then why would anybody want to shrink it?

Might want to read the parable of the talents again.

Would crucifying liberals stimulate the economy? Sure. But it would also massively violate Quiggin's Implied Rule of Economics (QIRE).

Pay attention. Violating QIRE is the cause of recessions/depressions. Stop violating QIRE and there will never be any need to stimulate the economy.

Teaching Economics to Anarcho-capitalists

As I've mentioned before...Anarcho-capitalism and Pragmatarianism...there are two ways that somebody can arrive at anarcho-capitalism...

Route 1 - they can study economics
Route 2 - they can study morality

The vast majority of anarcho-capitalists took the second route...it's shorter and easier.  The problem is...if somebody has arrived at the conclusion that coercion is immoral...then there's absolutely no reason for them to try and understand the economic arguments for anarcho-capitalism.  Coercion is wrong and that's the end of the story.  Because most anarcho-capitalism have taken route number 2...it's really hard for them to understand the value of pragmatarianism.  They don't have enough economics under their belt to "see" and appreciate the market process.  Route 2 anarcho-capitalists just have faith that noncoercion = abundance.

Step 1: Noncoercion
Step 2: ???
Step 3: Abundance
 
This is why, over on the Ron Paul Forums, I'm in the middle of my second debate with ProIndividual...Public vs Private System of Representation.  You can read about the first debate here... The Visible Hand vs The Invisible Hand

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Your destination is not a destination...or if it is, it's just more state socialism, albeit re-engineered. You can't escape the logic of that. - ProIndividual

You're saying that tax choice's destination is simply our current location?  If so, then you're saying that socialism is a perfectly viable concept.

If the supply of public goods is exactly the same before and after tax choice is implemented...then clearly government planners (in our case, 500 congresspeople) are capable of divining the actual demand for goods.
Right now we have 500 congresspeople determining how our taxes are spent in the public sector.  This is the visible hand.  The visible hand takes our money and determines how much of each public good gets placed in the shopping cart.  Can you see the contents of the shopping cart?  Of course you can...just look around you...it's the current supply of public goods.

In a tax choice system we would have millions and millions of taxpayers determining how their own taxes are spent.  This is the invisible hand.  The invisible hand would determine how much of each public good gets placed in the shopping cart.

Now, here you are telling me that the contents of both shopping carts would be exactly the same...

You're saying that somehow the visible hand managed to correctly determine exactly what the invisible hand would have placed in the shopping cart.  You're saying that the supply of public goods in a tax choice system will create the same exact amount of value as the current supply of public goods.  You're saying that the tax choice destination is exactly the same as our current location.  You're saying that socialism is a perfectly viable system for determining how society's limited resources should be allocated/used/distributed.

It's funny because if you read all these people's critiques of pragmatarianism...Unglamorous But Important Things...they are all certain that the contents of the two shopping carts would not be identical.  The vast majority of people are certain enough that the supply of public goods in a tax choice system would be far less valuable than the current supply.  In other words...they are certain that tax choice would take us to a far less valuable location.  

The average Joe believes that tax choice would take us to a far less valuable location while you believe that tax choice wouldn't take us anywhere different.  

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 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.