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Showing posts with label values. Show all posts
Showing posts with label values. Show all posts

Saturday, March 24, 2012

Perspectives Matter - Backstory

The study of knowledge (epistemology) is pretty darn interesting.  Here are a couple discussions which provide some recent background on my upcoming post (Perspectives Matter - Economics in One Lesson).  The first discussion took place on a political forum...Libertarian Pudding Tastes Good!!!...and the second discussion took place on Gene Callahan's recent an entry on business cycles....Notes on a General Theory of the Social Cycle.

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Reiver
Why isn't socialism a viable concept? Because it's impossible for a king...or a committee...to determine the optimal level of funding for an organization.
This doesn't make sense. Economic planning is the norm in all viable economic paradigms. Capitalism is certainly reliant on it, with the invisible hand often deliberately avoided.

Not Amused

Companies change their plan with conditions, government try to force the condition to fit their plan.

Companies often reduce spending, and terminate products that are no longer viable. Government rarely reduces spending, and rarely only terminates program spending.

Over time, companies provide more value for the same, or less cost, or go out of business. The cost of government has little to do with it's value.

Reiver
Companies change their plan with conditions
But they actively avoid the market. The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)

Xerographica

It's only nonsensical if you're unfamiliar with the opportunity cost concept...
Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. - Wikipedia
To familiarize yourself with this concept take a look at the following...
If a pragmatarian system were implemented...would you guess that the scope of government would narrow or broaden? In other words...would the result be anarcho-capitalismpragma-socialism or somewhere in between?

Reiver 
It's only nonsensical if you're unfamiliar with the opportunity cost concept...
Opportunity costs ensure a distinction between economics and accountancy. It doesn't provide any counter to my comment. Try again:

The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)
To familiarize yourself with this concept take a look at the following... 
I'm not interested in your petty advertising of your blog. Defend your argument with something that makes sense!

Xerographica

Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because your perspective doesn't matter.

Xerographica

Maybe you missed my question. Here it is again...

Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because you perspective doesn't matter.

So does your perspective matter? Is this a difficult question for you?

Reiver

The problem is that you have made economic comment that is certainly invalid. Clearly you also cannot (at least attempt to) suggest otherwise.

Xerographica

Why are you avoiding the question? Let me ask again. Does your perspective matter?

Reiver

If you want to improve your comments and achieve some validity? Certainly! So far I haven't seen a valid economic comment from you. Your attempt to reply with a reference to opportunity costs, for example, was laughable

Xerographica

So your perspective matters! But only in terms of me improving my comments and achieving some validity? Your perspective only matters in this ridiculously limited regard? You exist solely to improve my comments? Are you sure your perspective doesn't also matter in other areas as well?

Reiver

Your dodge really isn't imaginative or entertaining. Except for your petty attempt at advertising your blog, care to actually try to respond 'with economics'?

Xerographica

LOL...I'm asking you if your perspective matters. How did I define "perspective"? I defined it as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.

Economics, in case you missed it, is the study of scarcity. For some reason you believe that your perspective...your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge...has nothing to do with with study of scarcity.

*awkward*

Hmmm...maybe you should read my blog and then try again.

Reiver

You're not going to impress me with reference to ECon 101 textbooks. Let's see if we can coax you towards economic comment, just for the crack:

The socialist calculation debate has effectively been won. Rather than referring to the theoretical reproduction of neoclassical perfect competition, we can refer to the use of market socialism and how- with a more stable market supported by the defence of property rights (including the worker right to receive the value of their labour)- it actually reduces the need for economic planning

Try and critique the comment. Don't go back to the insipid dodging!

Xerographica

Insipid dodging? My "insipid dodging" definitively proved that you don't know the first thing about economics. You can't even answer the question of whether your perspective matters. If people's perspectives do not matter then what's the point of discussing scarcity? One use of a limited resource would be as good as any.

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The economist Gene Callahan recently posted an entry on business cycles....Notes on a General Theory of the Social Cycle.  So I posted a comment on how how perspectives matter...but Callahan totally misunderstood me.  I took full responsibility and tried again.  Here was his response...
@xerographica: “The problem is that I’m the only one seriously advocating that taxpayers be allowed to directly allocate their taxes.”
That’s cool and all, but i don’t see what it has to do with creating a general theory of social cycles.
Shucks.  Here was my third attempt...with a bit more polishing...

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It boils down to hedging our bets. We all make mistakes…aka fallibilism…therefore…we shouldn’t put all our eggs in one basket. Let’s evaluate this on three levels...
  1. Epic Fail = Socialism resulted in epic fails because all the eggs were in one basket. One committee controlled an entire nation’s resources.  
  2. Substantial Fail = Mixed economies like our own result in depressions and recessions because we allow a committee (538 congresspeople) to control the distribution of 150 million people’s taxes. In other words…we have way too many eggs in one basket. For example, a tax rate of 25% means that 538 congresspeople control around one quarter of our nation’s resources.
  3. Micro Fail = If I gamble my home on a business idea that doesn't pan out…then I'll lose my home...but this won't have any impact on my neighbors’ homes.
The only difference between the three failures is scale/scope.  Depressions and recessions...widespread failures...are a direct result of large scale resource misallocations.

As we established…the efficient use of limited resources depends entirely on our perspectives. Does congress have any idea what your perspective is on how they should spend your taxes? Does it matter that they do not?  What difference does it make that 538 congresspeople have no idea what 150 million people’s unique perspectives are?

People think that voting reveals their perspectives. Nothing could be further from the truth. The only way to reveal somebody’s perspective is to allow them to make decisions with their own, individual time/money. This is exactly why taxpayers should be able to choose which government organizations receive their own, individual taxes. This would allow them to integrate their unique perspectives…which would lead to the efficient allocation of public funds…which would reduce…if not eliminate…widespread failures.

Of course…I could be wrong!  The thing is though...this very concept is based on the idea of fallibilism…
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. – Raaj K. Sah, Fallibility in Human Organizations and Political Systems
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Callahan responded that I was trolling and bothersome.  He also said that pragmatarianism is my "pet peeve".  It's my "pet peeve" that the perspectives of 150 million taxpayers do not matter in the public sector?  That's one way of putting it.  Why isn't it his pet peeve as well?   Why isn't it every economist's pet peeve?  Does it matter that your perspective has no direct influence on the distribution of public funds?  Is it possible for a committee of 538 people to efficiently allocate a huge chunk of our nation's resources?  Am I tilting at windmills here...or are economists ignoring the neon pink bull wreaking havoc in our china shop?

Tuesday, March 6, 2012

Partial Knowledge and Opportunity Cost


This is my response to the comments that Anonymous shared on my post on An Economy Based on Wife Swapping...

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If you read through all the responses to pragmatarianism that I shared on this page...Unglamorous but Important Things...it should be clear that Swit, and many others, made the same type of argument that you did.  Therefore, I addressed your concern by showing you that others share your concern.  Perhaps you think that because others share your concern it validates your concern?  It doesn't.  It just creates a picture of you and Swit pointing your fingers at each other and saying, "this guy is too myopic to fund FEMA during years when there are no disasters".  In other words...you guys think that you are atypical taxpayers when in reality you're just typical taxpayers.

"Citizen allocation of taxes won't result in efficient levels of disaster relief."

A better word to use is "adequate".  You're concerned that tax choice would not result in adequate levels of disaster relief.  Conservatives are concerned that tax choice would not result in adequate levels of national defense.  Liberals are concerned that tax choice would not result in adequate levels of social programs.  Yet, I'm not advocating that we reduce the tax rate.  Therefore, given that the tax revenue would be exactly the same, where would the money go if not towards programs that liberals care about and programs that conservatives care about?

Who is to say what constitutes "adequate" levels of funding for government programs?  If you couldn't care less about space exploration then should you be in charge of determining what constitutes "adequate" levels of funding for NASA?  Conversely, if I believe that we should already have colonies on Mars...then should I be in charge of determining what constitutes "adequate" levels of funding for NASA?  Perhaps Newt Gingrich should be in charge of determining what constitutes "adequate" levels of funding for NASA?

You believe that 538 congresspeople can somehow know what constitutes "adequate" levels of funding for government programs.  But here's what Hayek would say about your belief...
The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Hayek, The Use of Knowledge in Society
What solution are we trying to determine?  We're trying to determine what constitutes adequate levels of funding for FEMA, for NASA, for the EPA and so on and so on.  You believe that 538 congresspeople have access to enough facts to determine the solution.  My argument is that the solution is "produced by the interactions of people each of whom possesses only partial knowledge".

What I struggle to understand is how we are on such different pages on this concept.  Do you think that Hayek was saying that the solution could be determined by the interactions of 538 congresspeople each of whom possesses only partial knowledge?  The point of Hayek's essay was to demonstrate why socialism fails.  What is socialism?  Socialism is a committee of government planners that think they have enough facts to determine adequate levels of funding for organizations.  But what is congress if not a committee of government planners?  So why would Hayek argue that 538 government planners can have access to enough facts to determine the solution?  Why would he argue that 538 people could overcome the knowledge problem?  Why would he argue in favor of socialism?  He wouldn't.  Hayek was arguing that the solution can only be determined by the interactions of millions and millions of people each of whom only possess partial knowledge.

Bastiat, in his essay on the Seen vs the Unseen was pretty much saying the same thing as Hayek...but from the angle of values/priorities.
It is not seen that, since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library. In brief, he would have put his six francs to some use or other for which he will not now have them. - Bastiat, The Seen vs the Unseen
As I argued before...538 congresspeople have no idea which public goods you value most.  Without knowing what all our priorities are it's impossible for them to know how much funds NASA should receive relative to the EPA or FEMA.  As individuals we can say that space colonization is more important than disaster relief or environmental protection.  We can point our fingers at other taxpayers and say, "you are being myopic if you can't see that we only have a finite amount of time left in this solar system before our sun dies."   But when it comes to public goods....our priorities cannot be accurately determined by a king...and they cannot be accurately determined by 538 congresspeople...and they certainly cannot be accurately determined by voters.  In order to accurately determine what our priorities should be each and every taxpayer should be allowed to consider the opportunity costs of their tax allocation decisions.

Economics is the study of scarcity.  Hayek's partial knowledge concept and Bastiat's opportunity cost concept are powerful tools that can help us understand how scarce resources are efficiently allocated.  When we add fallibilism into the mix we get the idea that allowing 538 congresspeople to allocate 150 million people's taxes is the equivalent of putting all our eggs in one basket.  As I argued in my post on Fallibilism vs Fairness...the equation is as follows...

Scarcity + Fallibilism = Hedge Our Bets = Tax Choice = Pragmatarianism


Monday, November 28, 2011

Other People's Values

I've seen things you people wouldn't believe. Attack ships on fire off the shoulder of Orion. I watched C-beams glitter in the dark near the Tannhauser gate. All those moments will be lost in time... like tears in rain... Time to die. - Roy Batty, Bladerunner
Nobody wants to have their moments lost in time like tears in rain.  That's why we should always make back up copies of our photos...and discussions?

Here's a discussion that I'm making a back up copy of...just in case.  It's a discussion that I had with Linda Beale, the tax expert liberal professor.  The discussion, which took place on Beale's entry on Repatriation Holiday Lobbying -- Money Speaks, came to mind when Seth decided to play devil's advocate over at his blog...Two Ways of Saying the Same Thing.  His argument was that liberals would not be happy spending their own money..."most of government will be at the whim of the wealthy unless we somehow collectively allocate the wealthy’s taxes for them."

The logical problem with this type of argument is that it is a hasty generalization.  We all engage in hasty generalizations to some extent...but liberals would be up in arms if you generalized welfare recipients as being lazy...yet liberals see no problem generalizing the wealthy as being selfish and evil.

But would liberals reevaluate their generalization if all the billionaires gave 90% of their wealth to non-profit organizations?  Or would liberals still consider the wealthy to be selfish because nobody was given the opportunity to "vote" on which public goods the billionaires spent their money on?

The question is...how accurately do votes convey value?  How accurately do votes convey all the moments we've experienced in our lifetimes?  Don't get me wrong...we need democracy to settle certain social conflicts (ie whether marijuana should be legal)...but when it comes to the efficient allocation of public goods...nothing beats incorporating people's true values by forcing them to consider the opportunity costs of their tax allocation decisions.

We are all just blind men touching different parts of a elephant.  We all have access to a limited amount of truth.  What truth do we have access to?  We all have access to our own unique individual values...which reflect all the unique moments that we've experienced in our lifetimes.  You can't generalize or average values and hope to discover the actual scope of government.  Reality is not the average of moments experienced.  The only result of trying to impose your values onto other people will be a situation exactly akin to blind men arguing over the scope of government.

How can we end this gridlock?  How can finally resolve this battle of values?  All it takes is to recognize, respect...or at least tolerate other people's values...even if they are diametrically opposed to our own.

Here's the bottom line for the discussion between Linda Beale and myself...
Why would I assume that your experiences and values are any less valuable than my own? If I'm not going to make that assumption about you...then I'm certainly not going to make that assumption about taxpayers as a whole.
That's what I wrote to Beale early on in the discussion.  And here's what she wrote at the end of the discussion...
sure, values are ultimately at stake in the decisions that are made by government and by people. But that's not the discussion we've been having. We've been talking about facts like feasibility of mechanisms, empirical evidence about public and private sector activities, etc. 

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"The conservative world view vs. the liberal world view has been the source of political disputes for many millennia."

You should've quite while only moderately behind.

The modern conservative ideology, as espoused by the contemporary American far right, is between a half and one and a half centuries old (depending on how you count and what policy ares you look at). Modern liberalism is maybe half a century old in its current form, with precursors going back two and a half centuries or so. Social democracy is around one and a quarter century old. These are all comparatively young as ideologies go.

Now, even if you had been right about the age of the bullshit you espouse, it would still not have been a valid argument. People practised bleeding cures for millennia. People thought the Sun went around the Earth for millennia.

"It isn't as simple as saying one view is right and the other is wrong."

If you had said "I have mine, and screw the rest," then we would have had a policy disagreement, and people may disagree on this without being provably wrong. But when you say "less regulation benefits everybody," then you are making an objectively false statement. When you say "balanced budgets enhance growth," then you are objectively in error. When you say "the US government is broke," then you're lying (the US federal government has been definitionally solvent since it pulled out of Bretton Woods - that was the main reason it pulled out). When you say that lower taxes create jobs, then you're objectively wrong.

I don't see any reason to respect bullshit, or compromise on matters of fact. "For successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Feynman

"The argument that smaller government (not zero government) is better for society as a whole is a subjective one"

But that is not the argument you made. "Better for society," depends on your subjective assessment of the value of the people government protects from the predations of oligarchs, and on your subjective valuation of economic stability relative to the power and prestige of banksters. What you claimed was that deregulation is "better for everyone." Which is quite clearly bullshit for all commonly accepted definitions of "improvement" and "everyone."

"Progressives tend to have more faith in government bureaucrats and conservatives tend to have more faith in the private sector."

The private sector cannot satisfactorily provide for - healthcare, unemployment insurance, pensions, disability insurance, education, infrastructure, macroeconomic stability, etc. That's just simple empirical reality. You may argue that these areas are unimportant, or that they are less importance than your right to not pay taxes. But you cannot, if you wish to interact with the reality-based community, argue that the private sector does them better than the public.

Macroeconomic stability, in particular, is just flat out impossible for the private sector to provide, since it requires an investor of last resort who is definitionally solvent. The public sector will always, no matter how corrupt, inefficient and incompetent, do that better than the private sector, because the private sector cannot do it at all.

That you have "faith" in the private sector is neither here nor there. Economic policy should not be a faith-based initiative.

- Jake

Posted by: JakeS | October 05, 2011 at 01:41 AM
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Jake, Peter is certainly more right than you are when it comes to the age of these fundamental concepts.

From around 55 BC..."Gaius gracchus proposed a grain law. The people were delighted with it because it provided an abundance of food without work. The good men, however, fought against it because they thought the masses would be attracted away from hard work and toward idleness, and they saw the state treasury would be exhausted."

According to the charity laws of Judaism...the highest form of giving is to help the recipient become self-reliant.

I like the part where you said "simple empirical reality". That's really great!!! You're definitely the kind of person that I'm certain will completely embrace pragmatarianism.

All pragmatarianism does is allow taxpayers to directly allocate their individual taxes among the various government organizations at anytime throughout the year.

Of course the allocation decisions of taxpayers will reflect your "simple empirical reality". How could they not? Why in the world would taxpayers allocate their taxes according to some ridiculous faith-based fantasy? Taxpayers all want the most bang for their buck...not surreal antiquated obfuscation.

Taxpayers are in the perfect position to substantiate your claim. Actually...they are the only ones that can substantiate your claim. Their cumulative opportunity-cost decisions will reveal to everybody the reality that you've been trying to share all along.

Isn't pragmatarianism the best? I'm sure you'll fully support it. Now you'll have the perfect opportunity to let your actions speak louder than your words...you'll be able to put your money where your mouth is!

Posted by: Xerographica | October 05, 2011 at 06:09 AM
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Xerographica

such allocation schemes sound halfway plausible on paper but are utterly unworkable. How would you be able to fund long-term cancer research through NIH if you didn't know how many dollars you would have from year to year? The same thing applies to all long term planning. One big problem that we have right now is that too much is short-term--due to Congress's response to moneyed lobbying. We need more long-term thinking, not less.

The taxpayer allocation scheme is problematic for another reason. It assumes informed taxpayers. The biggest lesson one can derive from voting results from populations that have huge majorities in favor of INCREASED rights to unionization, INCREASED taxes on the rich/progressivity of taxation, and INCREASED protection of the environment is that people don't understand the sometimes complex interrelationships of agencies and regulations and businesses and particular votes cast by lawmakers. Of course, that is why we have a representative government to set policies--to allow those representatives to become more expert than the people themselves. But we need a certain threshold of education to ensure that voters keep politicians in line--if those experts are captured by Big Business they will allow the oligarchs to dictate the policy in their favor. We have been moving in that direction since Reagan's election and are now moving at an accelerated clip due to the consolidation of power in the ranks of the uberrich and their corporations.

Posted by: Linda Beale | October 05, 2011 at 02:08 PM
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Linda, how unworkable would it be if donors to PETA and donors to the NRA had to pool their donations together and elect representatives to decide how to split the money between the two organizations?

It shouldn't be too hard to imagine the results...it would be the same thing as you and Peter arguing over whose experiences and values are more valuable.

My mother endured a very long and terribly agonizing death from throat cancer. I basically watched her slowly starve to death because gnawing hunger was less painful than trying to swallow. What more information do I need?

It's fine that you want to reduce military spending but having served in Afghanistan for a year I would gladly help fund our efforts over there to support the same basic freedoms that so many Americans take for granted. What more information do I need?

Having graduated from UCLA with a degree in International Development Studies...I certainly do not take public education for granted. What more information do I need?

Why would I assume that your experiences and values are any less valuable than my own? If I'm not going to make that assumption about you...then I'm certainly not going to make that assumption about taxpayers as a whole.

The amount of public goods information that congress has access to is minuscule in comparison to the amount of public goods information that taxpayers as a whole have access to.

Posted by: Xerographica | October 05, 2011 at 03:03 PM
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Xerographica.
Your response is an illustration of the problem. You use anecdote and individual preferences on a small number of items to suggest you would fund cancer research (I assume), and the military--specifically apparently the war in Afghanistan and therefore you think it would be relatively easy to have direct democracy decisionmaking on government expenditures. To what extent? How much to each? How would you determine what is reasonable? Which budgets would you review, which development projects, which future forecasts? Why would you not support basic physics research or the performing arts? What if basic physics research was ultimately important to complex cancer research? Is it because you don't know enough about them or because you are anti-them that you don't support the things that you don't choose to support?

How would cancer research take place if it is funded for several years by three people at $100 each and another year by 2 million at $1000 each, when it needs long-term commitments for lab spaces, researchers (and research assistants), and all that research entails?

You are talking in pipe dreams that might at best work for relatively small cooperatives of people with fairly close values and objectives, but would be utter chaos for any modern society with its hundreds of millions of denizens and almost uncountable number of problems needing to be addressed and prioritized from global warming to food-borne infections. That is of course one of the reasons that programs tend to go on auto-pilot, except for those on which considerable attention is focused. But there is some value in that approach--if enough attention gets focused, the program will be reviewed more deeply. Else it should probably go along at base-budget funding

A statement such as yours that "the amount of public goods information that Congress has access to is miniscule compared to the amount that taxpayers as a whole have access to" reveals a lack of understanding of process. Taxpayers as a whole actually do not have as much access as congress. Everyone has everything that is in the public domain, though that "potential access" is much much larger than actual access potential. The point of committees is to have expert staffers (as well as the congressional research service, the JCT, the CBO and similar groups) to develop studies to answer questions that congressional reps in the course of assessing the right course. The problem, of course, that I raise in my post is the concern about the degree of lobbying by special interests that warps that review. But look at the misinformation that most taxpayers have about everything from 9/11, civil rights, economics, taxation to war. A huge proportion of Americans that are not in the top 20% think they are in the top 20% of the income distribution. A huge majority of Americans thinks that income in America is distributed almost evenly, with a little bit more going to the top than to the bottom. That couldn't be further from the truth--which is that the very top garners significantly more than anybody else. Those facts are "out there" but people are either too ignorant to understand them, or too fixed on a particular dogmatic position to be able to distinguish fact from fiction. And of course there is an awful lot of money being spent to mislead Americans on these issues in order to get them to vote against interest. It would be even worse with "direct democracy" voting on what the government would spend money on (even assuming away the other huge problems, like the question of how you do long-term planning with short term volatile funding).

YOur response to Jake reveals considerable naivete about how decisionmaking can work in dynamic group settings--20 people sitting in a room and agreeing to develop a plan by consensus is not the same as 300 million living together in a country where all want clean water, clean air, jobs, food, shelter, a decent life, protection from crime, protection from natural disasters, etc. but have 300 million opinions about what it takes to accomplish that and mostly wrong information about how it is being accomplished (or not) today.

I am involved in my law school's budget advisory committee and it requires me to delve into considerable detail, just for our small budget of under $15 million. Imagine considering what is worthy, and why, and how much when there are so many things on which it can be spent. That is why Congress has worked out a system of committees, with those who represent us developing expertise. It worked pretty well up until about 1980 when the right-wing machine became so adept at obstructionism that most of the decisions now are made reflecting the minority's views.

Anyway, enough said. You appear to be on a libertarian hobbyhorse of remaking the institutional structure along the lines of the anarcho-libertarian concept that taxation is theft. That view treats the status quo property distribution as some kind of god-given natural state, and then treats the state as an usurper taking that away through taxation. Nuts. The state is there before or at least simultaneously with the markets, and thus what any of us "has" is partly predetermined by what the state offers and subtracts. You might want to read the "Myth of Ownership" for some backgrounding on these issues.

Posted by: Linda Beale | October 05, 2011 at 06:36 PM
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Linda, never mentioned anything about taxes being theft so not quite sure where you got the impression that I'm an anarcho-libertarian. Perhaps you noticed on your blog traffic statistics where I linked to this entry from Kent's blog?

If that's the case then you should try and read through my comments on his entry a bit more carefully. Kent is an anarcho-capitalist...he believes that the private sector can produce everything better than the public sector can. So I tailored my arguments accordingly.

If Kent had been a socialist then I would have tried the exact opposite approach. If you don't believe me take a look at my relatively short entry on the joy of writing checks to the government.

See, I'm a new breed...I'm a pragmatarian. I take my cue from Deng Xiaoping...that guy was so cool. He went around saying that he didn't care if a cat was black or white...what mattered was whether it caught mice.

I'm not dogmatically attached to any particular ideology like you, Jake, Kent and Peter are. I could care less whether an organization is public or private...all I care about is results.

All pragmatarianism says is that taxpayers, like you, will, given a choice, look at results and allocate their taxes accordingly. For example, it doesn't matter to most taxpayers whether the public or private sector comes up with a cure for cancer. But the public will certainly benefit by increased competition between the two sectors.

"How would cancer research take place if it is funded for several years by three people at $100 each and another year by 2 million at $1000 each"

This kind of funding fluctuation occurs because the government leadership is replaced every few years by the opposite faction...but it certainly wouldn't happen with a pragmatarian system. Funding would be relatively steady because demand for cancer research is relatively constant.

Obviously, just because I allocated my taxes to a GO in no way implies that I would have a say how they spent the money. Just because somebody donates to PETA in no way implies that they get to run PETA. So it will be completely up to the organization leadership to decide whether physics research is relevant to cancer research.

Committees are perfectly fine. I'm not saying that we should get rid of any committees. If taxpayers are happy with how congress is spending their money then they would have the option to allocate 100% of their taxes to congress.

Given that you mentioned obstructionism...it would seem logical that you would appreciate the ability to bypass any obstructions and put your taxes directly into the organizations that need it the most.

If we had a pragmatarian system then the whole national healthcare debate would be a moot point. The amount of funding that national healthcare received would determine the percentage of the population that would qualify for coverage.

The top 1% of taxpayers pay for 40% of total taxes while the bottom 99% of taxpayers pay for 60% of total taxes. So...what? There are no public goods that the rich can exclusively benefit from. And not sure if it would be of any benefit trying to generalize how the rich would allocate their taxes.

Yeah, there's certainly a lot of misinformation out there. The thing is...there's a strong correlation between education and income. People who are better educated tend to make more money and pay more taxes. These people, like you, have the necessary critical thinking skills to effectively separate fact from fiction.

Plus, to find any relevant facts they'll just need to visit a GO's website. Each GO website will have a fundraising progress bar and some relevant information demonstrating merit and effectiveness.

Just like the website Charity Navigator analyses the financial health and effectiveness of various non-profit organizations so too will there be several independent organizations set up to do the same thing for GOs. Or maybe Charity Navigator will just expand to include GOs as well.

Posted by: Xerographica | October 05, 2011 at 08:46 PM
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X--
I'm not going to reargue your arguments. I've addressed them and you haven't really responded. Saying that better educated people make more money and pay more in taxes so will make better decisions in this allotment process is about as naive as the rest. This is not a matter of education but a matter of the inability of each and every taxpayer to be sufficiently informed about all the issues and interrelationships to allot his or her tax dollars in any way that would make sense or for any resulting aggregate allotments to make any sense.

Posted by: Linda Beale | October 05, 2011 at 09:27 PM
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Linda, up until relatively recently quite a few people applied your same logic to the allocation of private goods. Here are some of the countries that still have planned economies...Cuba, Libya, North Korea, Saudi Arabia, Belarus, and Myanmar.

It seems pretty straightforward that markets are incredibly more efficient at allocating private goods.

There is only one difference between public and private goods. With public goods people can free-ride off the contributions that others make to public goods...which decreases the financial incentive for companies to provide public goods.

This problem can be corrected simply by forcing people to pay taxes. Once people are forced to pay taxes then the market can be used to decide how to efficiently allocate public goods.

Again...
1. Planners fail at efficiently allocating private goods.
2. Public goods are not significantly different than private goods.
3. Therefore, planners fail at efficiently allocating public goods.

I'm not making any judgments regarding the tax rate or which goods should be considered public or private. All I'm saying is that markets have long since been proven to be better at efficiently allocating goods.

What's naive is you thinking that a relatively small group of planners could ever allocate public resources as efficiently as 150 million taxpayers could. It demonstrates that you are completely clueless as to how private goods are allocated. Thank goodness that you do not need to know how the invisible hand works for it to work.

Unfortunately, it seems pretty obvious that you need to know how the invisible hand works in order to support pragmatarianism.

Posted by: Xerographica | October 06, 2011 at 04:14 AM
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X
there you go again. Equating discussion of private sector, money-making, "risk it but maybe win it" activities with activities in which the government provides needed intervention because the private sector won't/can't do it, and the question of how to make the decisions about which of those areas to invest resources.

Posted by: Linda Beale | October 06, 2011 at 08:33 AM
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X (cont'd)
Public goods are clearly quite different from private goods--if you can't see that, our discussion is useless.

Markets have NOT "long since been proven" adept at the kind of decisionmaking we are discussing. That is anti-empirical thinking. As I have said, there is no such thing as a "market" without government. The concept of "government free markets" is an absurdity.

The kind of arguments you engage in are unsupportable by the facts. But you just continue to assert your assumptions as though they were facts.

Moreover, the "invisible hand" is one of the most overused and wrongly used metaphors in economic discussion--and used in ways that Adam smith himself would find unsuitable, since he thought that there was a genuine problem when the propertied upper class overtook decisionmaking.

Nuff said.

Posted by: Linda Beale | October 06, 2011 at 08:37 AM
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Linda, you aren't going to get any argument from me that the government provides needed intervention because the private sector won't/can't do it. Again, I'm a pragmatarian...not a libertarian.

The problem is that the government has no idea how to prioritize its interventions.

"When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money?" - Patricia Kennett

Pragmatarianism forces taxpayers to consider the opportunity costs of their allocation decisions. This would allow the interventions of government to accurately reflect the values of taxpayers.

Taxpayers can say that they want this and that and some other thing but their allocation decisions will speak louder than their words.

Posted by: Xerographica | October 06, 2011 at 09:19 AM
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X
No, your "pragmatarianism" does not give the goverment an idea how to prioritize its interventions, nor does it "force" anyone to consider opportunity costs. There is nothing that can require taxpayers to make considered judgements, anymore than there is anything to require voters to do so.

You haven't addressed obvious flaws in an idea that has enormous transaction costs and transition costs to get off the ground, is likely to lead to even more dominance by the wealthy in the decisionmaking apparaturs (those with more money pay more taxes--though not enough--and have more control of how that tax money is used, so will likely use it to benefit themselves) or the many other obstacles I have mentioned.

Posted by: Linda Beale | October 06, 2011 at 10:21 AM
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Linda, obviously there are enough voters that want marijuana to be illegal. But how much of the other public goods that they value (defense, infrastructure, border security, etc.) would they be willing to forgo in order to help finance the war against drugs? That is the question that millions of taxpayers would be forced to consider when deciding how to allocate their taxes.

The amount of money that the drug war received would determine how much the government intervened in this area.

Obviously, if somebody is in the ridiculously small minority of people that only care about one public good then they won't be forced to consider the opportunity costs of their allocation decisions. But the rest of us will be forced to make hard choices that we are not currently forced to make.

What's interesting to consider is that, when taxpayers are forced to be directly responsible for funding the public goods that they value...what percentage of taxpayers will be happy to pay more than their fair share of taxes?

What are the transaction costs?

Yes, the wealthy will "purchase" more public goods just like they can purchase more private goods. The difference is that...unlike with private goods...we would all benefit when they "purchase" public goods. Public goods are, by their very definition, non-excludable.

There are no serious obstacles to overcome because this system already works for the non-profit sector. The only difference will be that people will be forced to allocate a percentage of their income (as determined by the tax rate) among the various public organizations.

One "obstacle" that is sometimes mentioned is the cost of fundraising. But with good fundraising practices it is standard for non-profits to receive $5 for every $1 they spend on fundraising...which is a ridiculously high return on investment.

Look, this probably won't happen in our lifetime but it's as a progressive concept as they come. Just like we can look back and realize how was absurd for one king to control all the taxes...so too will people eventually look back and realize how absurd it was for 535 people to control all the taxes.

Just like there were plenty of people who thought that the king had some kind of "divine" wisdom so too are there plenty of people who think that just because congresspeople are elected it imparts some sort of special wisdom when it comes to deciding how taxes should be allocated. It shouldn't take more than an hour of watching C-Span to realize that this is far from the case.

If you're genuinely interested in finding out if this concept would work then just propose it to your friends and ask them to predict which public goods would be underfunded. Compile a list of their responses and see if you don't notice a pattern emerging. At the very minimum it's an interesting intellectual exercise.

Posted by: Xerographica | October 06, 2011 at 04:19 PM
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Jake--re organizational decisionmaking versus individual decisionmaking--yes, clearly the difficulty individuals have in assessing information and making decisions in real time is a key aspect of the problems with X-type "solutions" to tax policy. Of course, even organizational decisionmaking can face some of these same problems, with the usual result then being a tendency to favor the status quo. There are other types of organizational decision-making problems, such as the ones the US now faces with the obstructionism of the right, which is willing to sacrifice the organization in order to satisfy dogmatic, ideological objectives.

Posted by: Linda Beale | October 08, 2011 at 04:18 PM
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X--no, there would be no reasonable way for individuals to make decisions about prioritizing the myriad functions of government, because their individual decisions would be compromised or reinforced by others' decisions. And worse, those with the most would carry the most weight (which those with the least would be all to aware of from the outset).

Posted by: Linda Beale | October 08, 2011 at 04:37 PM
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If you think the government has a myriad of functions...then how many functions do you think the private sector has? If the market truly couldn't handle efficiently allocating the relatively small percentage of public functions...then it certainly would have long ago failed at efficiently allocating all of the private functions.

The primary failure of the market is that because of the free-rider problem there is little financial incentive to produce public goods. The primary failure of the government is that planners only have access to a microscopic percentage of the information available to society as a whole.

The solution is simple...donations to government organizations should be 100% tax deductible.

What's interesting is that even though you're a liberal and Peter's a conservative...both of you agree that a market system wouldn't be able to handle efficiently allocating the relatively small percentage of public goods.

Posted by: Xerographica | October 13, 2011 at 07:37 AM
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X

(1) It isn't just the number of functions, but also the type.
(2) The private sector clearly fails at allocating monies appropriately, even among areas that we consider most appropriately handled by the private sector. To take just one example, that's why the US car companies quite innovating with the 'easy money' of newly opened markets in South America (only remedying the problem in connection with the financial crisis) and why CEOs make much more than they should based on their value-added to the enterprise, while workers make less than their value-added to the enterprise (etc.)
(3) The private sector simply, inherently, can't handle appropriately inherently government functions like forcing itself to take account of "externalities".
(4) You are wrong on primary failures but you are even more wrong on your socalled pragmatarianism solution--i've exposed the numerous flaws in your logic on several posts. I won't do it again here but other readers should look at the comments for exchanges between X and me on these issues.
(5) Pappas' contributions to the comments at ataxingmatter are revealing because he sometimes acknowledges what the facts show but then goes on to espouse his "beliefs" in conservative ideology anyway.

Posted by: Linda Beale | October 13, 2011 at 01:39 PM
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Linda, people's values are "wrong" when they pay CEOs the big bucks but congress's values are "right" when they bail out the auto industry? Yet congress's values are "wrong" when they block national healthcare?

Let me guess...my values are wrong while your's are right? That's why I started off this discussion with my personal anecdotes...to help you consider the possibility of other people's values having value even if they are not the same as your own.

How is it that I can respect your values while you cannot respect my own?

There's nothing wrong with me valuing the EPA more than I value bailing out the auto-industry. There's nothing wrong with you valuing public healthcare more than you value national defense.

Our values as a whole are the only thing that can objectively and "correctly" determine the allocation of public resources. Votes do not accurately reflect values. Forcing taxpayers to consider the opportunity costs of their individual taxes is the only way we can ensure that limited public resources are used as efficiently as possible.

O how they cling and wrangle, some who claim
For preacher and monk the honored name!
For, quarreling, each to his view they cling.
Such folk see only one side of a thing.

Posted by: Xerographica | October 13, 2011 at 05:44 PM
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X
You're playing the old 'bait and switch' trick. We aren't having a values discussion. We're having a facts discussion. Your solution doesn't work, for the various reasons I've outlined. Your responses don't address most of the flaws, or continue to assume away the exposed flaws.

Posted by: Linda Beale | October 13, 2011 at 06:37 PM
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Linda, no bait and switch here...it's always been about values. How could the topic of the allocation of public resources be about anything but? The information that congress will never have access to is how much of one public good you would be willing to forgo for another public good.

This concept is known as opportunity cost...it's the only way to accurately determine values...and it's the only way to ensure that limited public resources are allocated as efficiently as possible.

You don't seem to be a fan of obstructionism...yet you definitely don't approve of allowing me to directly support the government organizations that I value. I'm not quite sure how that's any different than hyperpartisan obstructionism. You seem to be only happy when my dollars support your values.

Posted by: Xerographica | October 13, 2011 at 07:51 PM
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X
sure, values are ultimately at stake in the decisions that are made by government and by people. But that's not the discussion we've been having. We've been talking about facts like feasibility of mechanisms, empirical evidence about public and private sector activities, etc.

Posted by: Linda Beale | October 13, 2011 at 11:05 PM

Wednesday, September 21, 2011

Universal Suffrage, Pragmatarianism and the War On Drugs


Let's evaluate the two steps of the democratic process using the war on drugs as our example. Drugs are bad mmm'kay?

Step one involves the process of deciding whether or not drugs should be legal. Should kids be allowed to participate in this process? Here are some of the factors which are completely immaterial to whether they should be allowed to vote...
  1. whether they would vote for or against legalization
  2. whether they had enough information to make an "informed" decision
  3. whether they had enough life experience
  4. whether they pay taxes
Every argument against kids voting is an argument that we can make against adults voting. Voting is just the right to try and protect one's interests. Everybody should have the right to try and protect their interests...irrespective of all other factors. The only limitations should be that a voter must be a resident and that they cannot be accompanied in the voting booth.

So here we have the tug of war contest between two sides. It makes sense that we would want the side that cares the most to win. Therefore, it would be counterproductive to limit campaign contributions or to limit how many people volunteer for campaigns or to limit how many hours they can volunteer for. The amount of time/money that people contribute reflects how much they care about the issue.

In order to decide which side "wins" or "loses" the democratic contest we take a vote.

Step two of the democratic process involves funding the outcome…in this case…the war against drugs. Currently, both sides of the debate have to pay for the war against drugs. It's completely bizarre that people who believe that drugs should be legal have to help fund the war against drugs. It adds insult to injury and results in taxes being put in the same category as death.

So how do we decide how much money should be allocated to the war against drugs? Currently we have representatives making those decisions. The problem is that there's no way they can know the optimal level of funding for the war on drugs. It's impossible. They have no idea how many other public goods people would be willing to forgo in order to support the war on drugs.  In economic terms this is known as opportunity cost.

If any taxpayers feel that congress is not accurately representing their values then they should be able to individually decide what percentage of their taxes the war on drugs should receive. If anybody felt that the way on drugs wasn't receiving enough money…then they would be more than welcome to "donate" additional money to the war on drugs. They could also "donate" additional time by trying to convince others why it's important for them to "donate" more of their taxes to the war against drugs.

The beauty of pragmatarianism is that taxpayers would…
  1. …be transformed into donors supporting public goods.
  2. …have the opportunity to directly support the causes that they care about
  3. …only pay for results
The focus would switch from cutting to contributing.

The point is that everybody should be allowed to vote and everybody should be allowed to directly fund the public goods that they value. The bottom line for step one is that arguing against kids voting is the same thing as arguing against adults voting. The bottom line for step two is that arguing against pragmatarianism is the same thing as arguing against results.