Here's my reply to Adam Gurri's comment on my previous entry.
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Thanks for taking the time to read the entry and comment on it.
For me the originality (or lack thereof) of Rothbard's work isn't the main issue. The impression that you gave was that all of his work was merely "rights" arguments. I wanted to help you appreciate that this is really not the case.
From my perspective, the value of Rothbard's results arguments is that he correctly diagnosed the fundamental problem with government. He understood and argued that the government is no more capable of getting the supply of defense right than it is capable of getting the supply of food right. The same really can't be said for any minimal government libertarian (ie Milton Friedman, Hayek, Mises).
For Rothbard the "therefore" was anarcho-capitalism. I disagree with his remedy but agree with his diagnosis. From my perspective, Buchanan's "therefore" was much better: taxpayers are given the option to earmark their taxes. The supply of defense would more accurately reflect the true demand for defense.
You don't believe that the supply of defense should be determined by demand. Instead, you believe that it should be determined by "defending the best *reasons* for and against doing so". You make it sound like the debate over defense and the demand for defense are mutually exclusive. But they really aren't.
We can imagine that Samantha is a hard-core vegetarian. Everyone else in her family loves to eat meat. Quite frequently they have fierce debates over vegetarianism. When they do so they exchange copious amounts of information on the topic. For example, Samantha endeavors to introduce them to progressively better meat substitutes. The copious amounts of information exchanged among the members results in both sides being far more informed on the topic. At the end of the day it's still entirely up to each family member to decide for themselves how much meat to purchase. The spending decisions are made by, rather than for, the family members.
The same thing would occur if...
1. Unlike her family, Samantha was a hard-core pacifist
2. People could earmark their tax dollars
The defense spending decisions would be made by them. Right now the defense spending decisions are made for them.
The passages that I shared by Rothbard, Buchanan and Ostrom all made the case, more or less, that people should make their own defense spending decisions. These thinkers were all against, more or less, defense spending decisions being made for the people.
Unlike these thinkers, you haven't made your position on the issue exactly clear. It's not like there's a lot of options. Spending decisions are either made by the people, or for the people.
"do you *really* think the validity of an argument is dependent upon how much other people are willing to pay to read it?"
Lots of people were willing to pay to read Thomas Piketty's book. Does this make the arguments in his book more valid/correct/true? No. It makes them more important (worthy of attention). But it's necessary to appreciate that not everybody who purchased his book agreed with his arguments. The same can certainly be said for MacLean's book.
So let's remove the "purchase" aspect. People simply and solely use their money to help determine and reveal the importance of Piketty's book. Well... it doesn't work so well when there's only one book involved. Let's include the Wealth of Nations. People can decide how they divide their dollars between the two books. They aren't buying the two books, they are grading/judging the relevance/importance of the books with their own money. How would you divide your dollars between the two books? Does it matter? Would it be equally or more effective if you could just vote for one of the books instead?
Let's consider the issue of voting by looking at another example. I regularly go to plant shows. They are usually judged by a small group of experts. I strongly disagree with this system. It would be far better if everyone could divide their donations among all the entries.
Let's say that plant shows and dog shows were both judged using my preferred system. Would I spend more money at plant shows or at dog shows? I wouldn't even attend the dog shows. So I wouldn't spend any money at them. This is because I'm far more informed about plants. How I divided my dollars between dog shows and plant shows would reflect how my information was divided between dogs and plants.
What if Samantha manages to rope me into going to a dog show? Like I said, I certainly wouldn't spend any of my money to judge the dogs. But would I vote for the best dog? Sure. Why not? It wouldn't cost me anything to do so. Most of the people at the show would be in the same boat as me. The majority is always less informed than the minority on every conceivable topic. So with voting/surveys it's tyranny of the ignorant. With spending it's tyranny of the informed. With traditional judging it's tyranny of a small handful of experts without any skin in the game.
A while back I started a small informal plant society. In September we're planning to have a small show at a member's home. Each participant will bring one of their favorite plants. Then we'll each use our dollars to judge the relevance/importance of each other's plants. The money that everybody earmarks to their favorite plants will be used to promote a webpage that displays the entries sorted by their importance (as determined by spending).
If Samantha ropes you into attending this show, how much money would you spend on your favorite plants? I'm guessing that you wouldn't spend much, which would reflect your low level of plant information/interest. And because you wouldn't spend much, your low level of plant information wouldn't have much influence on the results/rankings. But let’s pretend that you’re super rich. Then, despite having low information, you could easily exert considerable influence on the results/rankings. This is why smaller markets are always worse judges of importance than larger markets.
Is my thinking original? That's not the right question. The right question is... am I barking up the right tree? Rothbard barked up a few different trees. Some trees were really wrong ("rights" arguments, anarcho-capitalism)... but one tree was really right (the fundamental problem with government). I have to recognize and commend him for barking up a very right tree. Of course it's possible that I'm wrong about the rightness of the tree. But it's not like Piketty or MacLean have come even close to disproving that it's the right tree. They don't even seem to be aware of Rothbard's best arguments, which are the same as the best arguments of Buchanan and the Ostroms. You certainly weren't aware of Rothbard's best arguments. But now you are. However, you really haven't clarified/defended your position on whether tax spending decisions should be made by, or for, the people. Well... you don't seem to think they should be made by the people. But you really haven't fleshed out a case that they should be made for the people. You should do so, if you want to avoid barking up the wrong tree.
I should probably spell out the relationship between importance and validity. Right now we don’t know just how important Rothbard’s two papers are to society. We don’t know the social importance of his two papers. I know how important they are to me, but I don’t know how important they are to Peter Boettke, Alex Tabarrok or anybody else. It’s certainly possible to see how many times Rothbard’s two papers have been cited. But if citations/votes were a good measure of social importance, then spending/shopping/markets would be a waste of immense amounts of time, energy and brainpower.
Because Rothbard’s two papers are important to me, I have taken the time and made the effort to bring them to your attention. So you now know that they are important to me, but you don’t know how important they are to me compared to Buchanan’s papers or the Ostrom’s papers. So you can't easily discern how I would want you to divide your limited time and attention between all their papers.
By bringing Rothbard’s two papers to your attention, I’ve given you the opportunity to scrutinize them. In computer lingo, you have the chance to try and debug them. Given enough eyeballs, all bugs are shallow (Linus’s Law). The more important Rothbard’s two papers are to society, the more attention that they should receive, the more rigorous, relentless and ruthless the inspection of their validity.
This is the relationship between importance and validity. Because we don’t currently know the true social importance of Rothbard’s two papers, their validity isn’t being optimally checked. The same is true of national defense. Because we don’t know the true social importance of national defense, its validity isn’t being optimally checked.
In all cases society’s attention/brainpower has to be divided somehow among a gazillion different things. How do we divide society’s limited resources? By voting? By spending? Or do we allow the division to be determined by a small handful of experts who don’t have any skin in the game?
Showing posts with label war. Show all posts
Showing posts with label war. Show all posts
Thursday, July 27, 2017
Saturday, April 15, 2017
Markets Are The Most Exciting Thing Ever!!!!!!!!!
Some discussion in: Netflix And Virtue Signalling
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It feels like you're focusing on the word "demand" rather than on the "money spent" part. For me it's significant and meaningful and important and useful to know how much money people are willing to spend on things. It's convenient to use the word "demand" to refer to the amount of money that people are willing to spend on things. But we can also use the letter "X" or the word "fhqwhgads" or "zeitgeist" or any other combination of letters you want. I'm less interested in the word than in the concept. So it would be great if you focused on the concept.
Spending money is a sacrifice. The more money that is spent, the bigger the sacrifice. Since spending money is a sacrifice... generally people don't randomly spend their money. They didn't exchange their limited time and effort for money just so that they can flush it down the toilet.
It's easy to prove this... all I have to do is ask for your money. Of course you're going to want to know why you should give me any money. So in order to persuade you to give me your money, I'd have to provide you with some information. You'd compare the information that I gave you with all the information that you have and then decide whether or not to give me money. If you decided not to give me any money, well, in theory I could endeavor to provide you with different and better information. And again you'd compare this new information with all your information in order to decide whether to give me money.
This process of persuasion involves lots of brainpower being used and lots of information being shared, considered and compared. So it's significant and meaningful and important to know how much money individuals and groups of individuals are willing to spend.
I was disappointed that Person of Interest was canceled...
It was canceled despite the fact that nobody knew how much money that I was willing to spend on the show. And I suppose this could potentially sound egocentric. So let me zoom out. It was canceled despite the fact that nobody knew how much money that any subscribers were willing to spend on the show. This fact makes me acutely feel like I'm living in the stone ages. Where I have to go around trying to convince people that fire and wheels are useful. I'm extremely grateful that I live in an era where I don't have to try and convince anybody that fire and wheels are useful... but I'm also extremely disappointed that I live in an era where I do have to try and convince everybody that it's useful to know how much money people are willing to spend on things.
Consider how much better off your life is because you live in an era where everybody knows that fire and wheels are useful. Now double or triple or quadruple that amount of betterness to try and appreciate how much better off your life would be if you lived in an era where everybody knows that it's essential to know how much money people are willing to spend on things.
Admittedly I have absolutely no idea how much money everybody would be willing to spend on Person of Interest... so of course I can't guarantee that, if ignorance (of willingness to pay) had been eliminated, the show would have been continued rather than canceled. But I can guarantee that the deciders, whoever they were, would have made a far more informed decision.
The world will be infinitely better off when everybody makes far more informed decisions.
Let's imagine that people could choose where their taxes go. Some people want to go to war with Canada. The shape of the demand looks like this...
What would you say about the shape of the demand? I'd say that it's certainly tall enough... but it's way too skinny. Too few people are truly willing to pay for war with Canada. Sure, these few people are willing to pay a lot... but that really doesn't overrule the fact that there aren't nearly enough of them to justify this particular use of their tax dollars. So the DoD would use the money for other things besides invading Canada.
Using technical terms I'd say that the breadth of the demand is insufficient. The shape is too skinny. The fatter (wider) it is... the greater the justification for using those tax dollars to attack Canada.
In terms of the public sector, being concerned with the shape of the demand makes sense because the point of taxes really isn't to spend them on things that only a relatively few people are going to benefit from. We really don't want rich people to be able to spend their taxes on private golf courses or private yachts or private airports. We want everybody, rich or poor, to spend their taxes on things that lots of people are going to benefit from. Maybe like healthcare?
The shape isn't super tall... but it's pretty fat. There's definitely more than enough demand breadth to justify these tax dollars being spent on healthcare. Although perhaps it's not quite correct to compare something more general (healthcare) with something more specific (war with Canada). It would probably be more correct to compare war with Canada to cancer research. We can reasonably guess that the demand for the latter would be far broader than the demand for the former.
In any case, it certainly makes sense to consider the shape of the demand when we're talking about tax dollars. The thing is, we really weren't talking about tax dollars. We really weren't talking about the public sector. We were talking about donors to the Libertarian Party using their donations to signal the value of the potential convention themes. Yet, you definitely thought that the shape of demand was very relevant!
If the entire point of the public sector is to have a space where it's unacceptable for money to be spent on things that will only benefit a few people... then it's gotta be the case that the entire point of the private sector is to have a space where it is entirely acceptable for money to be spent on things that will only benefit a few people.
If one person alone wants to spend enough money to choose the theme for the Libertarian Party convention... then that's entirely acceptable. If one person alone wants to spend enough money to prevent Person of Interest from being canceled... then that's entirely awesome. If one person alone wanted to spend enough money to pay for the Statue of Liberty's pedestal... then that also would have been entirely awesome.
If somebody is completely broke then clearly we can't know how much money they'd be willing to spend on defense, healthcare, Person of Interest, the Statue of Liberty's pedestal, food, clothes, computers or anything else. Homeless people don't have much or any money... this is certainly true. But does this really mean that we can't know the demand for anything? Does it really mean that it's irrelevant how much money people are willing to spend on things? Markets should be entirely discarded and replaced with... voting? I'm sure that this is not what you're suggesting... yet you're bringing up ability to pay as if it would somehow only be relevant to donors to the Libertarian Party using their donations to signal the value of potential convention themes. Actually, the ability to pay (or the lack thereof) is relevant to all markets. So if you're arguing that it invalidates the spending info for one market... then your argument has to be applicable to all markets.
If we prevent people from using their money to help determine the value of things... then things will be incorrectly valued. When things are incorrectly valued, things will be incorrectly used. When things are incorrectly used, people will be worse off. Therefore, the degree and extent to which people are currently worse off... reflects the degree and extent to which we prevent people from using their money to help determine the value of things.
Right now you believe that the products at your grocery store are going to be correctly continued or discontinued because shoppers are allowed to use their money to help determine the value of the products.
Yet you also believe that the shows on Netflix are going to be correctly continued or canceled despite the fact that subscribers aren't allowed to use their money to help determine the value of the shows.
And of course you don't believe that Netflix can read the minds of its subscribers. Instead, you believe that subscribers already provide enough information for Netflix to make adequately informed decisions. But even Netflix acknowledges that ratings are less trustworthy than viewing habits. Except, how can viewing habits be more trustworthy than spending decisions? And it's not like Netflix can compare the two sets of information. It doesn't even see the point in having the information about spending. And there isn't a single subscriber who is interested in providing this information. Except for me. And one of my friends. I suppose there might be a few more people out there who would see the point of using their fees to inform Netflix. In any case we certainly aren't the rule.
The idea of using our money to inform each other sounds so simple and solid. We already do use our money to inform each other. We subscribe to Netflix. This informs everyone that we value Netflix's content more than we value the alternative uses of our money...
Netflix's content > alternative uses
We clearly and obviously empower Netflix to compete society's limited resources away from less valuable alternative uses. Yay!!!!!
There's one very basic premise here: we don't equally value Netflix and the alternatives. Except, this is just as true for Netflix's content! Nobody equally values Netflix's content.
If we could spend our fees on our favorite content, then this would inform Netflix that we value our favorite content more than we value the alternative uses of our fees...
favorite content > alternative content
We would clearly and obviously empower the producers of our favorite content to compete society's limited resources away from the producers of less valuable content. Yay!!!!!!!!! Yay?
People get excited about finding a $100 dollar bill on the sidewalk...and graduating... and getting engaged... and having a baby... and getting a promotion... and writing a bestseller... and winning the lottery. Yes, these things and many more are very reasonable justifications for excitement. But in the grand scheme of things.... all of these things are subordinate to empowering more beneficial producers to compete society's limited resources away from less beneficial producers. Therefore, nothing should excite us more than markets. We should be the most excited about markets because they facilitate the most excitement. If Netflix was a market... then we'd be able to use our fees to inform everyone how excited we are about our favorite shows. Netflix and other producers would be able to use this information to supply even more exciting shows. Yay!!!!!!!!!
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The money wouldn't necessarily be given to the content producers anyway - it would go to the people who own the IP. Netflix can't change that. Even if it did and even if we assume people didn't just lazily dump the fee into the first thing they see because they get to access everything anyway, money spent wouldn't necessarily reflect demand. - Conscentia
It feels like you're focusing on the word "demand" rather than on the "money spent" part. For me it's significant and meaningful and important and useful to know how much money people are willing to spend on things. It's convenient to use the word "demand" to refer to the amount of money that people are willing to spend on things. But we can also use the letter "X" or the word "fhqwhgads" or "zeitgeist" or any other combination of letters you want. I'm less interested in the word than in the concept. So it would be great if you focused on the concept.
Spending money is a sacrifice. The more money that is spent, the bigger the sacrifice. Since spending money is a sacrifice... generally people don't randomly spend their money. They didn't exchange their limited time and effort for money just so that they can flush it down the toilet.
It's easy to prove this... all I have to do is ask for your money. Of course you're going to want to know why you should give me any money. So in order to persuade you to give me your money, I'd have to provide you with some information. You'd compare the information that I gave you with all the information that you have and then decide whether or not to give me money. If you decided not to give me any money, well, in theory I could endeavor to provide you with different and better information. And again you'd compare this new information with all your information in order to decide whether to give me money.
This process of persuasion involves lots of brainpower being used and lots of information being shared, considered and compared. So it's significant and meaningful and important to know how much money individuals and groups of individuals are willing to spend.
Distributing the fee to the content does not guarantee that more such content will be made. Fans of Star Trek TNG could regularly dump their whole fee into the show but it's not going to be renewed for another season regardless. The show has long been finished. Netflix isn't Patreon. The money doesn't go to fund content. As such there is no sense is spending the fee into order to voice demand, and I'd expect user behaviour to reflect this. - Conscentia
I was disappointed that Person of Interest was canceled...
As CBS’s chairman, president, and CEO Leslie Moonves told The Hollywood Reporter recently, the company “broke even” on Person of Interest last year, but because Warner Bros., not CBS, profits from the show’s back end (DVD sales, foreign rights, streaming, syndication), it was literally not worth it to renew the show. - Kate Aurthur, “Person Of Interest” And The Mysteries Of Cancellation
It was canceled despite the fact that nobody knew how much money that I was willing to spend on the show. And I suppose this could potentially sound egocentric. So let me zoom out. It was canceled despite the fact that nobody knew how much money that any subscribers were willing to spend on the show. This fact makes me acutely feel like I'm living in the stone ages. Where I have to go around trying to convince people that fire and wheels are useful. I'm extremely grateful that I live in an era where I don't have to try and convince anybody that fire and wheels are useful... but I'm also extremely disappointed that I live in an era where I do have to try and convince everybody that it's useful to know how much money people are willing to spend on things.
Consider how much better off your life is because you live in an era where everybody knows that fire and wheels are useful. Now double or triple or quadruple that amount of betterness to try and appreciate how much better off your life would be if you lived in an era where everybody knows that it's essential to know how much money people are willing to spend on things.
Admittedly I have absolutely no idea how much money everybody would be willing to spend on Person of Interest... so of course I can't guarantee that, if ignorance (of willingness to pay) had been eliminated, the show would have been continued rather than canceled. But I can guarantee that the deciders, whoever they were, would have made a far more informed decision.
The world will be infinitely better off when everybody makes far more informed decisions.
No. That the one rich guy spent 6000 times more does not mean the demand is 6000 times greater. It just means he can afford to spend more. Even if he does want it more, so what? That one rich guy is still just one guy. - Conscentia
Let's imagine that people could choose where their taxes go. Some people want to go to war with Canada. The shape of the demand looks like this...
What would you say about the shape of the demand? I'd say that it's certainly tall enough... but it's way too skinny. Too few people are truly willing to pay for war with Canada. Sure, these few people are willing to pay a lot... but that really doesn't overrule the fact that there aren't nearly enough of them to justify this particular use of their tax dollars. So the DoD would use the money for other things besides invading Canada.
Using technical terms I'd say that the breadth of the demand is insufficient. The shape is too skinny. The fatter (wider) it is... the greater the justification for using those tax dollars to attack Canada.
In terms of the public sector, being concerned with the shape of the demand makes sense because the point of taxes really isn't to spend them on things that only a relatively few people are going to benefit from. We really don't want rich people to be able to spend their taxes on private golf courses or private yachts or private airports. We want everybody, rich or poor, to spend their taxes on things that lots of people are going to benefit from. Maybe like healthcare?
The shape isn't super tall... but it's pretty fat. There's definitely more than enough demand breadth to justify these tax dollars being spent on healthcare. Although perhaps it's not quite correct to compare something more general (healthcare) with something more specific (war with Canada). It would probably be more correct to compare war with Canada to cancer research. We can reasonably guess that the demand for the latter would be far broader than the demand for the former.
In any case, it certainly makes sense to consider the shape of the demand when we're talking about tax dollars. The thing is, we really weren't talking about tax dollars. We really weren't talking about the public sector. We were talking about donors to the Libertarian Party using their donations to signal the value of the potential convention themes. Yet, you definitely thought that the shape of demand was very relevant!
If the entire point of the public sector is to have a space where it's unacceptable for money to be spent on things that will only benefit a few people... then it's gotta be the case that the entire point of the private sector is to have a space where it is entirely acceptable for money to be spent on things that will only benefit a few people.
If one person alone wants to spend enough money to choose the theme for the Libertarian Party convention... then that's entirely acceptable. If one person alone wants to spend enough money to prevent Person of Interest from being canceled... then that's entirely awesome. If one person alone wanted to spend enough money to pay for the Statue of Liberty's pedestal... then that also would have been entirely awesome.
Willingness to pay reflects ability to pay, and as such is not a measure of demand. One cannot be willing to pay money one doesn't have, regardless of whether one wants something. - Conscentia
If somebody is completely broke then clearly we can't know how much money they'd be willing to spend on defense, healthcare, Person of Interest, the Statue of Liberty's pedestal, food, clothes, computers or anything else. Homeless people don't have much or any money... this is certainly true. But does this really mean that we can't know the demand for anything? Does it really mean that it's irrelevant how much money people are willing to spend on things? Markets should be entirely discarded and replaced with... voting? I'm sure that this is not what you're suggesting... yet you're bringing up ability to pay as if it would somehow only be relevant to donors to the Libertarian Party using their donations to signal the value of potential convention themes. Actually, the ability to pay (or the lack thereof) is relevant to all markets. So if you're arguing that it invalidates the spending info for one market... then your argument has to be applicable to all markets.
If we prevent people from using their money to help determine the value of things... then things will be incorrectly valued. When things are incorrectly valued, things will be incorrectly used. When things are incorrectly used, people will be worse off. Therefore, the degree and extent to which people are currently worse off... reflects the degree and extent to which we prevent people from using their money to help determine the value of things.
Right now you believe that the products at your grocery store are going to be correctly continued or discontinued because shoppers are allowed to use their money to help determine the value of the products.
Yet you also believe that the shows on Netflix are going to be correctly continued or canceled despite the fact that subscribers aren't allowed to use their money to help determine the value of the shows.
And of course you don't believe that Netflix can read the minds of its subscribers. Instead, you believe that subscribers already provide enough information for Netflix to make adequately informed decisions. But even Netflix acknowledges that ratings are less trustworthy than viewing habits. Except, how can viewing habits be more trustworthy than spending decisions? And it's not like Netflix can compare the two sets of information. It doesn't even see the point in having the information about spending. And there isn't a single subscriber who is interested in providing this information. Except for me. And one of my friends. I suppose there might be a few more people out there who would see the point of using their fees to inform Netflix. In any case we certainly aren't the rule.
The idea of using our money to inform each other sounds so simple and solid. We already do use our money to inform each other. We subscribe to Netflix. This informs everyone that we value Netflix's content more than we value the alternative uses of our money...
Netflix's content > alternative uses
We clearly and obviously empower Netflix to compete society's limited resources away from less valuable alternative uses. Yay!!!!!
There's one very basic premise here: we don't equally value Netflix and the alternatives. Except, this is just as true for Netflix's content! Nobody equally values Netflix's content.
If we could spend our fees on our favorite content, then this would inform Netflix that we value our favorite content more than we value the alternative uses of our fees...
favorite content > alternative content
We would clearly and obviously empower the producers of our favorite content to compete society's limited resources away from the producers of less valuable content. Yay!!!!!!!!! Yay?
People get excited about finding a $100 dollar bill on the sidewalk...and graduating... and getting engaged... and having a baby... and getting a promotion... and writing a bestseller... and winning the lottery. Yes, these things and many more are very reasonable justifications for excitement. But in the grand scheme of things.... all of these things are subordinate to empowering more beneficial producers to compete society's limited resources away from less beneficial producers. Therefore, nothing should excite us more than markets. We should be the most excited about markets because they facilitate the most excitement. If Netflix was a market... then we'd be able to use our fees to inform everyone how excited we are about our favorite shows. Netflix and other producers would be able to use this information to supply even more exciting shows. Yay!!!!!!!!!
Tuesday, October 4, 2016
Samuel Hammond VS QIRE
Comment on: Voting as a collective action problem by Samuel Hammond
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Prohibition, the Holocaust and every war ever started were "solutions" to collective action "problems". Same thing with the pyramids and putting a man on the moon.
Voting is only good to the extent that it doesn't violate Quiggin's Implied Rule of Economics (QIRE). So... when does voting not violate QIRE? The only way that we could know that voting was not violating QIRE would be if we actually knew people's willingness to pay (WTP) for their preferred option. But that would require replacing voting with spending.
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Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. - Edward Glaeser, If You Build It…
The correct fix for crowded roads is to charge people for the social costs of their choices. - Edward Glaeser, If You Build It…
People should pay for the social cost of their flying. The TSA should be paid for by fliers. - Edward Glaeser, The one thing Trump and Clinton agree on is infrastructure.
Until people are made to bear the full costs of their decisions, those decisions are unlikely to be socially sound, in this as in other areas of public policy. - Richard Bird, Charging for Public Services: A New Look at an Old Idea
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. - Adam Smith, Wealth of Nations
Public officials and professionals may have higher preferences for some public goods than the citizens they serve. Thus they may allocate more tax monies to these services than the citizens being served would allocate if they had an effective voice in the process. Under-financing can occur where many of the beneficiaries of a public good are not included in the collective consumption units financing the good. Thus they do not help to finance the provision of that good even though they would be willing to help pay their fair share. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices
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WTP is an incredibly coherent thread in economics (and in the best libertarianism). Why are you ignoring it? Do you think it's irrelevant? Are you not aware of it?
Elsewhere you wrote...
It seems like you care about a person's willingness to move. But willingness to move is the same thing as WTP. So.... clearly, to some extent, you're not entirely unaware of WTP. The question is... why are you ignoring it when it comes to voting? Why does it matter when it comes to foot voting but it doesn't matter when it comes to ballot voting?
Giving people the freedom to decide for themselves whether it's truly worth it to throw the alternative uses of their own resources under the bus is the only way to prevent QIRE from being violated.
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Prohibition, the Holocaust and every war ever started were "solutions" to collective action "problems". Same thing with the pyramids and putting a man on the moon.
Voting is only good to the extent that it doesn't violate Quiggin's Implied Rule of Economics (QIRE). So... when does voting not violate QIRE? The only way that we could know that voting was not violating QIRE would be if we actually knew people's willingness to pay (WTP) for their preferred option. But that would require replacing voting with spending.
************
Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. - Edward Glaeser, If You Build It…
The correct fix for crowded roads is to charge people for the social costs of their choices. - Edward Glaeser, If You Build It…
People should pay for the social cost of their flying. The TSA should be paid for by fliers. - Edward Glaeser, The one thing Trump and Clinton agree on is infrastructure.
Until people are made to bear the full costs of their decisions, those decisions are unlikely to be socially sound, in this as in other areas of public policy. - Richard Bird, Charging for Public Services: A New Look at an Old Idea
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. - Adam Smith, Wealth of Nations
Public officials and professionals may have higher preferences for some public goods than the citizens they serve. Thus they may allocate more tax monies to these services than the citizens being served would allocate if they had an effective voice in the process. Under-financing can occur where many of the beneficiaries of a public good are not included in the collective consumption units financing the good. Thus they do not help to finance the provision of that good even though they would be willing to help pay their fair share. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices
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WTP is an incredibly coherent thread in economics (and in the best libertarianism). Why are you ignoring it? Do you think it's irrelevant? Are you not aware of it?
Elsewhere you wrote...
Economists call this Tiebout sorting, a model that inspired a generation of libertarians to a kind of municipal fetishism which vastly overestimated the average person’s willingness to move, and vastly underestimated the potential for localized forms of tyranny.
It seems like you care about a person's willingness to move. But willingness to move is the same thing as WTP. So.... clearly, to some extent, you're not entirely unaware of WTP. The question is... why are you ignoring it when it comes to voting? Why does it matter when it comes to foot voting but it doesn't matter when it comes to ballot voting?
Giving people the freedom to decide for themselves whether it's truly worth it to throw the alternative uses of their own resources under the bus is the only way to prevent QIRE from being violated.
Friday, September 16, 2016
Edward Glaeser VS John Quiggin
Who doesn't love a good juxtapose?
Edward Glaeser: If You Build It...
John Quiggin: Face the facts:
I'm pretty sure that Glaeser wins this round.
Am I biased? Well yeah. I'm biased towards markets... but I'm also biased towards Quiggin. He's my favorite liberal economist. So my biases cancel each other out. Yup. I love markets just as much as I love Quiggin. Errrr... well...
Does public provision really work?
In case you missed it...
Which sounds very similar to this...
Which sounds a lot like this...
And...
*****************************
A second common feature of pro-war analysis is a failure to take account of the opportunity cost of the resources used in war. The $300 billion used in the Iraq war would have been enough to finance several years of the Millennium Development project aimed at ending extreme poverty in the world, and could have saved millions of lives. But even assuming this is politically unrealistic, the money could surely have been spent on improved health care, road safety and so on in the US itself. At a typical marginal cost of $5 million per live saved, 60 000 American lives could have been saved. This is morally relevant, but is commonly ignored. - John Quiggin, War and its consequences
Given the performance of the Bush Administration so far, it is tempting to agree with Harry that any money saved from the Iraq war would have been wasted elsewhere. But I think this is incorrect, in part because there’s no sign that the Bushies recognise a budget constraint. For them, the war is free: it isn’t even included in the regular Budget which is, in any case, massively in deficit with extra items regularly added to the slate. The bills will have to be paid in the end, but there’s no easy way to predict who will pay or in what form. - John Quiggin, Opportunity costs redux
Even at the cost of lining up with Friedman, I’d be pleased if the idea that war is a mostly futile waste of lives and money became conventional wisdom. Switching to utopian mode, wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)? - John Quiggin, War and waste
*****************************
See the part about "switching to utopian mode"?
I certainly can't blame Quiggin for switching to utopian mode. Utopian mode is super essential. I spend lots of time in utopian mode. It's why I favor government expansion. But do I imagine a State different from the one possible in the physical world?
Hey Munger... would it be possible in the physical world to have a State where people can choose where their taxes go? Would it be more or less possible in the physical world to have a libertarian government?
However we spin it, a libertarian government would still be a command economy. It's certainly true though that a smaller command economy is better than a larger command economy. But is it possible in the physical world to have a smaller command economy that stays small? If you're going to trust politicians to determine how much money should be spent on war.... then where, when, why and how do you draw the funding line?
Does a limited government sound like an oxymoron? If not.... then what about a limited command economy?
Let's say that we created a market in the public sector by allowing people to choose where their taxes go. Then we'd have a market in the public sector and a market in the private sector. Wouldn't the issue be, in the end, one of public versus private?
What's the difference between public services and private services?
*****************************
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. - Frédéric Bastiat, Private and Public Services
Public services are never better performed than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them. - Adam Smith, Wealth of Nations
The extent and range of public services are determined by the collective willingness of individuals to purchase them. Services will be extended as long as the aggregate benefits are held to exceed the costs. For the total of all public services, aggregate benefits should approximately equal total costs in terms of sacrificed alternatives. Ideally, the fiscal process represents a quid pro quo transaction between the government and all individuals collectively considered. The benefit principle must be applied in this sense. - James Buchanan, Fiscal Theory and Political Economy
It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. - Abraham Maslow, Toward a Psychology of Being
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes. - Frédéric Bastiat, What Is Seen and What Is Not Seen
*****************************
Public services and private services both fill holes. There are lots of public and private holes that genuinely need to be filled. Because society's resources are limited, it's a really good idea to prevent the government from filling the wrong holes.
According to Quiggin's Implied Rule of Economics (QIRE)... society's limited resources should be put to more, rather than less, valuable uses. How do we prevent QIRE from being regularly and massively violated?
A. willing to pay to use infrastructure
B. willing to pay for infrastructure
Sure we can charge people for the social costs of their choices... but what are the chances that the charges will accurately reflect the costs? Super slim. This is because one price really does not fit all. A cost, like a benefit, is entirely in the eye/mind/heart of the consumer.
************************
Simply considered, cost is the obstacle or barrier to choice, that which must be got over before choice is made. Cost is the underside of the coin, so to speak, cost is the displaced alternative, the rejected opportunity. Cost is that which the decision-maker sacrifices or gives up when he selects one alternative rather than another. Cost consists therefore in his own evaluation of the enjoyment or utility that he anticipates having to forgo as a result of choice itself. There are specific implications to be drawn from this choice-bound definition of opportunity cost:
1. Cost must be born exclusively by the person who makes decisions; it is not possible for this cost to be shifted to or imposed on others.
2. Cost is subjective; it exists only in the mind of the decision maker or chooser.
3. Cost is based on anticipations; it is necessarily a forward looking or ex ante concept.
4. Cost can never be realized because of the fact that choice is made; the alternative which is rejected can never itself by enjoyed.
5. Cost cannot be measured by someone other than the chooser since there is no way that subjective mental experiences can be directly observed.
- James Buchanan, Introduction: L.S.E Cost Theory in Retrospect
************************
Everybody perceives that they see society. But this perception is wrong. We don't actually see society. What we actually see is a reflection of society. All we can ever see is a reflection of society. This is because all we can ever know about what's really inside people depends entirely on what they choose to reveal. People's projections create society's reflection.
The accuracy of society's reflection is critical. Command economies fail because the reflection is terribly inaccurate. Market economies succeed because the reflection is far more accurate. If we can truly understand why, exactly, there's such a huge disparity in the accuracy of the reflections... then it should be really easy to understand how to improve market economies.
If we have a market in the private sector and a market in the public sector... then we will be able to see two different reflections of society. Will both reflections be equally accurate? Of course not.
In the public sector, people would not have any incentive to conceal their true preferences. This means that people's public projections would be more honest than their private projections. As a result, the reflection in the public sector would be more accurate than the reflection in the private sector. This is why I favor the expansion of government. To be clear, I favor the expansion of a pragmatarian government. I definitely don't favor the expansion of the current government.
Let's take a closer look at one-price-fits-all (OPFA). If we did charge for roads, what could we say about the people who were willing to pay the price? We could say that their payment (allocation) was equal to, or less than, their perception of relative scarcity (valuation)...
allocation <= valuation
What are the chances though that a user's allocation would be equal to their valuation? The chances would be super slim. In most cases the user's allocation would be greater than their valuation.
valuation - allocation = consumer surplus
But what if, rather than charging people to use the road... we gave people the freedom to allocate their taxes to the road and all the other goods in the public sector? Then people would no longer have an incentive to conceal their true preference for the road.
allocation = valuation
valuation - allocation = $0.00
Would tax choice truly eliminate all the consumer surplus in the public sector? Let's imagine a two good public sector with tax choice...
1. Roads
2. Education
The tax rate is essentially the amount of money charged for these two goods. With tax choice, taxpayers would have the freedom to decide how they divvied up their payment between these two goods. If the tax rate was too low then it would mean that most taxpayers would perceive that at least one of these goods was relatively scarce.
Let's say that Frank has a tax obligation of $3,000 dollars. He allocates $2,500 to education and $500 to roads. Does his allocation equal his valuation? Not if he perceives both goods to be in short supply. If he perceives both goods to be in short supply then his allocation will be less than his valuation...
allocation < valuation
valuation - allocation = consumer surplus
Perhaps a diagram would help...
In this diagram we can see that, with user fees, Frank pays a lot more for roads than he pays for education. Which intuitively seems a bit off. Logically it seems pretty intuitive that the user fee for roads should be a lot lower than the user fee for education. Right? But what is the basis for this intuition? Education is more costly than roads? Or, education is more valuable than roads? Or, the demand for education is greater than the demand for roads? Perhaps the intuition looks like this...
education > roads
Education is greater than roads. Ok, sure. But how much, exactly, is it greater?
Thanks to the diagram we can clearly see that Frank's valuation of education is greater than his valuation of roads. We know that Frank is willing to pay more for education than for roads. But user fees can never be custom tailored to Frank. So the user fees he pays for roads and education will never communicate exactly how much he perceives education to be greater than roads. The same is true of all the other users. As a result, with user fees, the proportion of funding for roads and education will never ever be optimal. The balance will always be suboptimal.
With user fees the proportions can only ever be roughly correct. But with tax choice, the proportions will always be 100% correct.
And I suppose that if I was as good at math as Paul Samuelson was then I'd be able to prove this with a beautiful model. Unfortunately, I'm not as good at math as Samuelson was. However, I'm far better at economics than he was. In the grand scheme of things, being good at economics is far better than being good at math. Maybe, in fact, there's something about being good at math that prevents a person from being good at economics. Have any of the seriously good economists been seriously good at math? Nope. I don't think so. So if an economist is good at math then don't trust their economics.
But perhaps I'm seriously overestimating my own econ skills. It's entirely possible. But until I'm proven wrong I'm going to continue believing that I'm right.
A. willing to pay to use infrastructure
B. willing to pay for infrastructure
The difference might seem subtle... but it's fundamentally important.
Glaeser is correct that willingness to pay is the only way to accurately measure the social cost/benefit of public services... but Quiggin is correct that public services shouldn't only be available to those able and willing to pay for them.
How cool is that? They both win! But Glaeser wins bigger because his article contains a fundamentally important economic truth that Quiggin, in another place and time, acknowledged, or recognized, at least to some extent...
When it comes to war, we especially want people to make the wisest choices possible. So it's imperative that we determine people's willingness to pay for war.
Last year Jeremy Corbyn made the wonderful argument that British taxpayers should be free to boycott the military...
Willingness to pay is the only way to prevent QIRE from being violated. So if some people are not willing to pay for war... then they shouldn't be forced to. Conversely, if other people are very much willing to pay for war.... then they should be free to.
What's so incredibly funny (not "haha" funny) is that liberals and conservatives largely oppose this idea. How could they both oppose it?! Ok, it's kinda "haha" funny as well. Right? This paradox is super easy to resolve...
Politicians have no clue which side would "win" and which side would "lose".
With the market we really don't think of "sides" winning or losing. This is simply because there aren't any "sides".
From the economic perspective, is there any benefit to having "sides"? Do we really need "sides" in the public sector? Why can't there simply be organizations in the public sector that have the strongest possible incentive to effectively and efficiently serve people?
Public services are not exempt from basic economic truths. It's a basic economic truth that incentives matter. It's a basic economic truth that every allocation has an opportunity cost. It's a basic economic truth that society's limited resources should be put to more, rather than less, valuable uses (QIRE). It's a basic economic truth that people's willingness to pay the opportunity cost is the only way to prevent QIRE from being regularly and massively violated. It's a basic economic truth that the pragmatarian model is the best way to reveal people's willingness to pay. It's a basic economic truth that people's allocations should reflect their valuations.
Ideally, economists should do a really good job of informing everybody of these basic economic truths. Ideally, the public sector should be based on these basic economic truths. When it finally is, then society's reflection will be far more accurate and everybody's decisions will be far more beneficial.
Like I said in the beginning, John Quiggin is my favorite liberal economist. He's my favorite liberal economist because, out of all the liberal economists, he does the best job of acknowledging/addressing basic economic truths...
But does Quiggin really need to be a liberal economist? Do we really need "sides" in economics? I really don't want to say that Quiggin is my favorite liberal economist. I would really prefer to say that he's my favorite living economist. But I'll only be able to honestly do so when his economic story is more coherent than Tabarrok's economic story.
It's pretty easy to test the coherence of an economist. First have them explain to you why the free-rider problem is a problem. And then have them explain to you why consumer surplus is not a problem.
Here's what will happen if they aren't coherent. First they'll say that a big disparity between allocation and valuation is a bad thing and then they'll say that it's a good thing!
For example...
I think that if economists made the effort to get their story straight then there would be far more interest in tax choice. In any case, there would be far more concern with the elephant in the room (a command economy in the public sector).
Edward Glaeser: If You Build It...
John Quiggin: Face the facts:
I'm pretty sure that Glaeser wins this round.
Am I biased? Well yeah. I'm biased towards markets... but I'm also biased towards Quiggin. He's my favorite liberal economist. So my biases cancel each other out. Yup. I love markets just as much as I love Quiggin. Errrr... well...
Sooner or later the advocates of reform will have to answer the Edison-Blair question: “What works?” And what works is traditional public provision. Through all of these failed experiments, the public sector, much-maligned and chronically underfunded, has carried on with the hard work of educating young people, treating the sick and providing the vast range of services needed in a modern society, on a the basis of an ethic of service to the entire community, and not merely those who can pay for premium service. - John Quiggin, Face the facts:
Does public provision really work?
As I’ve argued previously, a serious consequentialist analysis suggests that war usually has more bad consequences than good. In particular, anyone who takes consequentialism seriously must reckon with the fact that war is a negative sum game. This means either that at least one side in a war has miscalculated or that the costs of war are being borne by people who don’t have a say in the matter. In addition, it’s necessary to take account of rule-based concerns about the effect of decisions to go to war in particular cases weakening generally desirable rules to the contrary. - John Quiggin, War and its consequences
In case you missed it...
This means either that at least one side in a war has miscalculated or that the costs of war are being borne by people who don’t have a say in the matter. - John Quiggin, War and its consequences
Which sounds very similar to this...
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. - Adam Smith, Wealth of Nations
Which sounds a lot like this...
Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. Large-scale federal involvement in transportation means that the people who benefit aren’t the people who pay the costs. The result is too many white-elephant projects and too little innovation and maintenance. - Edward Glaeser, If You Build It…
And...
*****************************
A second common feature of pro-war analysis is a failure to take account of the opportunity cost of the resources used in war. The $300 billion used in the Iraq war would have been enough to finance several years of the Millennium Development project aimed at ending extreme poverty in the world, and could have saved millions of lives. But even assuming this is politically unrealistic, the money could surely have been spent on improved health care, road safety and so on in the US itself. At a typical marginal cost of $5 million per live saved, 60 000 American lives could have been saved. This is morally relevant, but is commonly ignored. - John Quiggin, War and its consequences
Given the performance of the Bush Administration so far, it is tempting to agree with Harry that any money saved from the Iraq war would have been wasted elsewhere. But I think this is incorrect, in part because there’s no sign that the Bushies recognise a budget constraint. For them, the war is free: it isn’t even included in the regular Budget which is, in any case, massively in deficit with extra items regularly added to the slate. The bills will have to be paid in the end, but there’s no easy way to predict who will pay or in what form. - John Quiggin, Opportunity costs redux
Even at the cost of lining up with Friedman, I’d be pleased if the idea that war is a mostly futile waste of lives and money became conventional wisdom. Switching to utopian mode, wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)? - John Quiggin, War and waste
*****************************
See the part about "switching to utopian mode"?
Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least 300 years. - Michael Munger, Unicorn Governance
I certainly can't blame Quiggin for switching to utopian mode. Utopian mode is super essential. I spend lots of time in utopian mode. It's why I favor government expansion. But do I imagine a State different from the one possible in the physical world?
Hey Munger... would it be possible in the physical world to have a State where people can choose where their taxes go? Would it be more or less possible in the physical world to have a libertarian government?
However we spin it, a libertarian government would still be a command economy. It's certainly true though that a smaller command economy is better than a larger command economy. But is it possible in the physical world to have a smaller command economy that stays small? If you're going to trust politicians to determine how much money should be spent on war.... then where, when, why and how do you draw the funding line?
Wartime spending needs are such that the threshold of decision can be crossed with newly imposed taxes or with substantial increases in rate levels of existing taxes. The additional real costs, in opportunity-cost terms, of the expanded spending program are accepted in the emergency setting. Once these needs disappear, however, the bias is shifted in favor of a continued high level of public activity, as opposed to a return to some pre-emergency balance between the public and the private sector. Not having to undergo the apparent sacrifice of real resources generated by new-tax financing, the individual is more willing, in post-emergency periods, to approve spending on the provision of services than he should have been in the pre-emergency fiscal setting. A corollary hypothesis is, of course, that the longer the emergency, the more pronounced this effect will be; that is to say, the older the tax, the more routine the institution, the greater the likelihood that it will be continued in existence. - James Buchanan, Public Finance in Democratic Process
Does a limited government sound like an oxymoron? If not.... then what about a limited command economy?
The issue is not, in the end, one of public versus private. Rather it is the fact that market competition and the profit motive inevitably associated with it is antithetical to the professional and service orientation that is central to human services of all kinds. - John Quiggin, Face the facts:
Let's say that we created a market in the public sector by allowing people to choose where their taxes go. Then we'd have a market in the public sector and a market in the private sector. Wouldn't the issue be, in the end, one of public versus private?
What's the difference between public services and private services?
*****************************
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. - Frédéric Bastiat, Private and Public Services
Public services are never better performed than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them. - Adam Smith, Wealth of Nations
The extent and range of public services are determined by the collective willingness of individuals to purchase them. Services will be extended as long as the aggregate benefits are held to exceed the costs. For the total of all public services, aggregate benefits should approximately equal total costs in terms of sacrificed alternatives. Ideally, the fiscal process represents a quid pro quo transaction between the government and all individuals collectively considered. The benefit principle must be applied in this sense. - James Buchanan, Fiscal Theory and Political Economy
It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. - Abraham Maslow, Toward a Psychology of Being
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes. - Frédéric Bastiat, What Is Seen and What Is Not Seen
*****************************
Public services and private services both fill holes. There are lots of public and private holes that genuinely need to be filled. Because society's resources are limited, it's a really good idea to prevent the government from filling the wrong holes.
According to Quiggin's Implied Rule of Economics (QIRE)... society's limited resources should be put to more, rather than less, valuable uses. How do we prevent QIRE from being regularly and massively violated?
If people are willing to pay to use infrastructure, we can assume that that infrastructure provides social value. - Edward Glaeser, If You Build It…
A. willing to pay to use infrastructure
B. willing to pay for infrastructure
The correct fix for crowded roads is to charge people for the social costs of their choices. Singapore instituted congestion pricing in 1975, and now operates state-of-the-art electronic road pricing, with tolls that vary by usage and time of day. London has now had congestion pricing for a decade. Both cities have eased traffic as a result. Yet America still acts as if charging drivers is a crime. - Edward Glaeser, If You Build It…
Sure we can charge people for the social costs of their choices... but what are the chances that the charges will accurately reflect the costs? Super slim. This is because one price really does not fit all. A cost, like a benefit, is entirely in the eye/mind/heart of the consumer.
************************
Simply considered, cost is the obstacle or barrier to choice, that which must be got over before choice is made. Cost is the underside of the coin, so to speak, cost is the displaced alternative, the rejected opportunity. Cost is that which the decision-maker sacrifices or gives up when he selects one alternative rather than another. Cost consists therefore in his own evaluation of the enjoyment or utility that he anticipates having to forgo as a result of choice itself. There are specific implications to be drawn from this choice-bound definition of opportunity cost:
1. Cost must be born exclusively by the person who makes decisions; it is not possible for this cost to be shifted to or imposed on others.
2. Cost is subjective; it exists only in the mind of the decision maker or chooser.
3. Cost is based on anticipations; it is necessarily a forward looking or ex ante concept.
4. Cost can never be realized because of the fact that choice is made; the alternative which is rejected can never itself by enjoyed.
5. Cost cannot be measured by someone other than the chooser since there is no way that subjective mental experiences can be directly observed.
- James Buchanan, Introduction: L.S.E Cost Theory in Retrospect
************************
Everybody perceives that they see society. But this perception is wrong. We don't actually see society. What we actually see is a reflection of society. All we can ever see is a reflection of society. This is because all we can ever know about what's really inside people depends entirely on what they choose to reveal. People's projections create society's reflection.
The accuracy of society's reflection is critical. Command economies fail because the reflection is terribly inaccurate. Market economies succeed because the reflection is far more accurate. If we can truly understand why, exactly, there's such a huge disparity in the accuracy of the reflections... then it should be really easy to understand how to improve market economies.
If we have a market in the private sector and a market in the public sector... then we will be able to see two different reflections of society. Will both reflections be equally accurate? Of course not.
Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his "true" preferences for public goods. - James M. Buchanan, The Economics of Earmarked Taxes
In the public sector, people would not have any incentive to conceal their true preferences. This means that people's public projections would be more honest than their private projections. As a result, the reflection in the public sector would be more accurate than the reflection in the private sector. This is why I favor the expansion of government. To be clear, I favor the expansion of a pragmatarian government. I definitely don't favor the expansion of the current government.
Let's take a closer look at one-price-fits-all (OPFA). If we did charge for roads, what could we say about the people who were willing to pay the price? We could say that their payment (allocation) was equal to, or less than, their perception of relative scarcity (valuation)...
allocation <= valuation
What are the chances though that a user's allocation would be equal to their valuation? The chances would be super slim. In most cases the user's allocation would be greater than their valuation.
valuation - allocation = consumer surplus
But what if, rather than charging people to use the road... we gave people the freedom to allocate their taxes to the road and all the other goods in the public sector? Then people would no longer have an incentive to conceal their true preference for the road.
allocation = valuation
valuation - allocation = $0.00
Would tax choice truly eliminate all the consumer surplus in the public sector? Let's imagine a two good public sector with tax choice...
1. Roads
2. Education
The tax rate is essentially the amount of money charged for these two goods. With tax choice, taxpayers would have the freedom to decide how they divvied up their payment between these two goods. If the tax rate was too low then it would mean that most taxpayers would perceive that at least one of these goods was relatively scarce.
Let's say that Frank has a tax obligation of $3,000 dollars. He allocates $2,500 to education and $500 to roads. Does his allocation equal his valuation? Not if he perceives both goods to be in short supply. If he perceives both goods to be in short supply then his allocation will be less than his valuation...
allocation < valuation
valuation - allocation = consumer surplus
Perhaps a diagram would help...
In this diagram we can see that, with user fees, Frank pays a lot more for roads than he pays for education. Which intuitively seems a bit off. Logically it seems pretty intuitive that the user fee for roads should be a lot lower than the user fee for education. Right? But what is the basis for this intuition? Education is more costly than roads? Or, education is more valuable than roads? Or, the demand for education is greater than the demand for roads? Perhaps the intuition looks like this...
education > roads
Education is greater than roads. Ok, sure. But how much, exactly, is it greater?
Thanks to the diagram we can clearly see that Frank's valuation of education is greater than his valuation of roads. We know that Frank is willing to pay more for education than for roads. But user fees can never be custom tailored to Frank. So the user fees he pays for roads and education will never communicate exactly how much he perceives education to be greater than roads. The same is true of all the other users. As a result, with user fees, the proportion of funding for roads and education will never ever be optimal. The balance will always be suboptimal.
With user fees the proportions can only ever be roughly correct. But with tax choice, the proportions will always be 100% correct.
And I suppose that if I was as good at math as Paul Samuelson was then I'd be able to prove this with a beautiful model. Unfortunately, I'm not as good at math as Samuelson was. However, I'm far better at economics than he was. In the grand scheme of things, being good at economics is far better than being good at math. Maybe, in fact, there's something about being good at math that prevents a person from being good at economics. Have any of the seriously good economists been seriously good at math? Nope. I don't think so. So if an economist is good at math then don't trust their economics.
But perhaps I'm seriously overestimating my own econ skills. It's entirely possible. But until I'm proven wrong I'm going to continue believing that I'm right.
A. willing to pay to use infrastructure
B. willing to pay for infrastructure
The difference might seem subtle... but it's fundamentally important.
Glaeser is correct that willingness to pay is the only way to accurately measure the social cost/benefit of public services... but Quiggin is correct that public services shouldn't only be available to those able and willing to pay for them.
How cool is that? They both win! But Glaeser wins bigger because his article contains a fundamentally important economic truth that Quiggin, in another place and time, acknowledged, or recognized, at least to some extent...
This means either that at least one side in a war has miscalculated or that the costs of war are being borne by people who don’t have a say in the matter. - John Quiggin, War and its consequences
Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. - Edward Glaeser, If You Build It…
Until people are made to bear the full costs of their decisions, those decisions are unlikely to be socially sound, in this as in other areas of public policy. - Richard Bird, Charging for Public Services: A New Look at an Old Idea
When it comes to war, we especially want people to make the wisest choices possible. So it's imperative that we determine people's willingness to pay for war.
Last year Jeremy Corbyn made the wonderful argument that British taxpayers should be free to boycott the military...
Could the Minister consider whether it would be right to introduce such a measure? The Italian Parliament has draft legislation before it that would allow Italian taxpayers to divert a proportion of their tax from the armed services to peace building, and there are three relevant petitions before this House. Given the huge rebuilding costs that will fall to this country and others in Kosovo and elsewhere where there has been conflict, perhaps we should have a peace-building fund that could invest in conflict resolution, reconstruction and trying to prevent terrible wars and civilian conflicts.
British taxpayers have a right of conscience not to participate in the armed forces in time of conscription and should have a similar right in time of peace to ensure that part of their tax goes to peace, not war. - Jeremy Corbyn, Taxpayers (Conscience)
Willingness to pay is the only way to prevent QIRE from being violated. So if some people are not willing to pay for war... then they shouldn't be forced to. Conversely, if other people are very much willing to pay for war.... then they should be free to.
What's so incredibly funny (not "haha" funny) is that liberals and conservatives largely oppose this idea. How could they both oppose it?! Ok, it's kinda "haha" funny as well. Right? This paradox is super easy to resolve...
It is impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other. - Knut Wicksell, A New Principle of Just Taxation
Politicians have no clue which side would "win" and which side would "lose".
With the market we really don't think of "sides" winning or losing. This is simply because there aren't any "sides".
From the economic perspective, is there any benefit to having "sides"? Do we really need "sides" in the public sector? Why can't there simply be organizations in the public sector that have the strongest possible incentive to effectively and efficiently serve people?
Public services are not exempt from basic economic truths. It's a basic economic truth that incentives matter. It's a basic economic truth that every allocation has an opportunity cost. It's a basic economic truth that society's limited resources should be put to more, rather than less, valuable uses (QIRE). It's a basic economic truth that people's willingness to pay the opportunity cost is the only way to prevent QIRE from being regularly and massively violated. It's a basic economic truth that the pragmatarian model is the best way to reveal people's willingness to pay. It's a basic economic truth that people's allocations should reflect their valuations.
Ideally, economists should do a really good job of informing everybody of these basic economic truths. Ideally, the public sector should be based on these basic economic truths. When it finally is, then society's reflection will be far more accurate and everybody's decisions will be far more beneficial.
Like I said in the beginning, John Quiggin is my favorite liberal economist. He's my favorite liberal economist because, out of all the liberal economists, he does the best job of acknowledging/addressing basic economic truths...
.@bretsikkink Keep a lookout for my book in progress, Economics in Two Lessons, a response to Hazlitt (and so, to Bastiat also).— JohnQuiggin (@JohnQuiggin) September 12, 2016
But does Quiggin really need to be a liberal economist? Do we really need "sides" in economics? I really don't want to say that Quiggin is my favorite liberal economist. I would really prefer to say that he's my favorite living economist. But I'll only be able to honestly do so when his economic story is more coherent than Tabarrok's economic story.
It's pretty easy to test the coherence of an economist. First have them explain to you why the free-rider problem is a problem. And then have them explain to you why consumer surplus is not a problem.
Here's what will happen if they aren't coherent. First they'll say that a big disparity between allocation and valuation is a bad thing and then they'll say that it's a good thing!
For example...
Nice piece by @mslaurabliss on Uber/"consumer surplus" https://t.co/g3IutnF3OJ addressing this Cohen, etc NBER piece https://t.co/PcSVog1qKm— Michael Munger (@mungowitz) September 15, 2016
I think that if economists made the effort to get their story straight then there would be far more interest in tax choice. In any case, there would be far more concern with the elephant in the room (a command economy in the public sector).
Monday, January 4, 2016
Consumer choice limits the influence of irrational people
Context: The Demand For Defense?
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Galloism: This is just a restatement of a number of assertions without proof. We do not see any significant tie between wealth and rationality, and as a result do not support a pragmatarian system. We do not think that resources will be more rationally located, and the exceptions will not disappear ever - but you can nip them in the bud with a 100% estate tax. Do you support a 100% estate tax to limit the number of irrational people with significant wealth?
Xero: The very point of markets is that they do an excellent job of limiting the influence of irrational people. I'm sure that you'd agree that Don Quixote was pretty irrational. He spent considerable time and energy attacking windmills because he thought that they were giants. I have no problem assuming that you wouldn't have voluntarily given your money to Quixote. This choice of yours would have helped to limit Quixote's influence.
Consumer choice limits the influence of irrational people. Right now we don't have consumer choice in the public sector. This is a problem because it gives irrational people more influence over really important things like national defense, environmental protection, education, healthcare and so on. The solution is simply to create a market in the public sector by giving people the freedom to choose where their taxes go.
German taxpayers weren't free to choose where their taxes went. Without this limit on the influence of irrational people... Germany ended up with an extremely influential Quixote... Hitler.
German taxpayers are still not free to choose where their taxes go. Neither are Chinese taxpayers. Or Russian taxpayers. Or American taxpayers. There isn't a single country where taxpayers can choose where their taxes go. In the absence of this limit in any public sector... it's only a matter of time before we end up with another extremely influential Quixote. Just because we beat the last extremely influential Quixote really doesn't guarantee that we'll beat the next one.
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Galloism: This is just a restatement of a number of assertions without proof. We do not see any significant tie between wealth and rationality, and as a result do not support a pragmatarian system. We do not think that resources will be more rationally located, and the exceptions will not disappear ever - but you can nip them in the bud with a 100% estate tax. Do you support a 100% estate tax to limit the number of irrational people with significant wealth?
Xero: The very point of markets is that they do an excellent job of limiting the influence of irrational people. I'm sure that you'd agree that Don Quixote was pretty irrational. He spent considerable time and energy attacking windmills because he thought that they were giants. I have no problem assuming that you wouldn't have voluntarily given your money to Quixote. This choice of yours would have helped to limit Quixote's influence.
Consumer choice limits the influence of irrational people. Right now we don't have consumer choice in the public sector. This is a problem because it gives irrational people more influence over really important things like national defense, environmental protection, education, healthcare and so on. The solution is simply to create a market in the public sector by giving people the freedom to choose where their taxes go.
German taxpayers weren't free to choose where their taxes went. Without this limit on the influence of irrational people... Germany ended up with an extremely influential Quixote... Hitler.
German taxpayers are still not free to choose where their taxes go. Neither are Chinese taxpayers. Or Russian taxpayers. Or American taxpayers. There isn't a single country where taxpayers can choose where their taxes go. In the absence of this limit in any public sector... it's only a matter of time before we end up with another extremely influential Quixote. Just because we beat the last extremely influential Quixote really doesn't guarantee that we'll beat the next one.
Sunday, August 23, 2015
Public Finance in a Nutshell
Reply to: Money Is A Broken System Of Value
Buchanan published that paper in 1963… nearly a decade after another Nobel economist published the most widely cited paper on the topic…
But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Samuelson, now with democracy, because 1. around half the country doesn’t pay income taxes and 2. the burden isn’t evenly distributed among those who do pay income taxes (progressive taxation)… it is in the selfish interest of most voters to give false signals, to pretend to have more interest in a given collective consumer activity than he really has, etc.
Wicksell published that in 1896. A few decades later…
After 9/11 plenty of people shouted for war… but why not? It’s not like the money was coming out of their pockets.
It should be painfully obvious that, when it comes to public goods… the free-rider problem is just as applicable to democracy as it is to the private sector. This really shouldn’t be news though. Here’s what Adam Smith, the founder of modern economics, wrote in 1776…
If you read Samuelson’s very short paper… then you’d realize that he doesn’t mention democracy at all. As strange as it may sound, he simply assumes omniscience on the part of government planners. Clearly he didn’t truly believe that government planners are omniscient! But from his perspective… discerning the actual demand for public goods was a very minor detail. Because he perceived that preference revelation was a minor detail… his grasp of economic reality was… tenuous… at best…
Back in the day, Economics was the most widely used economics textbook!
In summary… it’s human nature to want more for less. This works great when it comes to private goods because we all have the maximum incentive to shop around for better deals. Consumer choice gives producers the maximum incentive to offer better deals. Offering better deals depends on discovering better uses of society’s limited resources.
But when it comes to public goods… human nature doesn’t work so great. There’s considerable incentive to free-ride on other people’s contributions. So it’s reasonable to conclude that the private sector will undersupply public goods. The solution only requires one step though… taxation. That’s it! Because once the cost of contributing to public goods is a foregone conclusion… then human nature can work just as well for public goods as it does for private goods.
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The “minor” detail that you’re missing from your otherwise excellent and entertaining analysis is the free-rider problem.
Of course the private sector isn’t going to spend enough money on cancer research! Because if it did spend enough money on cancer research then the free-rider problem wouldn’t be a real problem and we wouldn’t need the government to solve it by forcing people to contribute to public goods (aka “taxation”).
So, by arguing that cancer research is undersupplied… your beef really isn’t with the private sector… it’s with the public sector. The entire point of the public sector is to ensure that public goods, such as cancer research, are not undersupplied.
The question is… why would the public sector fail to supply enough cancer research? Well… if the public sector was actually effective at supplying the optimal amounts of goods… then we really wouldn’t need markets at all. Socialism would be an adequately effective system for ensuring that society’s limited resources are put to their most valuable uses. However, as I’m sure you’re aware, there’s considerable evidence that socialism is far from effective at efficiently allocating resources.
We’re stuck between a rock and a hard place. Because of the free-rider problem… the private sector won’t supply enough cancer research. But because of the preference revelation problem… the public sector won’t supply the optimal amount of cancer research… or conservation… or welfare… or defense… or infrastructure… or any other public good.
We “unbreak” this predicament simply by creating a market in the public sector (pragmatarianism). The supply of public goods would be determined by the actual demand for public goods. If you demand more cancer research and less unnecessary wars… then you’ll spend your taxes accordingly.
Less formally… in the private sector, when it comes to public goods, you have a big incentive to be a big fat liar. “No… I don’t really value cancer research that much…” However, once the cost of contributing to public goods is a foregone conclusion (aka “taxation”)… your incentive to lie goes out the window. In fact, you have the maximum incentive to be truthful. “I might as well spend my taxes on the public goods that I have the greatest demand for! Like cancer research!”
More formally…
The “minor” detail that you’re missing from your otherwise excellent and entertaining analysis is the free-rider problem.
Of course the private sector isn’t going to spend enough money on cancer research! Because if it did spend enough money on cancer research then the free-rider problem wouldn’t be a real problem and we wouldn’t need the government to solve it by forcing people to contribute to public goods (aka “taxation”).
So, by arguing that cancer research is undersupplied… your beef really isn’t with the private sector… it’s with the public sector. The entire point of the public sector is to ensure that public goods, such as cancer research, are not undersupplied.
The question is… why would the public sector fail to supply enough cancer research? Well… if the public sector was actually effective at supplying the optimal amounts of goods… then we really wouldn’t need markets at all. Socialism would be an adequately effective system for ensuring that society’s limited resources are put to their most valuable uses. However, as I’m sure you’re aware, there’s considerable evidence that socialism is far from effective at efficiently allocating resources.
We’re stuck between a rock and a hard place. Because of the free-rider problem… the private sector won’t supply enough cancer research. But because of the preference revelation problem… the public sector won’t supply the optimal amount of cancer research… or conservation… or welfare… or defense… or infrastructure… or any other public good.
We “unbreak” this predicament simply by creating a market in the public sector (pragmatarianism). The supply of public goods would be determined by the actual demand for public goods. If you demand more cancer research and less unnecessary wars… then you’ll spend your taxes accordingly.
Less formally… in the private sector, when it comes to public goods, you have a big incentive to be a big fat liar. “No… I don’t really value cancer research that much…” However, once the cost of contributing to public goods is a foregone conclusion (aka “taxation”)… your incentive to lie goes out the window. In fact, you have the maximum incentive to be truthful. “I might as well spend my taxes on the public goods that I have the greatest demand for! Like cancer research!”
More formally…
Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his “true” preferences for public goods. — James Buchanan, The Economics of Earmarked Taxes
Buchanan published that paper in 1963… nearly a decade after another Nobel economist published the most widely cited paper on the topic…
But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Lindahl, now it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has, etc. — Paul Samuelson, The Pure Theory of Public Expenditure
But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Samuelson, now with democracy, because 1. around half the country doesn’t pay income taxes and 2. the burden isn’t evenly distributed among those who do pay income taxes (progressive taxation)… it is in the selfish interest of most voters to give false signals, to pretend to have more interest in a given collective consumer activity than he really has, etc.
If once the lower classes are definitely in possession of the power to legislate and tax, there will certainly be a danger that they may behave no more unselfishly than those classes which have so far been in power. In other words, there will be danger that the lower classes in power may impose the bulk of all taxes on the rich and may at the same time be so reckless and extravagant in approving public expenditures to which they themselves contribute but little that the nation’s mobile capital may soon be squandered fruitlessly. This may well break the lever of progress. — Knut Wicksell, A New Principle of Just Taxation
Wicksell published that in 1896. A few decades later…
As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. — Loren Lomasky, Geoffrey Brennan Democracy and Decision
After 9/11 plenty of people shouted for war… but why not? It’s not like the money was coming out of their pockets.
It should be painfully obvious that, when it comes to public goods… the free-rider problem is just as applicable to democracy as it is to the private sector. This really shouldn’t be news though. Here’s what Adam Smith, the founder of modern economics, wrote in 1776…
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. — Adam Smith, Wealth of Nations
If you read Samuelson’s very short paper… then you’d realize that he doesn’t mention democracy at all. As strange as it may sound, he simply assumes omniscience on the part of government planners. Clearly he didn’t truly believe that government planners are omniscient! But from his perspective… discerning the actual demand for public goods was a very minor detail. Because he perceived that preference revelation was a minor detail… his grasp of economic reality was… tenuous… at best…
The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive. — Paul Samuelson, Economics
Back in the day, Economics was the most widely used economics textbook!
In summary… it’s human nature to want more for less. This works great when it comes to private goods because we all have the maximum incentive to shop around for better deals. Consumer choice gives producers the maximum incentive to offer better deals. Offering better deals depends on discovering better uses of society’s limited resources.
But when it comes to public goods… human nature doesn’t work so great. There’s considerable incentive to free-ride on other people’s contributions. So it’s reasonable to conclude that the private sector will undersupply public goods. The solution only requires one step though… taxation. That’s it! Because once the cost of contributing to public goods is a foregone conclusion… then human nature can work just as well for public goods as it does for private goods.
Saturday, August 1, 2015
Poverty Depends On Disregarding Demand
Reply to: The REAL Story of Wealth Creation
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I appreciate and share your concern regarding poverty… but your story is fundamentally flawed. According to your story…
Except, here’s Aristotle discussing poverty…
Aristotle lived from 384 to 322 BC… a full 2000 years before you claim that poverty and capitalism began.
In order to understand the ACTUAL cause of poverty and the REAL story of wealth creation… let’s borrow the pyramids.
Imagine an ancient Egyptian market. Bob has an idea to bake bread. Consumers benefit from bread so they voluntarily give him their money in exchange for his bread. Peter, on the other hand, has an idea to build pyramids. Consumers don’t benefit from pyramids so they do not voluntarily give him their money in exchange for his pyramids. Does this prevent Peter from building pyramids? No. But it does effectively prevent Peter from building very large pyramids.
As we already know, Egypt has several very large pyramids. Clearly they were built outside of the market. Massive amounts of society’s limited resources were mobilized and allocated…. regardless of the demand. The size of the pyramids did not reflect the size of the demand. There was an epic disparity between supply and demand.
Poverty depends on disregarding demand. You disregard demand. You disregard consumers’ valuations. You think that the most valuable allocations of society’s limited resources can be determined by taking consumers’ valuations out of the equation. You’re a proponent of exclusive valuation. Therefore, you’re inadvertently responsible for the prevalence of poverty.
When people such as yourself definitively discontinue their disregard for demand... then, and only then… will poverty be destroyed. Once we no longer waste massive amounts of limited resources on the modern day equivalent of pyramids… then there will be a Cambrian explosion of better opportunities. The inherent diversity of demand will no longer be diminished by being diverted to a narrow range of less beneficial endeavors. Instead, a fully diverse demand will freely flow to find and support the widest possible variety of the most valuable discoveries.
In order to truly undam demand, people must be free to choose where their taxes go. The supply of public goods would be determined by the demand for public goods.
Right now we don’t know the demand for war. We have never known the demand for war. Creating a market in the public sector (pragmatarianism) would clarify the demand for war. Will everybody be happy with the answer? Probably not, but how can we effectively improve the answer when we don’t even know what it is?
Demand opacity is just as applicable to conservation. Just recently a white rhino died. The director of the zoo where the rhino had been living had this to say…
I wanted to laugh, scream and cry when I read this. What Rabas said is funny because he clearly wants more white rhinos. How many more? Maybe 10 more? Or 100 more? Or a 1,000 more? What about 10,000 more? Yes? Rabas most definitely wants an abundance of rhinos. But… isn’t that greedy of him? Isn’t it greedy to want more and more and more? Of course! Yet, there he is shaking his fist at greed!
Human greed really isn’t the problem… it’s the solution! Human greed is the solution to human greed. The greed to consume more must be checked and balanced by the greed to conserve more. Right now the balance is heavily weighted in favor of consumption. This is simply because human greed has been largely limited to the private sector.
We don’t have a market in the public sector. Rabas isn’t free to choose where his taxes go. The government takes his taxes and a small group of elected representatives decides how to spend them. But there isn’t a single elected representative that can come even close to matching Rabas’ in terms of rhino greed and knowledge. No representative cares more than Rabas does about effectively increasing the supply of rhinos. No representative feels the loss of rhinos more deeply than Rabas does. No representative frequently dreams of endless herds of freely roaming rhinos.
It’s a travesty that Rabas’ rhino greed/knowledge is blocked from the public sector. Just like it’s a travesty that my epiphyte greed/knowledge is blocked from the public sector. How many similar travesties are there?
We expect our elected representatives to effectively embody humanity’s greed and knowledge. There has never been… and will never be…a more harmful absurdity.
What is the demand for rhino conservation? We don’t know. We really should know… but we don’t. How long will it take for people to grasp the problem with not knowing the truth? How long will it take for people to grasp the benefit of human greed?
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I appreciate and share your concern regarding poverty… but your story is fundamentally flawed. According to your story…
- capitalism is to blame for poverty
- both began around the 1700s
Except, here’s Aristotle discussing poverty…
It is also advantageous for a tyranny that all those who are under it should be oppressed with poverty, that they may not be able to compose a guard; and that, being employed in procuring their daily bread, they may have no leisure to conspire against their tyrants. The Pyramids of Egypt are a proof of this, and the votive edifices of the Cyposelidse, and the temple of Jupiter Olympus, built by the Pisistratidae, and the works of Polycrates at Samos; for all these produced one end, the keeping the people poor. — Aristotle, The Politics
Aristotle lived from 384 to 322 BC… a full 2000 years before you claim that poverty and capitalism began.
In order to understand the ACTUAL cause of poverty and the REAL story of wealth creation… let’s borrow the pyramids.
Imagine an ancient Egyptian market. Bob has an idea to bake bread. Consumers benefit from bread so they voluntarily give him their money in exchange for his bread. Peter, on the other hand, has an idea to build pyramids. Consumers don’t benefit from pyramids so they do not voluntarily give him their money in exchange for his pyramids. Does this prevent Peter from building pyramids? No. But it does effectively prevent Peter from building very large pyramids.
As we already know, Egypt has several very large pyramids. Clearly they were built outside of the market. Massive amounts of society’s limited resources were mobilized and allocated…. regardless of the demand. The size of the pyramids did not reflect the size of the demand. There was an epic disparity between supply and demand.
Poverty depends on disregarding demand. You disregard demand. You disregard consumers’ valuations. You think that the most valuable allocations of society’s limited resources can be determined by taking consumers’ valuations out of the equation. You’re a proponent of exclusive valuation. Therefore, you’re inadvertently responsible for the prevalence of poverty.
When people such as yourself definitively discontinue their disregard for demand... then, and only then… will poverty be destroyed. Once we no longer waste massive amounts of limited resources on the modern day equivalent of pyramids… then there will be a Cambrian explosion of better opportunities. The inherent diversity of demand will no longer be diminished by being diverted to a narrow range of less beneficial endeavors. Instead, a fully diverse demand will freely flow to find and support the widest possible variety of the most valuable discoveries.
In order to truly undam demand, people must be free to choose where their taxes go. The supply of public goods would be determined by the demand for public goods.
Right now we don’t know the demand for war. We have never known the demand for war. Creating a market in the public sector (pragmatarianism) would clarify the demand for war. Will everybody be happy with the answer? Probably not, but how can we effectively improve the answer when we don’t even know what it is?
Demand opacity is just as applicable to conservation. Just recently a white rhino died. The director of the zoo where the rhino had been living had this to say…
It is a terrible loss. Nabiré was the kindest rhino ever bred in our zoo. It is not just that we were very fond of her. Her death is a symbol of the catastrophic decline of rhinos due to a senseless human greed. Her species is on the very brink of extinction. — Přemysl Rabas, Female Nabiré, one of the last five northern white rhinos, died
I wanted to laugh, scream and cry when I read this. What Rabas said is funny because he clearly wants more white rhinos. How many more? Maybe 10 more? Or 100 more? Or a 1,000 more? What about 10,000 more? Yes? Rabas most definitely wants an abundance of rhinos. But… isn’t that greedy of him? Isn’t it greedy to want more and more and more? Of course! Yet, there he is shaking his fist at greed!
Human greed really isn’t the problem… it’s the solution! Human greed is the solution to human greed. The greed to consume more must be checked and balanced by the greed to conserve more. Right now the balance is heavily weighted in favor of consumption. This is simply because human greed has been largely limited to the private sector.
We don’t have a market in the public sector. Rabas isn’t free to choose where his taxes go. The government takes his taxes and a small group of elected representatives decides how to spend them. But there isn’t a single elected representative that can come even close to matching Rabas’ in terms of rhino greed and knowledge. No representative cares more than Rabas does about effectively increasing the supply of rhinos. No representative feels the loss of rhinos more deeply than Rabas does. No representative frequently dreams of endless herds of freely roaming rhinos.
It’s a travesty that Rabas’ rhino greed/knowledge is blocked from the public sector. Just like it’s a travesty that my epiphyte greed/knowledge is blocked from the public sector. How many similar travesties are there?
We expect our elected representatives to effectively embody humanity’s greed and knowledge. There has never been… and will never be…a more harmful absurdity.
What is the demand for rhino conservation? We don’t know. We really should know… but we don’t. How long will it take for people to grasp the problem with not knowing the truth? How long will it take for people to grasp the benefit of human greed?
Thursday, July 30, 2015
Unlimited Wants vs Limited Resources
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You’re looking for people to learn from? I nominate Adam Smith…
The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired would occur more rarely, and be of shorter continuance. Those, on the contrary, during which the ability was in the highest vigour would be of much longer duration than they can well be under the system of funding. — Adam Smith, Wealth of Nations
Here are a couple fundamental truths…
- Society’s wants are unlimited.
- Society’s resources are limited.
Markets work because people are forced to prioritize how they spend their own hard-earned money. We can’t afford to purchase everything on our want list… so we have to make some painful decisions. We have to deliberate, discern and determine which wants will provide us with the most value. Our spending decisions communicate our valuations to producers… and producers utilize this information to put society’s limited resources to their most valuable uses. As a result, society derives the maximum value from its limited resources.
Governments fail because they aren’t markets. In the absence of markets, society will not derive the maximum value from its limited resources.
Does this mean that we have to eliminate governments? Nope. The fact of the matter is that we can’t solely rely on voluntarily contributions to public goods. Again, people’s wants are unlimited… so there’s a strong incentive to free-ride on other people’s contributions to public goods. You can’t benefit from the steak that I buy (unless I want you to)… but you can benefit from the national defense that I contribute to. So it’s not unreasonable to guess that the free-rider problem would be extensive. Therefore, public goods would be largely underfunded/undersupplied.
The solution is to turn the government into a market. People would still have to pay taxes… but they would be able to choose where their taxes go. If war is truly a priority for most people… then their spending decisions would clearly communicate this. People’s true priorities can only be revealed by their willingness to sacrifice the alternative uses of their own money. Take personal sacrifice out of the equation and you’re bound to get the wrong answer.
You’re on the right track by endeavoring to try and facilitate communication between citizens and government. But it’s fundamentally important to understand and appreciate the significance of actions (spending) speaking louder than words (opinions).
Perhaps it will help to apply this concept to our current context.
Four people have “Recommended” this story of yours…
- Madeline Roachell
- Tulio Malaspina
- Travis Truman
- James Horton
The “Recommend” button facilitated communication. It made it stupid easy for these four people to communicate that they like your story. They didn’t have to send you a smoke signal… or knock on your door… or send you a telegram… or send you a fax… or write you a letter… or send you an e-mail… or send you a text… or call you on the phone… all they had to do was click one button. With minimal sacrifice… these four people voted for your story. And now we know that they like it.
What we don’t know is how much these four people like your story. Does it matter how much they like their story? Does it matter how important your story is to them? Does it matter how much they would be willing to sacrifice for your story? Does it matter how they would rank your story among all the other stories that they’ve also recommended? Shall we pretend that they value each of their recommended stories equally?
In order for society’s limited resources to be put to their most valuable uses… valuing stories has to be as stupid easy as recommending them. Communicating values has to be as stupid easy as communicating opinions. Next to the “Recommend” button could be some coin buttons… penny, nickle, dime and quarter. Clicking a coin button would instantly transfer the money from the reader’s digital wallet to your digital wallet. Which coin button(s) would James Horton click? Which coin button(s) would Madeline Roachell click? Which coin button(s) would you click? How much do you value your own story? Which of your stories do you value most? Which of your stories does the crowd value most? Which of the crowd’s stories do you value most?
Of course we’d still be up against the free-rider problem. But the existence of the non-profit sector clearly proves that many people are happy to voluntary make some contributions to support worthy causes and concepts. So I’m pretty sure that plenty of people on Medium would be happy to click some coin buttons in order to more accurately communicate the intensity of their preferences.
It would be really awesome if some city government endeavored to clarify demand by making it stupid easy for citizens to communicate their values. But clarifying demand is equally relevant to Medium and a gazillion other websites. I’m guessing that Medium would be much more likely to add coin buttons than some city government. Just like I’m guessing that other websites would be much more likely to add coin buttons than Medium is.
There are multiple paths to any destination. If the shortest path has significant obstacles… then it might not be the best path.
Friday, March 6, 2015
Holocaust - The Extremely Inefficient Allocation Of Jews
Recently I explained that blocking nearly all of our country's competence from the public sector results in the inefficient allocation of competence. Around the same time that I posted that entry... I stumbled upon a rigorous debate regarding the causes of The Holocaust.
What happens when you put 2 + 2 together?
Blocking nearly all of a country's competence from the public sector has, in the past, resulted in a huge amount of competence being allocated to the gas chambers.
In other words... the massive shortage of competence in Germany's public sector resulted in the massive misallocation of a multitude of Germany's most competent citizens.
More specifically... preventing Jews and other competent citizens from shopping in Germany's public sector resulted in millions of Jews being exterminated.
It's more than half a century later and Jews still can't shop in any country's public sector.
I was just crushed by the enormity of my responsibility/burden. This made it way too tangible. What I'm trying to teach, if it's correct, could keep all sorts of people out of the gas chamber. So if I fail to teach my simple lesson...
This is what happens when you fondle the elephant so thoroughly. I really don't want this responsibility. I don't want to be the only one really pushing for a pubmar. I really want to pass the cup on to all these far more qualified people...
This is my cup list. David Friedman is on this list. When I asked him about pragmatarianism... this was his response...
The following is a bit of a non-sequitur... but please bear with me. Right now there are people who are genuinely concerned with the rise of super intelligent (SI) robots. These concerned citizens even have their own think tank... Machine Intelligence Research Institute (MIRI). In their most recent blog entry... Davis on AI capability and motivation... I shared this comment...
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If you raised your AI like a child... and I did the same with my AI... and they both grew up to be SIs... would there be any disparity in their goals?
As humans, we all have different pieces of the puzzle which is why we are like blind men touching an elephant but coming to very different conclusions. Would our respective SIs, with their countless pieces of the puzzle, both converge on the correct conclusion? Or is it possible that one would conclude that humanity should be eradicated and the other would conclude that we should be protected like any other species on this planet? If they came to different conclusions it's hard to imagine that they wouldn't quickly compare information and exchange missing puzzle pieces. In essence their information would go from asymmetric to symmetric in no time flat.
If the two (or more) SIs did converge on the same conclusion... if your conclusion was different then would you trust your own conclusion or would you "lean not unto thine own understanding" and trust their conclusion instead?
It's funny because in my recent blog entry I mentioned that around 11 I stopped believing in God. And now I'm entertaining the possibility that when I'm 60 I'll start believing in God again.
Not sure if you're interested... but this blog entry... What Do Coywolves, Mr. Nobody, Plants And Fungi All Have In Common? has my theory on why we developed our exceptional intelligence.
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David Friedman and I are like two blind men fondling different parts of an elephant and coming to different conclusions. If we were SIs... then we could quickly and easily synchronize our information and thus make it impossible to reach different conclusions. But we aren't SIs! We're humans. It's impossible for us to achieve information symmetry. We can however, with some effort, make our information marginally more symmetric. Just like this.
Perhaps it will help to share some background information. This isn't the first time that I've considered whether pragmatarianism would have prevented The Holocaust. Like I mentioned though, it is the first time that I've thought about it so tangibly.
Back in 2011... I posted this thread over at the Ron Paul Forums... Ron Paul vs The Invisible Hand...
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If you had to choose between Ron Paul being elected president OR applying the invisible hand to the public sector...which would you choose?
Applying the invisible hand to the public sector would simply involve giving taxpayers the freedom to directly allocate their individual taxes among the various government organizations...aka pragmatarianism.
You have a good idea what Ron Paul would try to do if he was elected...but do you have a good idea what the invisible hand would do to the public sector if given the opportunity?
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I attached a poll that included two options...
1. Ron Paul
2. The Invisible Hand
Here are the results of the poll...
Two out of three respondents would have voted for Ron Paul. Would the percentage be higher or lower if I posted the same thread but with Rand Paul?
One member of the forum, Conza88, was exceptionally nonplussed with the idea of allowing people to choose where their taxes go...
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Ron Paul... given your notion of the 'invisible hand' is clinically ______ed. Furthermore, since he would abolish the FED, Dept. of Education, Dept. of Labor, IRS, CIA, FBI etc....
You would implicitly condone their maintenance and existence, via 'pragmatarianism'. If we applied "pragmatarianism" back in National-Socialist Germany, your proposed system would support the continued funding of death camps.
NOR is what you suggest even close to resembling the process of the market and the 'invisible hand'. It is analogous to Robert Nozick's attempts at justifying an immaculate conception of the state. "every step of Nozick's invisible hand process is invalid: the process is all too conscious and visible"...
So the characterizing your 'invisible hand' process; AFTER the fact they have had NO choice in whether they are to be stolen or not, distorts reality. And is a massive misnomer.
It's still the re-distribution of wealth... and the free market option is not available. Who do you propose to implement this program? Politicians? Statists to give up their pie? Delusional. - Conza88
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All that emphasis was in the original.
Given enough eyeballs, all bugs are shallow? Was Conza88 pointing out a genuine problem with pragmatarianism?
To say the least, Conza88 never really struck me as a particularly thoughtful person. But I'm really glad that I never added him to my ignore list like he quickly added me to his! Because even though I didn't think that the "bug" he was pointing out was a real bug... it definitely put pragmatarianism in a very different, but extremely important, frame.
Different frames can yield different insights. But it's certainly a challenge to look at things differently. Which is exactly why two heads are better than one.
The question is... would pragmatarianism have prevented The Holocaust?
Thanks to Conza88, that was the first time that I had ever asked myself this question. And there's no doubt about it... it's a priceless question. It would behoove everybody on my cup list to allocate their considerable competence to answering it to the best of their ability. Publicly. Not privately. This way, if we come to different conclusions, everybody can compare the different information.
My information leads me to conclude that pragmatarianism would have prevented The Holocaust.
What's useful to consider is when pragmatarianism would have had to be implemented in order for The Holocaust to have been prevented. A stitch in time saves nine. If pragmatarianism truly helps to prevent a country's competence from being misallocated... then implementing it earlier is always better than later.
Every once in a while I'll daydream about trying to persuade Adam Smith to include a section on pragmatarianism in his book The Wealth of Nations. Occasionally my daydream goes as far back as Socrates. I try and imagine what pictures that I'd have to draw in order to overcome the language barrier. Maybe blind men fondling an elephant?? Have you seen my drawing skills?!
Even though earlier is always better than later, what's the latest year that pragmatarianism could have have been implemented in order for The Holocaust to have been prevented? Effectively answering this question requires a decent grasp of history. Is it possible to be a good economist without having a decent grasp of history? Is it possible to be a good historian without a decent grasp of economics?
As a quick aside... not sure if you've noticed but sometimes I like to attach more than one epiphyte to the same branch (> kill two birds with one stone). If I'm going to set up and climb the ladder... then while I'm up there attaching one epiphyte... I might as well attach two... or three.
With that in mind... have you read Pushing For A Pubmar yet? If not, you really should. In that blog entry I encourage my cup listers to try and imagine just how much credit they would have been able to take for Deng Xiaoping's gradual free-market reforms. These reforms have lifted millions of people out poverty.
In that entry I shared this example of my drawing skills...
Deng Xiaoping began his market reforms around 1978. We look back and take it as a given that there was enough support for China to take these small steps in the right direction. But what if those small steps had never been taken because market enthusiasts were pushing for large steps in the right direction?
Mao Zedong took control of China around 1950... five years after the end of WWII. In 1933, Hitler took control of Germany. It's hard to imagine that pragmatarianism could have been implemented in Germany after 1932. But what about in 1922? That was when Hitler took control of the Nazi Party (National Socialist German Workers Party (NSDAP)). Around that time it had less than 4,000 members.
On the completely opposite end of the ideological spectrum... 1922 is also the year that the Jewish economist Ludwig von Mises published his critique of government... Socialism. Here's a snippet from that book...
I modified the image above accordingly...
What if, in 1922, Mises had pushed for a pubmar? What if Socialism had made the really strong case that blocking competence from the public sector results in the inefficient allocation of competence? What if all the other market enthusiasts had started to help him push for a pubmar?
If all the market supporters had pushed hard/smart enough... and both the US and Germany implemented pragmatarianism a few years after Mises published his book... then each country's public sector would have been flooded with competence. What would this have averted?
1. The Great Depression (1929-39). Market enthusiasts love to blame the depression on the government and liberals love to blame the depression on the market. I think it's pretty reasonable to conclude that the depression was the result of blocking most of the country's competence from the public sector. One head really isn't better than a thousand. Given enough eyeballs, all bugs are shallow (Linus's Law). In the multitude of counselors there is safety (Proverbs 11). When you block nearly all the most competent heads/eyeballs from the public sector then it's guaranteed that there are going to be a myriad of important details that are missed.
2. The Holocaust/WWII (1939-45). Hitler's rise to power was in no small part due to the depression. He blamed the depression on the Jews and everybody else he didn't like. This scapegoat strategy proved to be quite effective. It wouldn't have been nearly as effective if Germany had been thriving. When a country is growing and there's plenty of prosperity... the party that's not in power has a lot less ammunition to use against the party that's in power. Also, pragmatarianism would have made political parties entirely redundant. It's pointless to join a political party when everybody is free to shop for themselves in the public sector.
3. The Great Leap Forward (1958-61). Without the depression, and without the war... communism/socialism (command economies) never would have spread around the world. This would have spared millions and millions of lives.
What other disasters would have been averted? And what would have been accomplished if so much competence hadn't been so majorly misallocated? How much better would our world now be?
Hopefully it's clear that my point here really isn't to assign any sort of blame or responsibility to Mises. I'm sure the thought of a pubmar never occurred to him. We can certainly lament the fact that he didn't offer the world this third solution... but we can't blame him for failing to spot this Easter Egg. Here we are now though, nearly a century later, looking at the possibility of a pubmar. And history seems to strongly support the conclusion that the people on my cup list are potentially making a huge mistake by not pushing for a pubmar.
In my blog entry... Pushing for a Pubmar... I encouraged my cup listers to imagine just how much credit they would have been able to take for China's small, but extremely beneficial, steps in the right direction. In this blog entry... it's sort of the same idea. If Ludwig von Mises had managed to successfully push for a pubmar just like Deng Xiaoping managed to successfully push for a primar... then how much credit would my cup listers have been able to take for all the disasters that a pubmar would have averted? How much credit would they have been able to take for all the benefit that a pubmar would have created? If Mises had tried to push for a pubmar... but wasn't successful because he was the only one pushing... then how responsible would my cup listers be for all the disasters that logically resulted from blocking competence from the public sector?
As an anarcho-capitalist, David Friedman is pushing to abolish the government. If Deng Xiaoping had pushed for abolishing the government... it's doubtful that China would have taken any steps in the right direction. If Ludwig von Mises had pushed for abolishing the government... it's doubtful that the depression, or WWII, or The Holocaust, or The Great Leap Forward would have been averted.
If pragmatarianism truly would have prevented The Holocaust and other disasters, then it stands to reason that the opportunity cost of pushing for anything else is way too high.
So where's the bottleneck? Could it be that the competence of Jews isn't appreciated?
What's of particular relevance, and perhaps some explanation for their competence, is Jewish diligence when it comes to giving...
Another one of my cup listers, Bryan Caplan, is also an anarcho-capitalist. But more often than not he pushes for open borders. Plenty of Jews left Germany before it was too late... so we know it wasn't impossible for them to do so. But these open borders really didn't prevent The Holocaust. From my perspective, The Holocaust would have been prevented if Jews had been free to vote with their taxes. Yet, does Bryan Caplan push for people to be free to vote with their taxes? Nope, he pushes for people to be free to vote with their feet.
Where's the bottleneck?
As I mentioned about the depression... liberals love to blame the market and market proponents love to blame the government. It's pretty much the same situation when it comes to Hitler's rise to power. Liberals love to blame big business for financing Hitler and market proponents love to blame liberals for failing to recognize the value of property rights.
As a result of this blame game, if you dig around for information regarding who bears responsibility for Hitler's rise to power... you'll find quite a bit of conflicting information. So perhaps this explains why it's not so clear that allowing German taxpayers to choose where their taxes go would have prevented The Holocaust.
If all Germans back then were evil... then pragmatarianism certainly wouldn't have prevented The Holocaust. Obviously not all Germans were evil. The millions of Jews were clearly an exception. But anybody who's seen Schindler's List would know that Jews weren't the only exceptions. So perhaps the essence of Conza88's critique was that there weren't enough exceptional Germans. Except, this is problematic for Conza88 because it would have him agreeing with liberal arguments that industrialists were largely responsible for Hitler and The Holocaust. Even the anarcho-capitalist Murray Rothbard recognized the problem with this line of thinking...
Of course I'd really like to believe that my "stitch in time" argument is more than adequate to support the conclusion that pragmatarianism would have prevented The Holocaust. Flooding Germany's public sector with competence earlier rather than later would have prevented all the problems that logically resulted from blocking nearly all of Germany's competence from the public sector. Hitler wouldn't have been able to exploit problems that didn't exist. He wouldn't have been able to blame Jews for problems that didn't exist.
Even though I'd like to believe that my "stitch in time" argument is adequate... it is still probably a good idea to continue exploring the available evidence.
In 1933, there around 67 million people in Germany. Out of 44,685,764 registered voters... 43.91% of them (17,277,180) voted for Hitler (source). So even with a considerable effort on the part of the Nazis to intimidate and suppress other voters... the majority of Germans did not vote for Hitler. And just because somebody did vote for Hitler, this does not necessarily mean that they would have been willing to put their taxes where their votes were...
free lunch... then the free-riders will disappear as quickly as they appeared.
The evidence is pretty clear that most Germans were not hell-bent upon assaulting and robbing their neighbors. They weren't interested in Hitler's "free" lunch. Yet, they were served it anyways.
So where's the bottleneck?
Maybe everybody who voted for Hitler was a taxpayer and everybody who didn't was not? This line of argument is more or less consistent with the liberal argument that business/industry was largely responsible for Hitler's rise to power. If this "most taxpayers are evil" argument is correct, then pragmatarianism definitely wouldn't have prevented The Holocaust.
If you read the Wikipedia article on Gustav Krupp von Bohlen und Halbach... then this is what you'll learn...
We get a different story, however, from a book that Henry Ashby Turner wrote in 1985... German Big Business and the Rise of Hitler. Here are some relevant passages from a few different reviews of this book...
Once Hitler was in power, he transferred ownership and control of various factories in such a way as to try and maximize the productive capacity that was in the hands of supporters. The Spanish economist Germa Bel wrote an excellent paper on this topic...Against the mainstream: Nazi privatization in 1930s Germany. Some snippets...
Any industrialists who failed to comply with Hitler's plan were quickly and easily replaced.
Let's review.
The Weimar Republic was established in Germany after the end of the first world war. Taxpayers were not free to choose where their taxes went. This blocked nearly all of Germany's competence from the public sector. As a result, competence was inefficiently allocated. Hitler exploited the subsequent problems and the "free" lunch democracy responded accordingly...
It's only natural for people to compare Germany's political system after WWI to our current system here in the US. People with Government 101 under their belt probably get the sense that, with our robust system of checks and balances, it's nearly impossible for any president to take control of the power of the purse. Is "nearly" impossible really good enough though? Wouldn't we be far better protected by decentralizing the power of the purse? This decentralization could be easily achieved simply by shifting control of the purse to millions and millions of taxpayers around the country.
It's also natural to compare one person, Hitler, controlling the power of the purse to our 500 congresspeople controlling the power of the purse. Perhaps the fact that our system hasn't resulted in the extremely inefficient allocation of Jews somehow proves that our system is good enough? I agree that it's wonderful that our Jews haven't been extremely inefficiently allocated... but, given the fact that they can't shop in the public sector, combined with the fact that they are the rule rather than the exception, then why should we have any confidence that Jews, or any of us, are being efficiently allocated? If you ever get the feeling that you're underemployed... then it's probably far more true than you can even begin to imagine. To quote my favorite Crooked Timber liberal John Holbo... "I’d be perfect for a lot of way cool jobs that don’t happen to exist."
To put it in terms of the cup half empty vs half full... any defender of our government is saying, "look, at least our cup isn't only 0.000000003% full". Yes, going from 0.000000003% to 0.0000017% is an improvement... but anybody who thinks that this is "enough" improvement is really missing the point. Or I'm really missing the point.
So where's the bottleneck?
I'm under the impression that it always helps to share my favorite passage from my favorite liberal congresswoman...
If Warren truly knows which public goods bakery owners, farmers and manufacturers need to stay rich... then giving taxpayers the option to directly allocate their taxes will simply give competent business owners the opportunity to hand their taxes to Warren so that she can spend their taxes for them. For some reason I highly doubt that very many business owners are going to want Warren, or any other politician, to spend their taxes for them. And this strong suspicion that I have, combined with the available evidence, leads me to believe that pragmatarianism would have prevented The Holocaust.
This branch could use another epiphyte...
In this video, Michael Sandel, a professor of philosophy at Harvard, makes an eloquent and crystal clear case against market expansion into civic territory. He's essentially the complete opposite of me.
Sandel's argument is that there are things that money can, but shouldn't, buy. He gives numerous examples... one of which is how some schools have experimented with paying kids to read. The concern of his, which his audiences have largely shared, is that money crowds out, or distorts, "intrinsic" value.
What's especially enjoyable about that video is that it has an exciting Easter Egg. I didn't recognize anybody on the panel but when introductions were finally made... one name jumped out at me... Julian Le Grand. Before I was banned from Wikipedia I created the articles for two of his books...
Motivation, Agency, and Public Policy
The Other Invisible Hand
These two books are the most relevant to the topic of tax choice. If I'm mistaken, please let me know!
In the video, Le Grand hints at what this blog entry is trying to shout. Even though it was just a hint... it seemed especially powerful because it was framed by Sandel's argument. This passage by J.S. Mill comes to mind...
Here's more of Sandel's argument (from his TED talk: Why we shouldn't trust markets with our civic life)...
... then it's imperative that we push for a pubmar.
The fact of the matter is that nobody is a mind reader. If we want an abundance of anything that's truly important to us... then we have to be free to spend our own money accordingly. We have to give both Jews and Gentiles alike the freedom to shop in the public sector. Not just in their own country's public sector... but in any country's public sector. And we shouldn't push for a pubmar because it's the "moral" thing to do... we should push for it because it's the beneficial thing to do.
Sympathy for the Devil
If it's true that blocking nearly all of a county's competence from the public sector results in the inefficient allocation of competence... then it would explain, in no small part, how Hitler himself ended up being so majorly misallocated. He was a victim of society's failure to recognize the value of a pubmar. All of us are victims... and we will continue to be until this fundamentally important lesson can be effectively taught to the world.
For your convenience... here's my cup list again...
While it would be immensely valuable if everybody on this list thoroughly answered the extremely important question of whether pragmatarianism would have prevented The Holocaust... maybe it's a better strategy to single out one person. And then they pick one person and so on.
It's a difficult choice... but I'm going to have to go with Alex Tabarrok. That's who I especially select to thoroughly answer the question that I've attempted to answer in this blog entry. Why Tabarrok? Here are the two main considerations...
1. potential value of his answer
2. likelihood that he'll answer
Tabarrok's total score is the highest.
What happens when you put 2 + 2 together?
Blocking nearly all of a country's competence from the public sector has, in the past, resulted in a huge amount of competence being allocated to the gas chambers.
In other words... the massive shortage of competence in Germany's public sector resulted in the massive misallocation of a multitude of Germany's most competent citizens.
More specifically... preventing Jews and other competent citizens from shopping in Germany's public sector resulted in millions of Jews being exterminated.
It's more than half a century later and Jews still can't shop in any country's public sector.
I was just crushed by the enormity of my responsibility/burden. This made it way too tangible. What I'm trying to teach, if it's correct, could keep all sorts of people out of the gas chamber. So if I fail to teach my simple lesson...
This is what happens when you fondle the elephant so thoroughly. I really don't want this responsibility. I don't want to be the only one really pushing for a pubmar. I really want to pass the cup on to all these far more qualified people...
- Alex Tabarrok, Tyler Cowen
- Bryan Caplan, Scott Sumner, David Henderson
- Robert Murphy
- Tom Woods
- Benjamin Powell
- Arnold Kling
- Jeffrey Tucker
- Deirdre McCloskey
- Thomas Sowell
- Peter Boettke
- Robert Higgs
- Walter Williams
- Michael Huemer
- Don Boudreaux, Russ Roberts
- David Friedman
- William Easterly
- Robin Hanson
- Randall Holcombe
- Roderick Long
- Walter Block
This is my cup list. David Friedman is on this list. When I asked him about pragmatarianism... this was his response...
I don't think that letting taxpayers allocate their taxes among options provided by the government solves the fundamental problems of government.Is there a more fundamental problem than people ending up in gas chambers? Or maybe this fundamental problem wouldn't have been solved by giving Jews and other competent people the freedom to shop in the public sector? Is Friedman missing something... or am I?
The following is a bit of a non-sequitur... but please bear with me. Right now there are people who are genuinely concerned with the rise of super intelligent (SI) robots. These concerned citizens even have their own think tank... Machine Intelligence Research Institute (MIRI). In their most recent blog entry... Davis on AI capability and motivation... I shared this comment...
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If you raised your AI like a child... and I did the same with my AI... and they both grew up to be SIs... would there be any disparity in their goals?
As humans, we all have different pieces of the puzzle which is why we are like blind men touching an elephant but coming to very different conclusions. Would our respective SIs, with their countless pieces of the puzzle, both converge on the correct conclusion? Or is it possible that one would conclude that humanity should be eradicated and the other would conclude that we should be protected like any other species on this planet? If they came to different conclusions it's hard to imagine that they wouldn't quickly compare information and exchange missing puzzle pieces. In essence their information would go from asymmetric to symmetric in no time flat.
If the two (or more) SIs did converge on the same conclusion... if your conclusion was different then would you trust your own conclusion or would you "lean not unto thine own understanding" and trust their conclusion instead?
It's funny because in my recent blog entry I mentioned that around 11 I stopped believing in God. And now I'm entertaining the possibility that when I'm 60 I'll start believing in God again.
Not sure if you're interested... but this blog entry... What Do Coywolves, Mr. Nobody, Plants And Fungi All Have In Common? has my theory on why we developed our exceptional intelligence.
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David Friedman and I are like two blind men fondling different parts of an elephant and coming to different conclusions. If we were SIs... then we could quickly and easily synchronize our information and thus make it impossible to reach different conclusions. But we aren't SIs! We're humans. It's impossible for us to achieve information symmetry. We can however, with some effort, make our information marginally more symmetric. Just like this.
Perhaps it will help to share some background information. This isn't the first time that I've considered whether pragmatarianism would have prevented The Holocaust. Like I mentioned though, it is the first time that I've thought about it so tangibly.
Back in 2011... I posted this thread over at the Ron Paul Forums... Ron Paul vs The Invisible Hand...
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If you had to choose between Ron Paul being elected president OR applying the invisible hand to the public sector...which would you choose?
Applying the invisible hand to the public sector would simply involve giving taxpayers the freedom to directly allocate their individual taxes among the various government organizations...aka pragmatarianism.
You have a good idea what Ron Paul would try to do if he was elected...but do you have a good idea what the invisible hand would do to the public sector if given the opportunity?
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I attached a poll that included two options...
1. Ron Paul
2. The Invisible Hand
Here are the results of the poll...
Two out of three respondents would have voted for Ron Paul. Would the percentage be higher or lower if I posted the same thread but with Rand Paul?
One member of the forum, Conza88, was exceptionally nonplussed with the idea of allowing people to choose where their taxes go...
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Ron Paul... given your notion of the 'invisible hand' is clinically ______ed. Furthermore, since he would abolish the FED, Dept. of Education, Dept. of Labor, IRS, CIA, FBI etc....
You would implicitly condone their maintenance and existence, via 'pragmatarianism'. If we applied "pragmatarianism" back in National-Socialist Germany, your proposed system would support the continued funding of death camps.
NOR is what you suggest even close to resembling the process of the market and the 'invisible hand'. It is analogous to Robert Nozick's attempts at justifying an immaculate conception of the state. "every step of Nozick's invisible hand process is invalid: the process is all too conscious and visible"...
So the characterizing your 'invisible hand' process; AFTER the fact they have had NO choice in whether they are to be stolen or not, distorts reality. And is a massive misnomer.
It's still the re-distribution of wealth... and the free market option is not available. Who do you propose to implement this program? Politicians? Statists to give up their pie? Delusional. - Conza88
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All that emphasis was in the original.
Given enough eyeballs, all bugs are shallow? Was Conza88 pointing out a genuine problem with pragmatarianism?
To say the least, Conza88 never really struck me as a particularly thoughtful person. But I'm really glad that I never added him to my ignore list like he quickly added me to his! Because even though I didn't think that the "bug" he was pointing out was a real bug... it definitely put pragmatarianism in a very different, but extremely important, frame.
Different frames can yield different insights. But it's certainly a challenge to look at things differently. Which is exactly why two heads are better than one.
The question is... would pragmatarianism have prevented The Holocaust?
Thanks to Conza88, that was the first time that I had ever asked myself this question. And there's no doubt about it... it's a priceless question. It would behoove everybody on my cup list to allocate their considerable competence to answering it to the best of their ability. Publicly. Not privately. This way, if we come to different conclusions, everybody can compare the different information.
My information leads me to conclude that pragmatarianism would have prevented The Holocaust.
What's useful to consider is when pragmatarianism would have had to be implemented in order for The Holocaust to have been prevented. A stitch in time saves nine. If pragmatarianism truly helps to prevent a country's competence from being misallocated... then implementing it earlier is always better than later.
Every once in a while I'll daydream about trying to persuade Adam Smith to include a section on pragmatarianism in his book The Wealth of Nations. Occasionally my daydream goes as far back as Socrates. I try and imagine what pictures that I'd have to draw in order to overcome the language barrier. Maybe blind men fondling an elephant?? Have you seen my drawing skills?!
Even though earlier is always better than later, what's the latest year that pragmatarianism could have have been implemented in order for The Holocaust to have been prevented? Effectively answering this question requires a decent grasp of history. Is it possible to be a good economist without having a decent grasp of history? Is it possible to be a good historian without a decent grasp of economics?
As a quick aside... not sure if you've noticed but sometimes I like to attach more than one epiphyte to the same branch (> kill two birds with one stone). If I'm going to set up and climb the ladder... then while I'm up there attaching one epiphyte... I might as well attach two... or three.
With that in mind... have you read Pushing For A Pubmar yet? If not, you really should. In that blog entry I encourage my cup listers to try and imagine just how much credit they would have been able to take for Deng Xiaoping's gradual free-market reforms. These reforms have lifted millions of people out poverty.
In that entry I shared this example of my drawing skills...
Deng Xiaoping began his market reforms around 1978. We look back and take it as a given that there was enough support for China to take these small steps in the right direction. But what if those small steps had never been taken because market enthusiasts were pushing for large steps in the right direction?
Mao Zedong took control of China around 1950... five years after the end of WWII. In 1933, Hitler took control of Germany. It's hard to imagine that pragmatarianism could have been implemented in Germany after 1932. But what about in 1922? That was when Hitler took control of the Nazi Party (National Socialist German Workers Party (NSDAP)). Around that time it had less than 4,000 members.
On the completely opposite end of the ideological spectrum... 1922 is also the year that the Jewish economist Ludwig von Mises published his critique of government... Socialism. Here's a snippet from that book...
The issue is always the same: the government or the market. There is no third solution. - Ludwig Von Mises, SocialismNo third solution?
I modified the image above accordingly...
What if, in 1922, Mises had pushed for a pubmar? What if Socialism had made the really strong case that blocking competence from the public sector results in the inefficient allocation of competence? What if all the other market enthusiasts had started to help him push for a pubmar?
If all the market supporters had pushed hard/smart enough... and both the US and Germany implemented pragmatarianism a few years after Mises published his book... then each country's public sector would have been flooded with competence. What would this have averted?
1. The Great Depression (1929-39). Market enthusiasts love to blame the depression on the government and liberals love to blame the depression on the market. I think it's pretty reasonable to conclude that the depression was the result of blocking most of the country's competence from the public sector. One head really isn't better than a thousand. Given enough eyeballs, all bugs are shallow (Linus's Law). In the multitude of counselors there is safety (Proverbs 11). When you block nearly all the most competent heads/eyeballs from the public sector then it's guaranteed that there are going to be a myriad of important details that are missed.
2. The Holocaust/WWII (1939-45). Hitler's rise to power was in no small part due to the depression. He blamed the depression on the Jews and everybody else he didn't like. This scapegoat strategy proved to be quite effective. It wouldn't have been nearly as effective if Germany had been thriving. When a country is growing and there's plenty of prosperity... the party that's not in power has a lot less ammunition to use against the party that's in power. Also, pragmatarianism would have made political parties entirely redundant. It's pointless to join a political party when everybody is free to shop for themselves in the public sector.
3. The Great Leap Forward (1958-61). Without the depression, and without the war... communism/socialism (command economies) never would have spread around the world. This would have spared millions and millions of lives.
What other disasters would have been averted? And what would have been accomplished if so much competence hadn't been so majorly misallocated? How much better would our world now be?
Hopefully it's clear that my point here really isn't to assign any sort of blame or responsibility to Mises. I'm sure the thought of a pubmar never occurred to him. We can certainly lament the fact that he didn't offer the world this third solution... but we can't blame him for failing to spot this Easter Egg. Here we are now though, nearly a century later, looking at the possibility of a pubmar. And history seems to strongly support the conclusion that the people on my cup list are potentially making a huge mistake by not pushing for a pubmar.
In my blog entry... Pushing for a Pubmar... I encouraged my cup listers to imagine just how much credit they would have been able to take for China's small, but extremely beneficial, steps in the right direction. In this blog entry... it's sort of the same idea. If Ludwig von Mises had managed to successfully push for a pubmar just like Deng Xiaoping managed to successfully push for a primar... then how much credit would my cup listers have been able to take for all the disasters that a pubmar would have averted? How much credit would they have been able to take for all the benefit that a pubmar would have created? If Mises had tried to push for a pubmar... but wasn't successful because he was the only one pushing... then how responsible would my cup listers be for all the disasters that logically resulted from blocking competence from the public sector?
As an anarcho-capitalist, David Friedman is pushing to abolish the government. If Deng Xiaoping had pushed for abolishing the government... it's doubtful that China would have taken any steps in the right direction. If Ludwig von Mises had pushed for abolishing the government... it's doubtful that the depression, or WWII, or The Holocaust, or The Great Leap Forward would have been averted.
If pragmatarianism truly would have prevented The Holocaust and other disasters, then it stands to reason that the opportunity cost of pushing for anything else is way too high.
So where's the bottleneck? Could it be that the competence of Jews isn't appreciated?
By the way, during Germany’s Weimar Republic, Jews were only 1 percent of the German population, but they were 10 percent of the country’s doctors and dentists, 17 percent of its lawyers, and a large percentage of its scientific community. - Walter E. Williams, Diversity, Ignorance, and Stupidity
Nobel Prizes have been awarded to over 850 individuals, of whom at least 22% (without peace prize over 24%) were Jews, although Jews comprise less than 0.2% of the world's population (or 1 in every 500 people). Overall, Jews have won a total of 41% of all the Nobel Prizes in economics, 28% of medicine, 26% of Physics, 19% of Chemistry, 13% of Literature and 9% of all peace awards. - List of Jewish Nobel laureatesI don't know why it isn't painfully clear that we're really hurting ourselves by blocking all this competence from the public sector.
What's of particular relevance, and perhaps some explanation for their competence, is Jewish diligence when it comes to giving...
As a general matter, Jewish tradition encourages donors to investigate supplicants. Those who allocate community tzedakah funds must investigate recipients and must avoid giving to frauds. It is a violation of Jewish law to give to organizations that distribute communal funds if its managers are not competent to certify the worthiness of beneficiaries. There are a few exceptions. In emergency situations, as when an individual is starving, aid must be given immediately. Moreover, it is recommended by our tradition that one give at least a small amount to everyone who asks, whether Jewish or not. - Ira Kaminow, Tzedakah: Some Principles of the Jewish Way of Giving
In addition, one must be very careful about how one gives out tzedakah money. It is not sufficient to just give to anyone or any organization, rather, one must check the credentials and finances to be sure that your Tzedakah money will be used wisely, efficiently and effectively. - Tzedakah (Wikipedia)
There are eight degrees of tzedaka, each one superior to the other. The highest degree . . . is one who upholds the hand of a Jew reduced to poverty by handing him a gift or a loan, or entering into a partnership with him, or finding work for him, in order to strengthen his hand, so that he will have no need to beg from other people. - Maimonides, Mishneh Torah
If Jews endeavor to ensure that their Tzedakah money will be used wisely, efficiently and effectively... then doesn't it stand to reason that this is exactly how they would spend their tax money if given the opportunity to do so?
Perhaps the US would benefit if it kicked all the Jews out of the country? Clearly it wouldn't. Yet, it's perceived that we somehow benefit when we prevent Jews from shopping in the public sector.
Another one of my cup listers, Bryan Caplan, is also an anarcho-capitalist. But more often than not he pushes for open borders. Plenty of Jews left Germany before it was too late... so we know it wasn't impossible for them to do so. But these open borders really didn't prevent The Holocaust. From my perspective, The Holocaust would have been prevented if Jews had been free to vote with their taxes. Yet, does Bryan Caplan push for people to be free to vote with their taxes? Nope, he pushes for people to be free to vote with their feet.
Where's the bottleneck?
As I mentioned about the depression... liberals love to blame the market and market proponents love to blame the government. It's pretty much the same situation when it comes to Hitler's rise to power. Liberals love to blame big business for financing Hitler and market proponents love to blame liberals for failing to recognize the value of property rights.
As a result of this blame game, if you dig around for information regarding who bears responsibility for Hitler's rise to power... you'll find quite a bit of conflicting information. So perhaps this explains why it's not so clear that allowing German taxpayers to choose where their taxes go would have prevented The Holocaust.
If all Germans back then were evil... then pragmatarianism certainly wouldn't have prevented The Holocaust. Obviously not all Germans were evil. The millions of Jews were clearly an exception. But anybody who's seen Schindler's List would know that Jews weren't the only exceptions. So perhaps the essence of Conza88's critique was that there weren't enough exceptional Germans. Except, this is problematic for Conza88 because it would have him agreeing with liberal arguments that industrialists were largely responsible for Hitler and The Holocaust. Even the anarcho-capitalist Murray Rothbard recognized the problem with this line of thinking...
A further point: in a profound sense, no social system, whether anarchist or statist, can work at all unless most people are "good" in the sense that they are not all hell-bent upon assaulting and robbing their neighbors. If everyone were so disposed, no amount of protection, whether state or private, could succeed in staving off chaos. - Murray Rothbard, Society without a StateIf Conza88's premise was that most German people were truly hell-bent on assaulting and robbing their neighbors... then his conclusion... "let's abolish the state"... really didn't follow.
Of course I'd really like to believe that my "stitch in time" argument is more than adequate to support the conclusion that pragmatarianism would have prevented The Holocaust. Flooding Germany's public sector with competence earlier rather than later would have prevented all the problems that logically resulted from blocking nearly all of Germany's competence from the public sector. Hitler wouldn't have been able to exploit problems that didn't exist. He wouldn't have been able to blame Jews for problems that didn't exist.
Even though I'd like to believe that my "stitch in time" argument is adequate... it is still probably a good idea to continue exploring the available evidence.
In 1933, there around 67 million people in Germany. Out of 44,685,764 registered voters... 43.91% of them (17,277,180) voted for Hitler (source). So even with a considerable effort on the part of the Nazis to intimidate and suppress other voters... the majority of Germans did not vote for Hitler. And just because somebody did vote for Hitler, this does not necessarily mean that they would have been willing to put their taxes where their votes were...
As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. Geoffrey Brennan, Loren Lomasky, Democracy and DecisionVoting is perceived to be a good deal if, and only if, the voter is under the impression that somebody else is going to pay for their "free" lunch. This means that if, prior to 1933, the power of the purse had been transferred from government to taxpayers... then voting for Hitler wouldn't have been such a good deal. Why would people have bothered voting for Hitler if there was absolutely no chance of him controlling the power of the purse? It's only natural for people to quickly line up for a "free" lunch... but if you change the deal like so...
The evidence is pretty clear that most Germans were not hell-bent upon assaulting and robbing their neighbors. They weren't interested in Hitler's "free" lunch. Yet, they were served it anyways.
So where's the bottleneck?
Maybe everybody who voted for Hitler was a taxpayer and everybody who didn't was not? This line of argument is more or less consistent with the liberal argument that business/industry was largely responsible for Hitler's rise to power. If this "most taxpayers are evil" argument is correct, then pragmatarianism definitely wouldn't have prevented The Holocaust.
If you read the Wikipedia article on Gustav Krupp von Bohlen und Halbach... then this is what you'll learn...
Unlike most of his fellow industrialists, Krupp opposed the National Socialists [Nazis]. As late as the day before Paul von Hindenburg appointed Adolf Hitler as Chancellor, Krupp tried to warn him against making such a choice. However, after Hitler won power, Krupp became, as Fritz Thyssen later put it, "a super Nazi" almost overnight.Most German industrialists supported the Nazis? This would certainly lend credence to Conza88's argument. The citation for that Wikipedia passage is a book written by William Shirer and published in 1960... The Rise and Fall of the Third Reich.
We get a different story, however, from a book that Henry Ashby Turner wrote in 1985... German Big Business and the Rise of Hitler. Here are some relevant passages from a few different reviews of this book...
Note that freedom from large subsidies enabled the NSDAP to propagate an extremely radical message unpalatable to elites then and now—apart from the PC radicalism of philo-Semitism, anti-white racism, and Leftism that has always been acceptable to elites. The NSDAP thereby satisfied the genuine needs and aspirations of its white constituency and generated an intensely loyal mass following. - Andrew Hamilton, Funding a Movement: German Big Business & the Rise of Hitler
It may be true that contributions of various sorts came from big businessmen like Fritz Thyssen, the Berlin manufacturer Ernst von Borsig, and the retired coal executive Emil Kirdorf, but despite statements to the contrary, they were never a critical source of funding. Most of the NSDAP funds were derived from membership dues, interest-free loans, and the gate receipts from the many mass rallies the party held. After the parliamentary breakthrough in September 1930, sales from Mein Kampf skyrocketed, providing Hitler himself with a steady source of income. And during the depression the volunteer labor given by party activists helped ease the effects of the increasingly austere economic conditions. - John M. Ries, German Big Business and the Rise of Hitler (Review)
Still, more than a few voices critical of such historical hanky-panky have been raised. Perhaps the most influential is that of Henry A. Turner, Jr., who has provided an accurate and verifiable history of the Weimar period in his German Big Business and the Rise of Hitler. Turner sensibly avoids class struggle as a theme and simply asks if big business liked Hitler. Did business leaders support him? Did they give him money? Turner concludes that they did not. Only "through gross distortion can big business be accorded a crucial, or even major, role in the downfall of the Republic" (p. 340). Turner claims that bias "appears over and over again in treatments of the political role of big business even by otherwise scrupulous historians" (p. 350). - Larry Schweikart, Hitler and Big BusinessFrom Turner we get the impression that prior to Hitler gaining control of the power of the purse, support from business was the exception rather than the rule. Same as well from this source...
There is little evidence to support the view that Hitler received substantial financial support from big business. The conservative upper classes generally regarded Hitler as an uneducated demagogue and gutter politician. - David A. Meier, Adolf Hitler's Rise to PowerI highly recommend that source if you're looking for a good overview.
Once Hitler was in power, he transferred ownership and control of various factories in such a way as to try and maximize the productive capacity that was in the hands of supporters. The Spanish economist Germa Bel wrote an excellent paper on this topic...Against the mainstream: Nazi privatization in 1930s Germany. Some snippets...
It is likely that privatization—as a policy favourable to private property—was used as a tool for fostering the alliance between the Nazi government and big industrialists. The government sought to win support for its policies from big business, even if most industrialists had been reluctant to support the Nazi Party before it came to power....also...
The reprivatization of United Steelworks, which put Fritz Thyssen in the leading position in the company, appears to be an example of the use of privatization to increase political support. It is worth recalling that Thyssen was one of only two leading industrialists to support the Nazi Party before it became the most powerful party on the political scene. Another privatization that can be linked to politics is the sale of publicly owned shares in Hamburg-SudAmerika to a Hamburg syndicate in September 1936 when the Hamburg ship-owners had joined the Nazi Party as a group....and...
It seems clear that neither the Nazi Party nor Hitler was ideologically devoted to private ownership. In fact, Nazis used nationalization when they considered it necessary. The case of the nationalization of two aircraft companies, the Arado and Junkers firms, is widely known. As Wengenroth explains, 'uncooperative industrialists such as aircraft manufacturer Hugo Junkers were removed from their positions and replaced with Nazi governors. This was not an explicit nationalization policy, but simply an attempt to control production and investment policies in the interest of rearmament'. In fact, as stated by Overy, Hugo Junkers 'refused to produce warplanes for Goering and found his business nationalized'. Indeed, Buchheim and Scherner note that state-owned plants were seen as necessary when private industry was not prepared to realize a war investment on its own.
Any industrialists who failed to comply with Hitler's plan were quickly and easily replaced.
Let's review.
The Weimar Republic was established in Germany after the end of the first world war. Taxpayers were not free to choose where their taxes went. This blocked nearly all of Germany's competence from the public sector. As a result, competence was inefficiently allocated. Hitler exploited the subsequent problems and the "free" lunch democracy responded accordingly...
Again, it may be objected that the poor are never invested with the sole power of making the laws; but I reply, that wherever universal suffrage has been established the majority of the community unquestionably exercises the legislative authority; and if it be proved that the poor always constitute the majority, it may be added, with perfect truth, that in the countries in which they possess the elective franchise they possess the sole power of making laws. But it is certain that in all the nations of the world the greater number has always consisted of those persons who hold no property, or of those whose property is insufficient to exempt them from the necessity of working in order to procure an easy subsistence. Universal suffrage does therefore, in point of fact, invest the poor with the government of society. - Alexis de Tocqueville, Democracy in AmericaAfter Hitler took control of the power of the purse, the world became his chess board...
The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, Theory of Moral Sentiments
I want everyone to keep what he has earned subject to the principle that the good of the community takes priority over that of the individual. But the state should retain control; every owner should feel himself to be an agent of the State . . . The Third Reich will always retain the right to control property owners. - Adolph Hitler (1931)
However well balanced the general pattern of a nation's life ought to be, there must at particular times be certain disturbances of the balance at the expense of other less vital tasks. If we do not succeed in bringing the German army as rapidly as possible to the rank of premier army in the world...then Germany will be lost! - Adolf Hitler (1936)
It's only natural for people to compare Germany's political system after WWI to our current system here in the US. People with Government 101 under their belt probably get the sense that, with our robust system of checks and balances, it's nearly impossible for any president to take control of the power of the purse. Is "nearly" impossible really good enough though? Wouldn't we be far better protected by decentralizing the power of the purse? This decentralization could be easily achieved simply by shifting control of the purse to millions and millions of taxpayers around the country.
It's also natural to compare one person, Hitler, controlling the power of the purse to our 500 congresspeople controlling the power of the purse. Perhaps the fact that our system hasn't resulted in the extremely inefficient allocation of Jews somehow proves that our system is good enough? I agree that it's wonderful that our Jews haven't been extremely inefficiently allocated... but, given the fact that they can't shop in the public sector, combined with the fact that they are the rule rather than the exception, then why should we have any confidence that Jews, or any of us, are being efficiently allocated? If you ever get the feeling that you're underemployed... then it's probably far more true than you can even begin to imagine. To quote my favorite Crooked Timber liberal John Holbo... "I’d be perfect for a lot of way cool jobs that don’t happen to exist."
To put it in terms of the cup half empty vs half full... any defender of our government is saying, "look, at least our cup isn't only 0.000000003% full". Yes, going from 0.000000003% to 0.0000017% is an improvement... but anybody who thinks that this is "enough" improvement is really missing the point. Or I'm really missing the point.
So where's the bottleneck?
I'm under the impression that it always helps to share my favorite passage from my favorite liberal congresswoman...
There is nobody in this country who got rich on his own. Nobody. You built a factory out there—good for you! But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. - Elizabeth WarrenDoes Warren know better than a Jewish business owner which public goods he needs to stay rich? Did some German bureaucrat in the 1920s know better than a Jewish business owner which public goods he needed to stay rich?
If Warren truly knows which public goods bakery owners, farmers and manufacturers need to stay rich... then giving taxpayers the option to directly allocate their taxes will simply give competent business owners the opportunity to hand their taxes to Warren so that she can spend their taxes for them. For some reason I highly doubt that very many business owners are going to want Warren, or any other politician, to spend their taxes for them. And this strong suspicion that I have, combined with the available evidence, leads me to believe that pragmatarianism would have prevented The Holocaust.
This branch could use another epiphyte...
In this video, Michael Sandel, a professor of philosophy at Harvard, makes an eloquent and crystal clear case against market expansion into civic territory. He's essentially the complete opposite of me.
Sandel's argument is that there are things that money can, but shouldn't, buy. He gives numerous examples... one of which is how some schools have experimented with paying kids to read. The concern of his, which his audiences have largely shared, is that money crowds out, or distorts, "intrinsic" value.
What's especially enjoyable about that video is that it has an exciting Easter Egg. I didn't recognize anybody on the panel but when introductions were finally made... one name jumped out at me... Julian Le Grand. Before I was banned from Wikipedia I created the articles for two of his books...
Motivation, Agency, and Public Policy
The Other Invisible Hand
These two books are the most relevant to the topic of tax choice. If I'm mistaken, please let me know!
In the video, Le Grand hints at what this blog entry is trying to shout. Even though it was just a hint... it seemed especially powerful because it was framed by Sandel's argument. This passage by J.S. Mill comes to mind...
But the peculiar evil of silencing the expression of an opinion is, that it is robbing the human race; posterity as well as the existing generation; those who dissent from the opinion, still more than those who hold it. If the opinion is right, they are deprived of the opportunity of exchanging error for truth: if wrong, they lose, what is almost as great a benefit, the clearer perception and livelier impression of truth, produced by its collision with error. - J.S. Mill, On LibertyLe Grand's point was especially bright because it was the only star in a pitch black sky. The entire event really should have been a debate/discussion between Le Grand and Sandel.
Here's more of Sandel's argument (from his TED talk: Why we shouldn't trust markets with our civic life)...
Now, what this, even this brief debate, brings out is something that many economists overlook. Economists often assume that markets are inert, that they do not touch or taint the goods they exchange. Market exchange, they assume, doesn't change the meaning or value of the goods being exchanged. This may be true enough if we're talking about material goods. If you sell me a flat screen television or give me one as a gift, it will be the same good. It will work the same either way. But the same may not be true if we're talking about nonmaterial goods and social practices such as teaching and learning or engaging together in civic life. In those domains, bringing market mechanisms and cash incentives may undermine or crowd out nonmarket values and attitudes worth caring about. Once we see that markets and commerce, when extended beyond the material domain, can change the character of the goods themselves, can change the meaning of the social practices, as in the example of teaching and learning, we have to ask where markets belong and where they don't, where they may actually undermine values and attitudes worth caring about. But to have this debate, we have to do something we're not very good at, and that is to reason together in public about the value and the meaning of the social practices we prize, from our bodies to family life to personal relations to health to teaching and learning to civic life.Where do markets belong? They belong anywhere and everywhere that we want to effectively and accurately communicate what's most important to us. Do we want to effectively and accurately communicate how important food is to us? If so, then a market belongs in the private sector. If we want to effectively and accurately communicate just how important any of the following things are to us...
- health
- education
- a safety net
- welfare
- space exploration
- infrastructure
- renewable energy
- the environment
- peace
... then it's imperative that we push for a pubmar.
The fact of the matter is that nobody is a mind reader. If we want an abundance of anything that's truly important to us... then we have to be free to spend our own money accordingly. We have to give both Jews and Gentiles alike the freedom to shop in the public sector. Not just in their own country's public sector... but in any country's public sector. And we shouldn't push for a pubmar because it's the "moral" thing to do... we should push for it because it's the beneficial thing to do.
Sympathy for the Devil
If it's true that blocking nearly all of a county's competence from the public sector results in the inefficient allocation of competence... then it would explain, in no small part, how Hitler himself ended up being so majorly misallocated. He was a victim of society's failure to recognize the value of a pubmar. All of us are victims... and we will continue to be until this fundamentally important lesson can be effectively taught to the world.
For your convenience... here's my cup list again...
- Alex Tabarrok, Tyler Cowen
- Bryan Caplan, Scott Sumner, David Henderson
- Robert Murphy
- Tom Woods
- Benjamin Powell
- Arnold Kling
- Jeffrey Tucker
- Deirdre McCloskey
- Thomas Sowell
- Peter Boettke
- Robert Higgs
- Walter Williams
- Michael Huemer
- Don Boudreaux, Russ Roberts
- David Friedman
- William Easterly
- Robin Hanson
- Randall Holcombe
- Roderick Long
- Walter Block
While it would be immensely valuable if everybody on this list thoroughly answered the extremely important question of whether pragmatarianism would have prevented The Holocaust... maybe it's a better strategy to single out one person. And then they pick one person and so on.
It's a difficult choice... but I'm going to have to go with Alex Tabarrok. That's who I especially select to thoroughly answer the question that I've attempted to answer in this blog entry. Why Tabarrok? Here are the two main considerations...
1. potential value of his answer
2. likelihood that he'll answer
Tabarrok's total score is the highest.
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