Thursday, January 9, 2014

Public vs Private System of Representation

We have two completely different systems of representation...private and public.  Which system is better?

Elena uses society's limited resources to make an excellent Greek Salad.  I give her my dollar votes because she represents my interest in good food.  Elena is my representative...I value how she uses society's limited resources so I give her positive feedback.

Elizabeth Warren is also my representative.  I didn't vote for her though.  Why bother voting?  I'm supposed to vote for somebody who represents all my public interests?  If this makes any sense why don't I also vote for somebody who represents all my private interests?

With the private system of representation...I have a robust repertoire of representatives.  Everybody I give my money to is my representative.  And I give my money to a lot of different people because I have a lot of different interests.  If I could replace all these representatives with a couple of people...then I could save all the time that I spend shopping.

But there's a problem with trying to find one person to represent all my interests...nobody comes even close.  So if I did give all my money to one person...I'd be really worse off.  My interests would suffer incredibly.  Especially if this one person also had to represent the interests of 100,000 other people.  My interests would be lost like tears in rain.  Chances are that my Greek Salad would be replaced with a hamburger...without pickles, jalapenos, onions, lettuce or tomatoes.  Elena would be flipping generic burgers instead of doing something that she really loves.  So if the public system can't adequately represent our interest in food...then why do you think it can adequately represent our interest in anything?

All of you who share my interest in economics...for goodness sake!  Choose you this day whom you will serve.  Use some brain grease to compare both systems of representation and ask yourself which one provides better coverage.  You're not thinking hard enough if you don't grasp how tax choice would far better protect our interests.


  1. I love this idea and I wish it could be implemented. Just imagine... if everyone were given the 'recommended' allocation but could allocate their tax dollars to the major categories. I guarantee it will be drastically different than what the current allocation is.

    1. RI, thanks for commenting! I wish it could be implemented too! There are quite a few obstacles though...but with enough eyeballs all bugs are shallow!

      I agree that the allocation would be considerably different. But heck if I know exactly how it would change! The few studies I've ran across seem to indicate that less money would be spent on defense...and more money would be spent on everything else. Even if these surveys are really good...they are still surveys...and a survey is simply a hypothetical situation. The truth of the matter can only be determined by allowing people to shop for themselves in the public sector.

      What I do know though is that the diversity of private goods isn't random. It's a reflection of the diversity of people's preferences and circumstances. Once people can shop for themselves in the public sector...the supply of public goods will diversify over time to better match the diversity of people's preferences.

      A much more varied and responsive supply of public goods will help us hedge our bets against the uncertainty of the future.

    2. RI, you must remember that public goods and private goods have very different properties.

      Public Goods are non-excludable and non-rivalrous. Private Goods are both.

      These differences are why there are so many more private goods. Only so many different goods and services (such as street lights) are such that their users cannot be identified to charge and can be used by many (two pedestrians using the light doesn't mean that the light cannot help a third as much). This means that Xero is wrong as his ideas won't change the number/variety/diversity of public goods.

      ~ Forsher

    3. Why wasn't there a huge variety of private goods in China when Mao was in charge? Do you think both North and South Korea have the same variety, quality and quantity of private goods?

      You're obviously wrong that the variety of a good is determined by whether it is non-excludable and non-rivalrous. The variety of goods is determined by whether they are provided by a market or by government planners.

      If we created a market in the public sector...we would see an incredible increase in the variety of public goods. This is because people have a wide variety of preferences. You just lack the imagination, creativity and originality to think that perhaps there are other ways to light a street!

      There is ALWAYS room for improvement. There are always new and better ways of doing things. Markets lead to diversification of products because there's an incentive to innovate.

      There's more than one way to protect the environment, provide public transportation, education, healthcare, defense and so on. Markets facilitate a variety of different approaches...which greatly increases the chances of success. So if we created a market in the public sector...taxpayers are going to demand a greater variety of public goods and any government organizations that fail to respond accordingly are going to lose funding.

    4. Xero, you completely misunderstand what I am saying. Look at your illustration of why I am wrong.

      What I said: "There can only be so many public goods because they are strictly defined by economists in the following ways. Private Goods lack these restrictions and, as a result, we see that there are far more private goods around than public goods."

      What you respond with: "Less market-orientated regimes result in economies with a lesser variety of private goods."

      These statements are both correct. The problem is the second is meant to be rebutting the first but it says nothing at all about public goods (which are not, in economics, state provided goods... refer to the definitions)

      There are dozens of varieties of street lights... as a consumer product. Street lighting, as we think of it, is more or less a service where the users cannot be identified and made to pay. It is also a service where multiple users can be covered without changing anything. That's why street lighting is a public good (except it's a service but you know what I mean). However, the streets a lit this will apply (unless we end up microchipping people to record which street lights they come within, say, 20 metres of... but that's never going to fly).

      Additionally, governments do this too. Take education... at any one point in time a govt. has a variety of policies in place looking at things. Many of them allow different assessment systems (in NZ the most common, in order, are NCEA, CIE and IB). You've got to remember that there are only ever going to be more things to spend money on if it's thought up. As I understand your ideas, politicians still do the thinking of directions. Let's work with this example (simplified, of course).

      Things to spend money on in education and percentage of tax revenue allocated by govt.:
      *New Schools. 2%
      *New textbooks. 3%
      *Improved teacher training. 1%

      Under your system people choose the percentage but not the thing. So, we could end up with 1%, 2% and 3% with tax choice. Alternatively, it gets a lot more like direct democracy and we end up with something "performance based pay" and "charter schools" also getting money from taxpayers. (This is possible, the plutocrats tax choice would create are likely ideologically aligned this way.)

      The question you have to answer is, "Why can only tax choice result in these extra ways of spending?" You can't because we know this is not the case. New ideas are always being thrown about and catching the eye of the voting public. Vote hungry politicians tend to latch on to these.

      Now, remember that private schools are typically subsidised and, yet, are still unaffordable to many. Remember that many people think that they shouldn't fund schools because they are not connected with them. Remember that there are heaps of different things to allocate money to. I think the ultimate outcome of tax choice at such a specific level as "new textbooks" or even the broader categories of "funding for administrative purposes" is doomed to cause severe shortfalls... ruining the education system (and the same would probably hold true of the welfare system... now what were the two things underpinning all modern developed states? Oh, yes, public education and the welfare state).

      Note, these policies are not public goods or public services. They're not private goods/services either as they are policies.

      RI, I implore you, see sense and reject Xero's ideas. Whether it's because his specific arguments are wrong (well, more irrelevant in this case... I agreed with aspects of the statement, after all) or because tax choice is the fast road to no-where but look further into the gloom and see that this is wrong. Maybe start with the url.

  2. Xero, I noticed this on NSG... first thing I've read of yours in months and there's been absolutely no evolution of your opinion whatsoever.

    Let's look at it this way. When you go to buy, say, oranges you're not voting. You're saying, "Well, I'd like some oranges and I can pay for them, thanks for the oranges". When you buy other stuff the same applies. Buying the oranges means nothing more than, "Yes, I see you're willing and able to sell some oranges to me."

    When you vote, what happens? Well, simply put, you say, "This person shares key parts of my own ideology more than these other people." No-one argues that you share all the same things, that's not the basis of the idea of voting. But, if the key parts are shared, that's usually enough to make individuals go, "Right, I better get these most important parts of what I think done: if I don't vote someone who thinks the opposite way may get in."

    Oranges and politics are as divorced as Greek Salads and politics. There's no connection. We don't vote in people to sell us oranges. We may vote in people who will remove subsidies to orange sellers. The reason why we don't vote orange sellers in is rather simple: they're selling something to us. Politicians are voted in because they're in a different sphere altogether. They're representing ideologies rather than the profit motive.

    Tax Choice is incredibly impractical. It's been explained to you, time and time again, how and why it doesn't work. Your typical response is to throw irrelevant "passages" at people as though you'd never been taught by an English teacher how quotes are actually incorporated into an essay and then bugger off for a week or two and come back with no changes whatsoever to what you're peddling. (And yes, saying you're trying to sell tax choice changes nothing -- it's metaphorical, not literal.)

    I've suggested before that you start talking about other subjects. Think of it as an investment. At the moment the dragons aren't willing to chuck money at your idea. They don't see how it can actually work in reality. By engaging in discussions about political issues such as foreign policy, minimum wage, abortions, education, religion etc. you'll be able to see where tax choice could work.

    @RI What Xero neglects to mention is that pooling funds is more efficient when you're dealing with something beyond the scope of microeconomics. This is macro stuff. Govt. deals with issues and concerns that vary hugely geographically. As an obvious example, Californians are going to be much more concerned about earthquakes than New Yorkers. The best way to juggle all these different concerns is to pool money. Flatmates pool money instead of each other all buying bread because, that way, they end up with enough bread instead of too much and can get other stuff. The same applies.

    Forsher, out.

    1. Forsher, heh, it's been a while.

      My opinion hasn't changed and you still haven't read...or understood...Bastiat...

      "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

      Let's try a practical exercise. Can you mail me some Pyrrosia eleagnifolia spore? In other words, can you represent my interest in drought/cold tolerant epiphytes?

    2. Now, work through the visible and invisible effects of tax choice. What happens? Nothing useful.

      Your exercise is bunk. The way it works is thus. I know you're a keen gardener. That's fine. Perhaps you value gardening more than anything else in the world... for the sake of this let's say that is the case. It's now election time and there are three candidates to choose from.

      Candidate A is quite business orientated. The consequence of their policies is that the local garden centre will go bust trying to compete with a larger store in the next town. This is an obvious consequence of their policies.

      Candidate B is a very worker-centric. There's no particular consequence of their policies on you as the local garden centre is self-employed so the union type stuff doesn't effect it. However, the larger chain garden centre in the next town is likely to take the opportunity to raise their prices (this is opportunism from the owners, rather than financial necessity) because they're aware that people can be convinced that Candidate B's policies require this.*

      Candidate C is all about improving the local area. This basically amounts to a lot of construction and road works. The trucks that drive past make your garden very dusty but, ultimately, lead to the local garden centre being able to expand. The issue here is that the expansion is not obvious but the dust is.

      Who do you choose? It's unlikely that you will opt for Candidate A as you're a clear loser in this situation. The other two candidates are somewhat neutral. The bigger centre you use sometimes (maybe for bulk purchases) and the trucks are obviously going to cause problems, but you think you'll do better in the long run. You could not vote but, in effect, that's the same as voting for Candidate A because it improves their chances of getting the most votes.

      As Bastiat points out, every candidate will have policies with obvious and not so obvious impacts on you. The same applies with tax choice. Imagine that you decide to put everything towards funding the local infrastructure (keep transport costs down... hopefully leading to cheaper prices at the garden centre/s) and policing (so that robbery or some such are less likely to impact the centre... and so you). You don't allocate any money to education (as do a lot of people), which turns out to be a mistake because the resultant cost increases for the owner of the local garden centre (who has children at school) mean they're unable to continue running the centre.

      Obviously, this is flawed. No-one values gardening and gardening only. Candidate A's policies quite likely appeal to you even if your own private interests are harmed... you may want to take one for the team. I realise this is the basis of some of your arguments for tax choice but, you have to realise, the issue is using a private concern to evaluate a public choice. Compromise has to happen and, unlike in the tax choice scenario, you only need to consider your own private concerns... rather than everyone's (a task, you say, is impossible for even many individuals like a govt. let alone an individual).

      In practical terms, Bastiat's invisible effects condemns tax choice. Maybe this is not how you wanted that passage used but as I, Forsher, constantly say, you need to actually use the quotes instead of chucking them in willy-nilly.

      *Garden centres are clearly not operating in a perfectly competitive market.

    3. Why is my exercise bunk? You have an abundance of Pyrrosia eleagnifolia in New Zealand and there's a complete scarcity of it here in the US. Why not tell me everything that you would have to go through to send me some spore? Why not represent my interest in epiphytic ferns? Do you need an incentive perhaps?

    4. It demonstrates nothing, that's why.

      Respond to the substantial part of my post, please.

    5. Are you familiar with the division of labor concept? Can you explain why it increases productivity?

      In the private sector we have a division of representation. For example, here you are representing my interest in economic discussion. But obviously you're not representing my interest in epiphytic ferns. Nor are you representing my interest in anything else. You're only representing my interest in one single thing...that's it.

      In the public think it's reasonable to expect that I'm going to find one person to adequately represent not just all my public interests...but all the public interests of 1000s of other people. Maybe you think I only have a few public interests? Or maybe you think that some politician is just far more capable than you are?

    6. This is better but, please, address the Bastiat relevant comments.

      Of course I am familiar with division of labour. By specialising we're able to achieve more than if everyone tries to do the same thing at once. Let's take a practical example.

      Imagine you and some mates are in a competition to build the most paper planes in ten minutes. One of you separates the paper, the next folds it in the middle, the third does the triangle folds and the fifth finishes it. This is great, you can do so much more this way than if you all tried to do everything. And, conveniently, the table you're at sits five comfortably. But, what if there were more of you? Suddenly, the table isn't big enough and you're getting in each others way. Plus, there are more of you than tasks. Specialisation can't prevent diseconomies of scale... commonly expressed as, "too many chefs spoil the broth".

      But, to be honest, "Too many chiefs, not enough Indians" is probably the more relevant (albeit much less PC) version here. You're reducing specialisation by making everyone have to make the decisions. Suddenly, there are, well, millions of politicians... for all intents and purposes.

      I think it's reasonable that you will find a politician or party that matches enough of your beliefs to vote for them... especially when you find alternatives quite distasteful. Imagine that you could vote for Candidate A who loves gardening and tax choice but supports a system where everyone has only an equal tax amount to allocate (whether they earn nothing or billions). Candidate B, on the other hand, loathes tax choice, favours increasing taxation rates for higher income brackets and, further to that, discourages gardening by imposing rigid water restrictions (year round). Who do you vote for?

      At the moment, on NSG, there's a thread called, "How would you change the political party you support?", which, I think, says everything there is to say about the reasonableness of saying that voting assumes you support everything about who you're voting for. Hell, people here make party votes that are ideologically totally different to their electorate vote (say, ACT and Mana).

      This conversation, on the contrary, does represent your interest in gardening. Large chunks of it, in fact, would not exist without that interest. Personally, though, I represent nothing about your interests. We're currently in what many would call an argument (and, yes, informally, it is one)... you've not asked me to go out somewhere and say something about tax choice or plants or whatever else you're interested in. Neither have I asked you to do the same.

      It's similar as to how the guy I buy oranges off doesn't represent my view on oranges or, even, business. All the act of my paying him for oranges represents is a functioning system of exchange but that's a different meaning of the word.

      A quick question before I can continue. If I bought eggs off a farmer, what does that mean?

    7. Heh, it's great to see that you joined reddit. Why stop there?

      Ron Paul Forums

      It's easy enough to register...and a lot more people are going to be exposed to your perspective on the topic. It's a two way street of'll be exposed to a lot of different perspectives on the topic!

      Most are against tax choice of course...even on the Ron Paul Forums! Isn't that funny? But there are two other supporters there though...which is certainly progress!

    8. Xero, my perspective is that which most people share. It is also one that you appear to be trying to avoid discussing here. This is a distraction, presumably to skirt the issue of replying to either or my remaining posts. Also, I will probably end up replying to your response on Reddit here. expect that in the next day or so.

    9. Forsher, heh, uh, am I really trying to skirt the issue? How about you read what you just wrote and see if you can come up with another possible motivation.

    10. You could be just in the process of taking a long time to write a reply. But, then, why would you ask for additional motivations? That's a distraction from the longer response, it'd make more sense to state that was what you were doing rather than allude or, alternatively, not reply and just finish the response.

      You could be bored of the discussion and are done with it. But, then, why address something here about expanding horizons? Because this is the place where you haven't had the last word... unlike Reddit (at the moment). You could've sent a TG via NSG but that's in private. The most rational explanation of an individual whose major interests are promoting tax choice is that which I went with... offering another discussion point to draw attention away from my unanswered questions.

      The beauty of that as an explanation is that, well, it works in conjunction with the others. It can explain the inconsistencies that exist with a pure explanation and makes sense given your subsequent post.

      So, you see, I think it is the best answer and I'm clearly a dimwit for following the train of thought this far because, even if your motives are entirely innocent, I really have made it a distraction.

    11. Wrong. You said that that other people share your perspective. So if you sign up to those other forums and reply with your concerns...then I'll kill multiple birds with one stone by addressing your concerns there rather than here. Here it's pretty much just the two of us.

      Sure I can reply in each thread and direct people to our discussion on this page...but it makes more sense for Mohammed to go to the mountain rather than the other way around.

      So, given that my time is limited...all things being priority will be replying to the people on the forums...given that I'll get more bang for my buck.