Libertarianism and the Free-rider Problem

Over at the Bleeding Heart Libertarian blog, Damien S perhaps misinterpreted a comment of mine and warned me about the free-rider problem that would occur if people had the option to put their taxes back in their pockets.  His concern was misplaced though because as I mentioned in my post on Pragmatic Ethics vs Deontological Ethics, the free-rider problem is partly what led me to reject libertarianism.

Here are a few of my other blog posts where I mention the free-rider problem...

• The Free-Rider Problem
• Libertarianism
• The Blind Men and the Scope of Government
• Economic Fairytales?

It's an important topic though so figured it's worth another entry or two.  This entry will focus on considering the liberal spectrum on A) the free-rider problem and B) the following compromises...

• Compromise A:  People would be able to directly allocate their taxes among any organizations in the public sector and among qualified organizations in the non-profit sector.  For example...people could give their taxes to either the Red Cross or FEMA.  
• Compromise B (pragmatarianism):  People would be able to directly allocate their taxes among any organizations in the public sector.  For example...people could give their taxes to the Dept of Defense and/or the Dept of Education.
• Compromise C: The same thing as pragmatarianism...but people would only be able to directly allocate a certain percentage of their taxes...the rest of their taxes would be allocated by congress.

Anarcho-capitalists 

Anarcho-capitalists want to get rid of the government because they believe that taxes are theft and/or the private sector can do everything as good as...or better than...the public sector can.  Those that believe that taxes are theft support the idea of full self-ownership (see Self-Ownership Survey) while those that believe in the superiority of the private sector support the idea of the invisible hand (see Unglamorous but Important Things).

For those that believe in full self-ownership...there's absolutely no need for them to address the free-rider problem...given that property rights trump all.  That being said...I have yet to run across a proponent of full self-ownership that hasn't made some consequentialist arguments.  Here are a couple examples...

1. Kent's perspective of the free-rider problem
2. Stefan Molyneux's perspective of the free-rider problem...Unglamorous but Important Things (the video)

In terms of the invisible hand crowd...perhaps the best way to understand their perspective on the free-rider problem would be to read Bastiat's essay on the Seen vs the Unseen.

Compromise A

The strongest evidence that I have that anarcho-capitalists would accept this compromise is that it was proposed by Neville Kennard on an anarcho-capitalist website....If You Could Choose to Whom You Paid Your Tax.  Given the expanded options...it seems reasonable that anarcho-capitalists would choose this compromise over pragmatarianism.

Compromise B 

Full self-ownership crowd - Many have considered this compromise but probably all of them have rejected it.  For a perfect example check out Kent's critique of pragmatarianism.  For a less clear cut example check out the discussion that I had with the Benjamin Marks...the author of this anarcho-capitalist challenge... One Question that People Are Scared to Answer

Invisible hand crowd - This group seems to be a really small minority among anarcho-capitalists.  But there's no doubt in my mind that they are more open to pragmatarianism than the self-ownership crowd.  For a good example check out my discussion with James E. Miller in the comment section of this entry...My Reply to Jeffrey Sachs

Compromise C

Given the relative lack of interest in pragmatarianism...there's no reason to believe that there would be any real interest in a watered down version of pragmatarianism.  

Libertarians

Libertarians do not want to abolish government...they just want to reduce the scope of government.  Like anarcho-capitalists they can roughly be grouped into those that strongly support property rights (but not full self-ownership) and those that lean more towards the invisible hand (consequentialists).

Most academic libertarians are aware of the free-rider problem...

The primary line of justification that has been advanced for the power to tax is the problem of free ridership. If taxes were replaced by voluntary contributions, it would be impossible for anyone to claim that the state was involved in expropriating private property. At the same time, it is argued, people would have strong incentives to take free rides on the contributions of others. As a result, services such as civil order and national security, which we all value, are likely to be underfunded. - Ronald Hamowy, The Encyclopedia of Libertarianism 

In essence..libertarians have a free-rider problem double standard.  Libertarians basically tell liberals...we're willing to gamble on the things that you value (welfare)...but we're not willing to gamble on the things that we value (national security).

There are always exceptions to every rule though.  Unfortunately, Jeffrey Miron seems to be the only libertarian that I know of that has acknowledged this double standard...Poverty and Libertarianism.  If you know of any other exceptional libertarians in this regard then please share a link to where they acknowledge this double standard.

Compromise A

Tad DeHaven made an argument...Charitable Donations to the Government...that was in the same general vicinity as Neville Kennard's proposal.  Even closer to Kennard's proposal was Arnold Kling's proposal...

I think that allowing taxpayers to allocate their taxes would be an improvement, but why stop with government organizations? Why not allow them also to choose from competing charitable organizations? That is what I propose in Unchecked and Unbalanced. - Arnold Kling, My Version of Race Against the Machine

So we wouldn't be going too far out on a limb to say that libertarians would choose Compromise A over pragmatarianism.

Compromise B

Libertarians have shown very little interest in this compromise.  The most notable exception is probably Lupis42...yet he certainly has his concerns...Lupis42's Critique of Pragmatarianism.  One academic libertarian, who shall go unnamed, expressed great concern at the thought of allowing taxpayers to decide how much funding the department of defense would receive.  This would seem to give credence to the free-rider problem double standard.

Compromise C

Pretty much the same situation as anarcho-capitalism.  Given the lack of interest in pragmatarianism...there's no reason to believe that there would be any interest in a watered down version of pragmatarianism.

Liberals

Or, in other words, the ironic prospect that it might only be due to the presence of libertarians that we need a coercive state. - Declan, The Logic of Collective Action

Compromise A

So far I don't have any direct evidence with regards to liberals' stance on this compromise.  It seems logical though that if they reject pragmatarianism then they will also reject this compromise.

Compromise B

Liberals, by far and large, primarily reject pragmatarianism on the basis of coordination problems...which indicates that they lack a basic understanding of how the invisible hand works...Unglamorous but Important Things.

Compromise C

Here's an article that the progressive Cait Lamberton wrote on this compromise...Your Money, Your Choice.  In her article she offers evidence that it would be beneficial to allow taxpayers to have control over even a small percentage of their taxes.

Pragmatarians

We can see that anarcho-capitalists and libertarians are considerably more inclined to accept Compromise A while liberals are considerably more inclined to accept Compromise C.   As a pragmatarian I would be inclined to accept any of these three compromises...but it seems logical that Compromise B presents the most realistic compromise because it is roughly mid distance between libertarianism and liberalism.

In order to make progress towards a reasonable compromise we need more libertarians like Jeffrey Miron to acknowledge the free-rider problem double standard and more liberals like Cait Lamberton to recognize the value of tax choice (the invisible hand).  Personally, I'd be really interested in listening to a discussion between Jeffrey Miron and Cait Lamberton.