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Showing posts with label concentrated benefits and dispersed costs. Show all posts
Showing posts with label concentrated benefits and dispersed costs. Show all posts

Tuesday, February 9, 2016

Clarifying The Demand For Green Lights

Reply to AntiBullshitMan: You Are What You Tax: Pragmatarianism & 'The Left'

*********************************************

Regarding subsidies... the relevant technical term is "concentrated benefits and dispersed costs". Right now a small percentage of all our tax dollars go into the pockets of the producers of meat and dairy. It really adds up to take a little money from a lot of people... which makes it worthwhile for the producers to lobby for subsidies... but not worthwhile for consumers to lobby against subsidies. Pragmatarianism would eliminate the problem of concentrated benefits and dispersed costs. The only way that any of my tax dollars could end up in the pockets of the producers of farm/dairy products would be if I chose to give them my tax dollars.

You're arguing that you would pull the plug on pragmatarianism if, thanks to the choices of taxpayers, the meat/dairy industry received more funding than it currently does... which would result in more animal cruelty. You would withdraw your support for pragmatarianism if it resulted in more animals being tortured. I'm not exactly sure what would motivate a significant amount of taxpayers to choose to put their tax dollars into the pockets of dairy/meat producers. Is increasing the supply of meat/dairy truly a priority for them? In any case, even though I'm opposed to animals being treated cruelly.... I don't think that I would pull the plug on pragmatarianism if it did actually result in more animal cruelty.

Pragmatarianism isn't about sweeping problems under the rug. It's not about burying our heads in the sand. Pragmatarianism is all about taking an honest, and perhaps quite painful, look at the reality of humanity. This will allow us to see where, exactly, is the most room for improvement. Once we have this knowledge... then we can put our heads together and figure out the best solutions to our most pressing problems.

Hiding the size and symptoms of cancer might make sense... if, and only if, doing so is somehow making the cancer shrink. But if you can't see the true size of the cancer... and you can't feel its effects... then you can't be 100% sure that it isn't growing.

Right now we're in the dark. We can't see the demand for public goods. Pragmatarianism would turn the lights on. Pragmatarianism is enlightenment. We would clearly see the demand for public goods. Are we going to like what we see? I don't know. Maybe not. But I know that turning off the lights wouldn't truly solve anything.

If we turned on the lights and discovered that there was a significant indirect demand for animal cruelty... then I think that animal rights activists would be motivated to allocate a huge amount of their taxes to whichever country is making the greatest strides in the production of cultured meat. The freedom of animal rights activists to shop around for better results... is the only thing that would ensure far better results in far less time.

Why do they even keep these things on at 3am anyway? Every street is deserted!

It doesn't make sense for you to be stuck at a red light when there's no oncoming traffic. It's a waste of your time. But what's the demand for smarter lights? We don't know because we don't know the demand for public goods. If you're stuck behind an unnecessary red light... then you should definitely have the freedom to say, "Hey smart car! Allocate $25 tax dollars to whichever country is making the most progress with smart lights!" Well... yeah... you'd figure that by the time that cars were that smart.... lights would be as well.

Actually... in a pragmatarian system... lights would change according to demand! Clearly... if every street is deserted... then your demand for green lights would be the greatest. You'd be willing to pay one penny for 100 green lights... and nobody would be around to bid against you. So all your lights would be green. Now imagine it's rush hour. As more and more people are stuck behind a red light... the greater the aggregate demand for the light to turn green. The light would turn green once the demand for it doing so was the greatest. And it would stay green until it was outbid.

Although I'm not sure who gets the money? The city? A poor person and a rich person are both approaching the same intersection... assuming equal urgency... the rich person will outbid the poor person for the green light. So should the money that the rich person spent on the green light be given to the poor person who had to wait at the red light? Yeah... right?

But at which point would lights turn yellow? A yellow light would say, "You're about to be outbid! Better dig deep into your pockets if you don't want to be stuck at a red light!"

You haven't read Deng Xiaoping? Well... neither have I. He was China's leader right after Mao was given the boot. In 1978 Deng Xiaoping began to gradually implement free-market reforms. This allowed China to trade with each other and the rest of the world... which resulted in millions of people being lifted out of poverty. It had nothing to do with Keynes or increased regulations. It had everything to do with reducing unnecessary government restrictions on trade. Restrictions/regulations are like red lights. We need red lights... but if you assume that government planners can know which lights should be red and for how long... if you assume that government planners can correctly calculate everybody's costs and benefits... then I'm not sure why you'd want to take any control from government planners and give it to taxpayers.

If you're assuming that government planners have night vision goggles... and you assume that they are going to make correct decisions based on what they see... then there's little point in turning on the lights.

So to clarify; I'm endorsing pragmatarianism (persuasionism) precisely because I have my finger on the taxpayers' pulse & know that they don't want bonkers changes leading to Anarcho-Capitalism or any type of stateless society.

Well... I really can't claim to have my finger on the pulse of taxpayers. I can't know that, in a pragmatarian system, taxpayers would not boycott the IRS out of existence. I do think it's a pretty reasonable assumption though... because... nobody wants to be cheated. But I fully appreciate that many anarcho-capitalists oppose compulsory taxation just like you oppose animal cruelty. Few, if any, anarcho-capitalists are interested in becoming pragmatarians. They have absolutely no interest in turning on the lights and seeing the true demand for coercion (the IRS). For them... ignorance is bliss. You, on the other hand, are willing to turn the lights on a little bit... but you're also willing to turn them completely off if you don't like what you see. I'm not sure that turning off the lights will really erase the disturbing image from your mind. I don't think that you can truly return to blissful ignorance.

I'd like to see pragmatarianism go global too, but I fear the average taxpayer might get overwhelmed at the catalog of options across all countries.

Are consumers overwhelmed at the catalog of private goods across all countries? I'm pretty sure that when I'm on Netflix... I'm not overwhelmed by the catalog of foreign movies. I love foreign movies. No country has a monopoly on awesome movies, music, books or food.... just like no country has a monopoly on awesome public goods.

Never thought of my uploads as public goods, but I gotta say, having your part-time hobby called a 'public good' is quite flattering.

The free-rider problem is certainly applicable to your work here on Youtube. Not knowing the true demand for your work increases the chances that you'll make the wrong decisions regarding your work. Being in the dark increases the chances that you'll trip on something. Youtube could turn on the lights by 1. charging every user $10 dollars a year and 2. allowing users to choose which videos they allocate their money to. This would help clarify the demand for videos. It would facilitate more accurate communication between consumers and producers. I would definitely allocate some portion of my $10 dollars to this video of yours. What's the total amount of money that would be allocated to this video? We don't know. And it's a problem that we don't know. There are millions of people who really should give up their day jobs... but they don't do so because they can't clearly see the demand for whatever it is that they are passionate about.

There are a gazillion "rooms" where the lights need to be turned on. But the largest dark room by far is the public sector. I can't guarantee that you're going to like what you see if we turn the lights on in the public sector. But I can guarantee that it's far more harmful to remain in the dark (ages).

Thursday, March 20, 2014

Concentrated Benefits and Dispersed Costs, House of Cards And Wikipedia





In my last post...Free Lunches Require Externalizing Costs...I mentioned that I'm banned from Wikipedia.  Today when I watched this excellent video it incentivized me to share some insight into why that is.

Did any of you who watched this video think, "hey, how come the House of Cards WP page doesn't mention public choice or rent seeking?" Or maybe, "hey, how come there isn't a Wikipedia entry for concentrated benefits and dispersed costs?"

Maybe one or two of you asked those questions?  If so, you're in luck.  The short answer is that I tried and failed (the knockers won)...
Librarian: So often these days, sir, we see, don't we, these so-called clever people who just can't wait to tear down and destroy.
Mrs Pert: And knock.
Librarian: And knock, yes. But do they ever have anything to put in the place of things that they destroy? No. It's wanton destruction.
Here's the long answer...


 *******  9 December 2012‎  *******


I created a stub for concentrated benefits and diffuse costs.


 *******  13 December 2012‎  *******


Rubin informally nominates it for deletion..."rarely used term, and the article only consists of a (disputed) definition and a series of (probably excessive) quotes."   I removed the deletion nomination because the "concept is noteworthy enough to warrant an article".


*******  15 December 2012‎‎  ******* 

Rubin formally nominates the article for deletion.

Rubin: PROD reason was: rarely used term, and the article only consists of a (disputed) definition and a series of (probably excessive) quotes; and was removed by article creator. In addition, the rare uses seem to be, with the exception of some libertarian think-tanks, primarily referring to corporate lobbying, rather than the more general concept implied here.

The result of the vote...
2 keep
2 delete
1 redirect

An admin, BWilkins (DangerousPanda), decided to redirect the article to tragedy of the commons.


*******  22 December 2012‎  *******

Xero: You recently redirected concentrated benefits and diffuse costs to tragedy of the commons...however, as far as I can tell, there are absolutely no reliable sources that specify a connection between the two concepts. Also, the results of the AfD were 2 keep, 2 delete and 1 redirect. Yet, there are plenty of reliable sources which support the notability of this concept:


BWilkins: There were actually 2 who mentioned redirect. I felt it was a better choice than the delete it would have been, as per WP:PRESERVE. So why not expand the other term with some of the ref's you provided so that it makes even more sense?

Xero: They mentioned redirect but failed to offer any reliable sources to substantiate their suggestion. That's because it's a concept within public choice theory. It's discussed in the special interests section...which now contains a link that erroneously redirects to the tragedy of the commons. So...given that I seem to be the only active editor who's familiar with the field of public choice...it would be great if you could read over those references or take my word for it that CB/DC is notable enough to warrant its own entry.

BWilkins: I'll be happy to go back and change it to delete - which was the only other possible close based on my reading of the ref's and policy-based arguments provided.

Xero: Can you please articulate the shortcomings of the ref's and specify exactly which policy based arguments that you are referring to? As far as I can tell...it's a notable concept with numerous reliable sources supporting its notability. It was only proposed for deletion because the editor was unfamiliar with the field of public choice.

Rubin: It was nominated for deletion because X presented no evidence that the concept is notable, or that most of the quotes relate to the concept. He's now created a second article about the same concept under a different name, although, he's added some (unsourced) background, and at least one of the quotes appears to be on-topic. He's created a number of articles which consist only of a dictionary definition and a collection of quotes.


*******  25 December 2012‎  ******* 

Rich: The discussion about deleting "Concentrated benefits and diffuse costs" was closed. The result was to redirect to ToC. Arthur Rubin was correct WRT to the redirect and your efforts to revive the article were disruptive. Please stop.

Xero: Do you know how I can bring this issue to the attention of any editors who might care about the fact that there are absolutely no reliable sources to support the redirect?

Rich: 1. You are missing the point. The discussion about concentrated benefits was closed and a decision was made. Rubin was implementing the decision and you improperly reverted it. 2. The guidance about RS does not apply to creating redirects -- when articles, such as those you created -- lack RS, it is proper to tag them as unreferenced and/or create the re-direct to an article which will cover the topic. 3. The burden to keep the material, when clearly unreferenced or of doubtful relevance, is on you. See: WP:PROVEIT. 4. "This issue" (whatever you mean by this is a mystery to me) is out there for editors to discuss. We do so on talk pages. As these are new articles they do not have followers, so the point is not a big one -- but you can raise them as you wish on WikiProject talk pages. 5. Your articles lack RS. As has been repeatedly stated, they are little more than WP:QUOTEFARMs. The guidance says: "This means that a quotation is visually on the page, but its relevance is not explained anywhere."

Xero: The entry on concentrated benefits and diffuse costs had numerous reliable sources...all of which can be found on the entry on legal plunder. Yet, there are absolutely no RS to support the redirect to tragedy of the commons. They are two completely separate and distinct concepts...concept A and concept B. By redirecting A to B you are saying that A = B when there are no RS sources to support that.

Rubin: The proper (from the point of view of Wikipedia) way of dealing with this would be to move legal plunder to wiktionary, and soft-redirect "concentrated benefits and diffused costs" there. You have not demonstrated the potential of a Wikipedia article on the subject. We would need to have people talking about the concept, not giving examples or consequences.

By that way, a redirect from A to B means only that A should be discussed in "B", not that A is B. May I suggest that you bring up the matter on Wikipedia talk:WikiProject Economics, if you want an expert opinion.

You might also bring up the redirect at WP:RfD, but, keep in mind, this would prohibit you from recreating the article in its present form anywhere in article-space, not just under the name, as the result of the AfD was "redirect".


*******  26 December 2012‎  ******* 
My talk page


Rubin: If you think I'm following you around, you're correct. If you want to point to any other editors who are primarily creating articles consisting of quotefarms, with "See also" sections pointing to all articles in a topic, such as public choice theory, I'll follow them around, too.


*******  2 January 2013‎  *******


N2e: Hi Bwilkins. I saw only today that you closed the AfD for Wikipedia:Articles for deletion/Concentrated benefits and diffuse costs on 22 Dec 2012.

I did not see the AfD until today, and therefore of course, could not have participated in it. While I regularly teach on the concept of "Concentrated benefits and diffuse costs" in Economics classes I teach at a small liberal arts college, and I could provide additional sources for the concept (if the article existed), I realize it is too late to have that discussion now.

But I have a different question: one about the process of the closure. Since it would appear that no consensus was reached, with about 50% favoring keep and 50% favoring a redirect or delete, what was the rationale under those circusmstances for making a change, and essentially removing the concept from Wikipedia?

I'm not an expert on AfD's, but it would seem that no consensus to make the change occurred in this particular article, and that the article should have remained in place.
Cheers.


*******  7 - 9 January 2013‎  *******


N2e: Hey Bwilkins. That was a serious question, and I am very much assuming good faith. I sincerely do not understand the criteria that was used to close that discussion, as it did not appear to have a consensus. Would appreciate your thoughts.

Herostratus: Hi N2e. Yes I agree that this change was problematical. I see a 3-2 headcount in favor of deleting or redirecting, which is not much of a quorum and not a supermajority, while the delete/redirect camp did not really have the upper hand in the argument either. So you're right. But you know, we have to work fast here, so mistakes like this crop up on occasion.

If the article had been deleted, you could go Wikipedia:Deletion Review. However, it was made into a redirect, so it's different. At any rate, while the concept is notable, the article was not too good, consisting mostly of a series of quoted passages (which are also copyright violations; we are allowed under fair use to quote short excerpts for certain purposes (such as describing/discussing the quoted work), but not to construct articles by pasting together string of copyrighted quotes). I suspect that's a main reason why the article was made into a redirect.

However, it still exists, and the history exists. I made a copy of the old version and put it in your userspace, here: User:N2e/Concentrated benefits and diffuse costs. What I suggest is that you create an improved version (if you want to) off-line, then edit the article and paste your work over the redirect in one edit. If the quality is reasonable I don't think anyone will object to this.

If you want to work on it here on Wikipedia -- say, if you want to ask User:Xerographica, the main editor of the article so far, if to work on it with you -- you can, but then instead of a simple copy-and-paste you have to a more complicated procedure called "history merge", which requires an admin to do. BWilkins or any admin will do this for you.

Xero: Why would you disparage the quality of the entry? Do you not understand how Wikipedia works? It's a notable concept...so I created a stub+...which anybody could have contributed to. The problem had absolutely nothing to do with the quality of the entry and everything to do with editors and admins editing way outside their areas of expertise.

Here are three entries that I just created...are any of them not up to your standard of quality? If so...then, rather than making the effort to improve them, why not just nominate them for deletion? Better yet...why not redirect them to the tragedy of the commons?

BWilkins: PLEASE NOTE: This was discussed at length further up this page - if it was your intent to continue that discussion, it should have been done there - or at least you should have read it before starting a new section. In my review of the article, and the quality of the policy-based discussions, the article was actually going to be a delete - this isn't a vote, so beginning the discussion with numerical counts is a bit of a red herring - the keep arguments were policy-weak, while the delete and redirect were strong enough to well outweigh the keep !votes. As part of WP:PRESERVE I chose the redirect option. Yes, you CAN take this to WP:DRV if you believe the closure was policy-incorrect

N2e: Hey, Bwilkins. I'm the one who started this Talk page section to ask YOU about YOUR rationale for closing the discussion without a real consensus one way or the other. I was not aware of any discussion higher up in the page, and had not seen it. I think you are confusing the comments of Xerographica with me.
I think your explanation of what was behind the closure answers my question, as does the helpful comment of Herostratus, above. I would be totally in support of poorly written and poorly sourced material being purged from the encyclopedia, at least temporarily, and then it can be re-added when/if it is ever better done by someone who cares enough to do it.

Xero: I cared enough to find all the reliable sources that supported the creation of a stub for a notable concept...a stub that anybody could have contributed to. Wikipedia is a collaborative project. It's based on Hayek's concept of partial knowledge. Expecting people to pop out perfectly polished entries goes against the entire concept of CROWD sourcing. And speaking of WP:BURDEN...where are the reliable sources that support concentrated benefits and dispersed costs being redirected to tragedy? It's been two weeks since I asked Rubin and BWilkins (see section above) to WP:PROVEIT and both have failed to do so.

N2e: Xerographica, as you can see above, I'm partially with you, in the sense that I know that Concentrated benefits and dispersed costs is a viable concept in economics, is notable, etc. As I said, I teach this stuff, and it is in the college textbook I assign to my classes.

Having said that, you should slow down, and self-monitor your behavior so we can all make this encyclopedia better together. Wikipedia will be just fine if it takes a few weeks, or a few months, to get the article back.

As you can see in the discussion above, the administrator who closed the discussion did so based principally on the poor quality of the article. It sounds to me like, based on that admin (BWilkins) and the other commenter (Herostratus), that the article, were it to be improved to meet article criteria, could simply replace the redirect at some point in the future, when some editor or set of editors [[WP:BURDEN|cares enough to ensure that all of it is well-sourced. That could be me, if I get around to having the time to follow the idea Herostratus left for me. But if not, it will emerge in time. But you will hurt your own ability to be constructive in improving the encyclopedia if continue to be disruptive. Relax. Cheers.

Herostratus: Just to clarify, it's not really the quality of the article. For all I know, creating a set of passages quoted from other works is a fine way to get some concepts across. It is, however, also against our rules because it violates the copyrights of the quoted works. Whoever works on the article in future needs to describe the concept in their own words.

Xero: Herostratus, you should really head over to the Wikiquote project and let them know that they are violating copyrights.

N2e, you're not addressing the reason that the article was nominated for deletion in the first place...
PROD reason was: rarely used term, and the article only consists of a (disputed) definition and a series of (probably excessive) quotes; and was removed by article creator. In addition, the rare uses seem to be, with the exception of some libertarian think-tanks, primarily referring to corporate lobbying, rather than the more general concept implied here. - Arthur Rubin
...and again...Wikipedia:Articles_for_deletion/Tax_choice
No sources have been provided that the name is used, and very few of the sources can be verified to discuss the same topic. I would accept a merge somewhere, if relevance is established, once the quotes are removed or placed in footnotes. - Arthur Rubin
...and again? Evidently we have different definitions of disruptive behavior.


*******  6 - 7 Feb 2013‎  *******

Xero: I created the "See also" section and added public choice theory to it. Rich removed it with the following explanation "Jesh, opening a SA section for various economic/political theories is not encyclopedic or constructive."

For those of you who've watched the series, it should be readily apparent just how relevant public choice theory is to the show. In fact, rent seeking should be mentioned somewhere in the article. Actually "Rent Seeking" would be a far more accurate, if somewhat less catchy, title for the show.

For those of you not familiar with Wikipedia See also policy...links do not require reliable sources to be listed...they just need to be at least "tangentially related". Public choice is directly related to this show...and as such, it should be included in the See also section.

Rich: Correction to your quote. It is "...tangentially related topics." [Emphasis added.] The topic of the article is the television show. Not beltway politics, or musings about economic ideas, or poor excuses to add "See also" listings.

Xero: Would an accurate synopsis of the show mention rent seeking?

Rich: No. It is a drama about "Kevin Spacey as Francis "Frank" Underwood, a ruthless politician with his eye on the top job in Washington, DC." Not "Kevin Spacey as Francis "Frank" Underwood, a ruthless politician who considers rent seeking when he evaluates his career prospects."

Xero: Underwood sucks on the tit, he doesn't provide it. Try again.

Rich: I don't care what he sucks on. (Would fellatio be tangentially related to the show and thereby appropriate as a see also?) The topic of the article is the TV show, nothing more than that.

Xero: The topic of the article is the TV show and a strong recurring theme in the TV show is rent seeking. Have you even seen the show?

Rich: As you say, the topic of the article is the TV show. The topic of the article is not recurring themes of the show. Your tangentially related argument does not cut it. Why did I mention fellatio? Well, by your logic, if I take it to an extreme, fellatio is appropriate because it is a type of sexual activity, e.g., it involves sucking on a body part. Tit sucking is related to both breastfeeding and the mechanics of human sexuality because it is sucking on a body part, similar to fellatio. Since the show mentions tit sucking, which has a strong allusion to breastfeeding and since breastfeeding is tangentially related to sexual activity (both pre-partum and post-partum), and since fellatio is a sexual activity, fellatio must be a proper tangentially related see also for the article. (And keep your inquiries as to whether I (or anyone) has seen the show (or read material) to yourself. If I/we answer yes, then you'd likely respond "well, then, you don't understand what you saw/read" and if I/we answer no, you'd have another smart remark about my/our ability to figure out whether this is an appropriate see also.)

Xero: Yeah, you really nailed my logic there. Why don't you watch the show and then come back so we can have an informed discussion on whether breastfeeding or rent-seeking is more relevant.

McDoobAU93: I would agree with Xerographica's statement on reliable sources and the "see also" section, but do we cross into original analysis territory by saying "well I've seen this concept in the show, so we should link to that". If a reliably-sourced critique of the series appeared that mentions that terminology and concept, then I would be all for it being described in the article. I don't think a "see also" section would be needed if the concept were introduced by way of critical commentary on the series.


*******  6 Feb 2013‎  *******


Xero: Speaking of rent-seeking...
Like "Veep," HBO's satirical half-hour, "Cards" remains somewhat coy about party affiliations for no clear reason, but Willimon exhibits a strong ear for the corrupting aspects of politics. Referring to a lobbyist throwing around money, Underwood drawls, "When the tit's that big, everybody gets in line." - Brian Lowry, House of Cards
Willimon clearly is having fun with the writing on this series, and he’s deftly able to make it shift characters and moods with ease. That means Francis isn’t always devouring people. In one scene, we find that he -- like so many others -- owes a great deal to lobbyists. And when he’s shown being threatened to make promises come true, he says to the camera: "It’s degrading, I know. But everybody gets in line when the tit’s that big." - Tim Goodman, House of Cards: TV Review
At a bare minimum...public choice theory should be added to the See also section.


*******  3 Mar 2013‎  *******


Bwilkins bans me indefinitely from Wikipedia


*******  13 Oct 2013‎  *******


Mark7-2 redirects CB/DC from ToC to Public Choice.

Thursday, February 27, 2014

Clarifying The Demand For Public Goods

[update] Please join the discussion: Demand Clarity Would Eliminate Corporate Welfare [/update]

Question

"How are we going to bust up big ag that has caused so much disparity?" - rabbitcaebannog, The Free Market religion needs to fall on its sword

Answer

We create a market in the public sector.  If people can choose where their taxes go (logistics) then we will see exactly what the demand is for farm subsidies...




This chart shows us what the demand for farm subsidies might look like.  As you can see, there's very little demand breadth because the benefits are extremely concentrated...
Those who think that central planning will promote economic progress are naive.  When business enterprises get more funds from governments and less from consumers, they will spend more time trying to satisfy politicians and less time satisfying customers.  Predictably, this reallocation of resources will lead to economic regression rather than prosperity. - James Gwartney and Richard Stroup, What Everyone Should Know About Economics and Prosperity
Their resources can be used in two ways: investment in capital goods that can be used to produce a product for sale in competitive markets, or investment in lobbying and bribing politicians and in trying to develop legislation that will protect firms from competition or provide them with a share of the public budget.  Under a large government, "political investment" can become relatively more profitable than "market investment," and a shift in investment from the market to the political arena should be expected.  In private competitive markets, a firm must appeal to buyers to enter mutually beneficial trades: in political markets it can enlist the power of the state to force people to give up part of their income for the firm's benefit. - Richard B. McKenzie , Bound to Be Free
Politicians exploit rational ignorance by conferring large benefits on certain constituents whose costs are widely dispersed and borne by the general population. Take the sugar industry. It pays the owners and workers to organize and tax themselves to raise money to lobby Congress for tariffs on foreign sugar. If they're successful, it means millions of dollars in higher profits and wages. Since they are relatively small in number the organization costs are small and the benefits are narrowly distributed. The Fanjul family, who owns large sugar farms in the Florida Everglades, capture an estimated $60 million annually in artificial profits. - Walter E. Williams, Rational Ignorance
My impression is that moves toward an economy with less open-market competition reflect a diversion of competition to the political process, as resort is made to greater governmental control over economic access to markets and terms of exchange.  Much of what passes for the new corporate economy should more accurately be called the new mercantilist, or the new “political” or politically regulated, economy, since it involves more political competition and the greater use of political rewards and penalties.  And this move to political influence has occurred in both small and large firm industries.  The “solution” (if such a “political” economy is a problem) usually is more political controls and political competition.  This is beneficial to those most adept at political competition, for they would benefit from increased demand for their services as political competition displaces market competition in controlling economic activity. - Armen A. Alchian, The Collected Works of Armen A. Alchian: Volume 2
Because the benefits of farm subsidies are so concentrated, if we implemented tax choice then it's highly likely that only a very small percentage of people will spend any of their tax dollars on them...
What a delicious prospect: a government office having to explain itself in order to persuade taxpayers to support its existence. The elements within the government that can make a persuasive case will do fine. Americans are not stingy or shortsighted. We will still have plenty of mine inspectors and curators. But who will voluntarily pay for the layers of bureaucratic barnacles that make up so much of the organization charts? Who will pay for the billions in subsidies that are doled out to agricultural, corporate and nonprofit special interests? Who will pay for the enormous pork-barrel projects? - Charles Murray, You Are What You Tax
If enough people don't pay for a public good (insufficient demand breadth)...then it won't be considered a public good.  As a result, people won't be able to spend their taxes on it.  

Another example is war...



There are multitudes with an interest in peace, but they have no lobby to match those of the 'special interests' that may on occasion have an interest in war. - Mancur Olson 
Going to war accelerated the move from indirect to direct rule. Almost any state that makes war finds that it cannot pay for the effort from its accumulated reserves and current revenues. Almost all war-making states borrow extensively, raise taxes, and seize the means of combat – including men – from reluctant citizens who have other uses for their resources. - Charles Tilly
In cases where a war has popular support (opinions, sentiment)...
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 Decision
...it's extremely unlikely that most people would spend any of their own money on it.  This is because talk is extremely cheap...which is exactly why we say that actions (spending) speak louder than words (voting).  The reality is that the multitude has a myriad of far more valuable/beneficial uses of their own money...
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron...Is there no other way the world may live? - Dwight D. Eisenhower
Another excellent perspective on the subject...
The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. Even when weapons of war are not actually destroyed, their manufacture is still a convenient way of expending labour power without producing anything that can be consumed. A Floating Fortress, for example, has locked up in it the labour that would build several hundred cargo-ships. Ultimately it is scrapped as obsolete, never having brought any material benefit to anybody, and with further enormous labours another Floating Fortress is built. In principle the war effort is always so planned as to eat up any surplus that might exist after meeting the bare needs of the population. In practice the needs of the population are always underestimated, with the result that there is a chronic shortage of half the necessities of life; but this is looked on as an advantage. It is deliberate policy to keep even the favoured groups somewhere near the brink of hardship, because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another. By the standards of the early twentieth century, even a member of the Inner Party lives an austere, laborious kind of life. Nevertheless, the few luxuries that he does enjoy his large, well-appointed flat, the better texture of his clothes, the better quality of his food and drink and tobacco, his two or three servants, his private motor-car or helicopter -- set him in a different world from a member of the Outer Party, and the members of the Outer Party have a similar advantage in comparison with the submerged masses whom we call 'the proles'. The social atmosphere is that of a besieged city, where the possession of a lump of horseflesh makes the difference between wealth and poverty. And at the same time the consciousness of being at war, and therefore in danger, makes the handing-over of all power to a small caste seem the natural, unavoidable condition of survival. - George Orwell

I've shown you charts that represent special interests...now, for comparison, here's a chart that represents what a general interest might look like...




Unlike with farm subsidies and war...many people will readily grasp the material benefit of spending their money on public healthcare.  We can see that, unlike with special interests, the demand for a general interest will be very broad.  This is because it will truly contribute to the well being of most people.

Consider this last passage...
The expenses of government, having for their object the interests of all, should be borne by every one, and the more a man enjoys the advantages of society, the more he ought to hold himself honoured in contributing to these expenses. - Turgot
Given the disparity between actions (spending/values) and words (voting/opinions)...the only way we can accurately discern how specific or general an interest truly is would be to create a market in the public sector.  If we do not clarify the demand for public goods then the interests of the many will continue to be sacrificed for the benefit of the few.  

Monday, February 17, 2014

Demand Opacity

Another attempt to teach economics to atheists...

Reply to: Public Goodness Survey

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Damarcus, ok, now we've made it to the very point of this thread. Except, if you understood my first and second posts in this thread then you wouldn't have argued that corporations would use tax choice to eliminate competition.

As I failed to explain in my first and second posts...in a tax choice system we'll see just how many people give their taxes to a government organization. This information will make it impossible for there to be public goods that only benefit special interests. For example...

"There are multitudes with an interest in peace, but they have no lobby to match those of the 'special interests' that may on occasion have an interest in war." - Mancur Olson

If there are a multitude with an interest in peace...then they are not going to give money to the DoD if it has an interest in attacking other countries. Therefore, the shape of the demand for the DoD would be deep and narrow. It would have depth but very little breadth. Breadth requires multitudes.

Imagine there's a government organization that finds a way to eliminate war. If there are multitudes with an interest in peace...then the shape of the demand for this government organization would be deep and wide.

The more general the interest, the wider the demand shape. The more special the interest, the narrower the demand shape.

With the current system, we have no idea what the demand shapes look like for each and every public good. I refer to this as demand opacity. The current system creates demand opacity which facilitates exactly the kind of problem you described. Tax choice would eliminate demand opacity by allowing us to truly see the actual demand for each and every public good.

Friday, February 14, 2014

Visualizing And Evaluating The Public Goodness Threshold

Nobody made a greater mistake than he who did nothing because he could do only a little. - Edmund Burke*
In a recent blog entry...What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You?...Razo challenged me to a duel (public debate)!  Who's Razo you ask?  He's with the International Voluntary Tax Fund.   That link takes you to his video...which is very interesting...and definitely worth liking.  Here's some of what Razo wrote on the Tax Choice Party facebook page...
Let's follow and expand your analogy. Divide the U.S. into two halves - those who are very intelligent and those who are very dull. History tells us that the most intelligent, especially at the upper extreme, will manipulate the system to their own individual advantage. This takes place no matter what political framework is chosen. In the past even forced collectivism hasn't been able to stop this, and liberal democracy is accelerating the division.
What will tax choice do to stop this?
Hmmm.  I spent over an hour on facebook composing and deleting around a dozen different responses (couldn't do that in a "real" public debate!).  A few were really long but the shortest was...
Concentrated benefits and dispersed costs are the logical consequence of rational ignorance and rational ignorance is the logical consequence of preventing people from shopping for themselves in the public sector. 
This is true...but I felt that it didn't adequately address some part of his concern.  I think it probably happens way too often where I make a point and expect the other side to think it through.  Or I assume they'll see the "obvious" stepping stones that they need to reach pragmatarianism.  Or something like that.  That's why it helps to draw diagrams, graphs and charts!

Ok, so in a pragmatarian system people will be able to choose where their taxes go.  You can read about the logistics here...pragmatarianism FAQ.

One concern from the liberal side is that rich will have too much influence because they pay most of the taxes.  Liberals are certain enough that the rich will spend their tax dollars in a way that will screw the middle class and the poor.

But there are two very important things to consider...

1. Nobody would stop the poor or middle class from shopping in the public sector.  The public sector wouldn't be some snobby country club or a stuck up Beverly Hills boutique.  You wouldn't have to be "this rich" in order to shop there.  This means that the EPA wouldn't laugh at anybody's $2 contribution.  Would they?  Maybe they didn't read the Bible story about the widow's mite?

2. We would be able to "see" exactly how many people contributed exactly how much to each and every government organization (GO).  This doesn't mean that we have to see exactly who these people are though.  We would just see how many different people donated to a GO and the amount that they each donated.  In other words, we would see the depth and breadth of the demand for each and every public good.

How many of you have already visualized where I'm going with this?

In order to help point out exactly where the stepping stones are...I've created a public goodness survey.  The survey consists of 10 different hypothetical public goods.  Each public good has its own chart which shows a different demand shape.

To participate in the survey simply rate each public good from 0 to 10...

0 = no depth/breadth = no public goodness
10 = maximum depth/breadth = maximum public goodness

...and indicate whether or not it should be a public good.

The objective is to determine exactly where the public goodness threshold is.  How deep/wide must the demand for a public good be in order for it to be considered a truly PUBLIC good?




1. PGA - In this case there's not much depth (people didn't contribute much) but perfect breadth (everybody contributed).  Every single citizen contributed the same exact amount of money to this public good.  Let's say the amount is $5 dollars.  Of course, $5 to the poorest person doesn't mean the same thing as $5 to the richest person.  This is the logic behind the progressive tax...
Economics can establish that a man’s marginal utility of money diminishes as his money-income increases. Therefore, they concluded, the marginal utility of a dollar is less to a rich man than to a poor man. Other things being equal, social utility is maximized by a progressive income tax which takes from the rich and gives to the poor. This was the favorite demonstration of the “old welfare economics,” grounded on Benthamite utilitarian ethics, and brought to fruition by Edgeworth and Pigou. - Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics
So what does PGA's chart tell us?  It tells us that everybody demands this good.  But income and demand for this good are inversely correlated.  The more money you make, the less accurately this good matches your preferences.




2. PGB - Another straight line.  But, it's twice as high on the y-axis.  So rather than everybody contributing $5...everybody contributes $10.




3. PGC - Uneven depth but great breadth.  Everybody demands this public good...but income and demand for this good are inversely correlated.




4. PGD - Lousy depth but great breadth.




5. PGE - Good depth and great breadth.




6. PGF - Great depth and breadth.




7. PGG - Great depth but lousy breadth.




8. PGH - Again, great depth but lousy breadth.




9. PGI - And again, great depth but lousy breadth.




10. PGJ - Great depth and decent breadth.

Can you think of other likely demand shapes?  Would any public goods match any of these shapes?

If we created a market in the public sector...then it's a given that each government organization (GO) would have a demand chart on their website.  As soon as somebody makes a payment directly to a GO...their demand chart would be automatically updated.  Like I said in the pragmatarianism FAQ...people would be able to shop in the public sector whenever they wanted.

The less demand depth/breadth a public good has...the stronger the case that it doesn't have enough public goodness to remain in the public sector.  If a public good is kicked from the public sector then taxpayers will no longer be able to spend their taxes on it.  As a result, people will understand that even a small contribution is better than no contribution.

Hopefully it should be clear that giving any group of people...poor, rich, white, black, male, female, gay, straight, atheist, theist, tall, short...the freedom to shop in the public sector will increase the accuracy of the demand charts.  By this same logic...wouldn't the accuracy of the demand charts greatly increase if taxpayers were given the freedom to shop in the public sectors of other countries?  Here's where I first considered this...A Global Free-trade Agreement for Public Goods.

If value was created by preventing people from spending their money on foreign private goods...then the same thing has to be true of foreign public goods.  But the reality is that no city, state or country can have a monopoly on the production of value.  This is because the production of value is the result of ideas...and there will always be new ideas wherever people are free to think and act.  But the value of a new idea/product/service can't be accurately determined if consumers are needlessly restricted.  If we want the pinata to release its treasure...we shouldn't spin, blindfold and tether consumers.  Same thing if we want the tail to be perfectly pinned on the donkey.  In order for humanity to derive the maximum value from the world's resources...we should make it make it as easy as possible for consumers to use their dollars to signal exactly where in the world resources should flow to.

For example, let's consider the Brazilian EPA's effort to conserve the Amazon rainforest.  Here's what the demand chart might look like if only Brazilians were free to give their taxes to their EPA...




What would happen to the demand chart if American citizens were also given the freedom to give their taxes to the Brazilian EPA?  It stands to reason that the demand would increase...




As each additional country gives its citizens the freedom to give their taxes to the Brazilian EPA, the accuracy of the demand chart increases...




If we look at the disparity in demand...then it's clear that massive amounts of value would be destroyed if we prevented taxpayers from shopping in the public sectors of other countries.  The Brazilian EPA would receive the wrong amount of funding...and as a result, rainforest that should have been conserved would be destroyed instead.

The amount of resources directed to the conservation of the Amazon rainforest should be determined by the amount of value the world derives from the Amazon rainforest.  And the only way we can know how much value the world truly derives from the Amazon rainforest would be to allow taxpayers to spend their taxes on any country's public goods.

What do you think?  Have I done a better job of pointing out where the stepping stones are?  Hopefully!  With these stepping stones illuminated...I can now provide the most succinct answer to Razo's question...
Let's follow and expand your analogy. Divide the U.S. into two halves - those who are very intelligent and those who are very dull. History tells us that the most intelligent, especially at the upper extreme, will manipulate the system to their own individual advantage. This takes place no matter what political framework is chosen. In the past even forced collectivism hasn't been able to stop this, and liberal democracy is accelerating the division. 
What will tax choice do to stop this?
It will open our eyes.

Right now we keep stubbing our toes because we're stumbling around in darkness.  Tax choice will enlighten us by removing the blindfold.  We will clearly see the depth/breadth of the demand for public goods.  If we see that the wealthy are the only ones spending their taxes on a public good...then this will call into question whether that good has enough public goodness to remain in the public sector.

As long as we have no idea what the actual demand for public goods truly is...then we will continue to blindly stumble around.  This demand opacity will destroy rainforests that should have been conserved...and we will continue to suffer the devastation of wars that neither side sufficiently demanded.  Pragmatarianism will eliminate demand opacity by illuminating the stepping stones that we need to walk out of these dark ages.  The steps we need to take are extremely simple...all that's required is to give people the freedom to shop for themselves in any public sector.

If any teachers/professors are interested in sharing this survey with your class...I'd be happy to e-mail you the PowerPoint document.  Just include your e-mail in a comment...or Google "public goodness survey" to find a website where you can register to send me a private message.

*HT Ryan Rickard

Tuesday, January 7, 2014

Rational Ignorance: Cause, Consequence and Cure

Over on the facebook page for tax choice...Scott Thurston wrote...
How? If you give more responsibility to citizens they are more likely to research it? How does it naturally follow, and how is rational ignorance the logical consequence of the current system?
The current system takes the power of the purse away from the citizens and gives it to congress.  This means that taxpayers don't have the option to shop for themselves in the public sector.  So even if you take the time to research and study how effective the EPA is...no matter what you learn...you're not going to be able to change the percentage of your money that goes to the EPA.  Any effort to do so will greatly exceed the potential benefit.  This is why it's logical not to make the effort to learn about the EPA.

The consequence of rational ignorance is that benefits are concentrated and costs are dispersed.  The EPA will cater to special interests and the costs will be dispersed among the rationally ignorant taxpayers.

The cure is simply to implement tax choice.  Taxpayers don't want their hard-earned money to be wasted...so once they can shop for themselves in the public sector they'll make the effort to ensure that they get the most bang for their buck.  This requires due diligence.

Here are some passages on the topic...
It is often worthwhile for an individual beneficiary to find out the value of promised benefits, as these tend to be concentrated, and hence large for each beneficiary. But it is often not worthwhile for the individual voter to put any effort into calculating the costs of the financing of benefits, as these costs are highly dispersed, and hence small for the individual voter in each case. Indeed, it is likely that people are much less informed about such abstract macroeconomic matters as the 'excess burden' of taxes, than about their own, much more concrete needs for economic security in the future, even though the latter type of misinformation
is ofted used as an argument for compulsory social security (the 'paternalistic' argument). - Assar Lindbeck, Overshooting, Reform and Retreat of the Welfare State
People employ what economists call rational ignorance. That is, we all spend our time learning about things we can actually do something about, not political issues that we can’t really affect. That’s why more than half of us can’t name either of our U.S. senators. And why most of us have no clue about how much of the federal budget goes to Medicare, foreign aid, or any other program. Even if a citizen studies the issues and decides to vote accordingly, he has a one in a hundred million chance of influencing the outcome of the presidential election, after which, if his candidate is successful, he faces a Congress with different ideas, and in any case, it turns out the candidate was dissembling in the first place. Instinctively realizing all this, most voters don’t spend much time studying public policy. - David Boaz, What Big Government Is All About
Imagine buying cars the way we buy governments. Ten thousand people would get together and agree to vote, each for the car he preferred. Whichever car won, each of the ten thousand would have to buy it. It would not pay any of us to make any serious effort to find out which car was best; whatever I decide, my car is being picked for me by the other members of the group. Under such institutions, the quality of cars would quickly decline. - David Friedman, The Machinery of Freedom
Not only does a consumer have better information than a voter, it is of more use to him. If I investigate alternative brands of cars or protection, decide which is best for me, and buy it, I get it. If I investigate alternative politicians and vote accordingly, I get what the majority votes for. The chance that my vote will be the deciding factor is negligible. - David Friedman, The Machinery of Freedom
Externalities play an enormously greater role in institutions controlled by voting. If I invest time and energy in discovering which candidate will make the best President, the benefit of that investment, if any, is spread evenly among 200 million people. That is an externality of 99.9999995 percent. Unless it is obvious how I should vote, it is not worth the time and trouble to vote 'intelligently', except on issues where I get a disproportionately large fraction of the benefit. Situations, in other words, where I am part of a special interest. - David Friedman, The Machinery of Freedom
Before going to UCLA to do graduate work, I had been reading books and articles by Gordon Tullock, James Buchanan, and Anthony Downs. They had shown that the probability of affecting the outcome of a typical election was so close to zero that the expected value of voting was substantially less than its cost. Therefore, they concluded, there was no point in voting, no matter which way you would vote, even in a close election. - David Henderson, Voting, Public Goods, and Free Riders
Imperfect models of the complex environment that the politician (and constituent) is attempting to order, institutional inability to get credible commitment between principal and agent (voter and legislator, legislator and policy implementer), the high cost of information, and the negligible payoff to the individual constituent of acquiring information all conspire to make political markets inherently imperfect. - Douglass North, Understanding the Process of Economic Change
In a statewide election, the probability that a voter will be killed in an auto accident on the way to the polls is quite likely larger than the probablility that his vote will affect the outcome of the election. - Dwight R. Lee, Overcoming Taxpayer Resistance by Taxing Choice and Earmarking Revenues
In the real world, demand revelation meets with the same problem that has long confounded students of democracy. As Anthony Downs and others have shown, rational voters have little or no incentive to spend their time or effort gathering or providing information about their preferences. And even if the information were available, what is the incentive for a bureaucratic (monopolistic) supplier of a public good to give voters the greatest amount of value at the minimum of cost? - Edward H. Clarke, Demand Revelation and the Provision of Public Goods
If anyone insisted on deliberating with maximum scrupulousness every one of the economic acts he undertakes every day, if he insisted on rendering a judgment of value throughout to the last detail concerning the most trifling good that he has to deal with by way of receipt or expenditure , by utilization or consumption, such a person would be too much occupied with reckoning and deliberating to call his life his own. The correct maxim and the one which would be observed in economic life is "Be no more accurate than it pays to be." In really important things, be really exact; in moderately important things be moderately exact; in the myriad trifles of everyday economic life, just make the roughest sort of valuation. - Eugen Böhm-Bawerk, Capital and Interest
Since each person has a fixed number of votes - either 1 or 0 - regardless of the amount of information he has and the intelligence used in acting on this information, and since minorities are usually given no representation, it does not "pay" to be well-informed and thoughtful on political issues, or even to vote. - Gary S. Becker, The Economic Approach to Human Behavior
Although choices in the private sector are also affected by advertising and other selling activities, rational individuals become reasonably well informed about most private decisions because they and their families usually bear the main consequences of their mistakes. The incentive to become well informed about political issues is weaker because each individual has only a minor effect on political outcomes decided by the majority (or by similar rules). Hence the average person knows far more about supermarket prices or the performance of cars than about import quotas or public wages. Although rational political behavior has appeared to be contradicted by widespread voter ignorance and apathy, the opposite conclusion is justified because rational voters do not invest much in political information. - Gary S. Becker, A Theory of Competition Among Pressure Groups for Political Influence
This greater complexity of political choice is compounded by an inability to gain from any investment in knowledge. In a market setting, a person can gain by storing food during the boom periods; it is a simple task to profit directly from knowledge. In a political setting, however, even if a person has acquired knowledge about the more complex question of "why," there is no way that he can profit from his knowledge because a change in policy will take place only after a majority of people have come to the same conclusion. Consequently, it is rational to be considerably more ignorant about general policy matters than about matters of market choice. - James M. Buchanan, The Theory of Public Choice: II
In addition to the uncertainty factor, which can be readily understood to limit the range of rational calculus, the single individual loses the sense of decision-making responsibility that is inherent in private choice. Secure in the knowledge that, regardless of his own action, social or collective decisions affecting him will be made, the individual is offered a greater opportunity either to abstain altogether from making a positive choice or to choose without having considered the alternatives carefully. In a real sense, private action forces the individual to exercise his freedom by making choices compulsory. These choices will not be made for him. The consumer who refrains from entering the market place will starve unless he hires a professional shopper. Moreover, once having been forced to make choices, he is likely to be somewhat more rational in evaluating the alternatives before him. - James M. Buchanan, Gordon Tullock, Individuality Rationality in Social Choice
In markets for private goods, consumers internalize the benefits and costs of their purchases. If you don't like your new car or the cup of coffee you've purchased, you have an incentive to spend more time comparing alternative brands of cars and coffee, and adjust your behavior accordingly. But if a new kind of pollutant is thought by scientists to deplete the earth's ozone layer, to warm the planet, or to threaten the ecosystem of an endangered species, there is little reason for most people to study the issue carefully, since each person's consumption choices have a negligible impact on whether the atmosophere is altered, or another species becomes extinct. This line of reasoning suggests that ignorance by respondents to CV surveys is not anomalous; it is a predictable fact explained by the incentive structure of public goods problems. - Jonny Anomaly, Public Goods and Government Action
Overall, government action seems likely to reduce the robustness of institutions and to exacerbate collective-good problems because removing the ‘exit’ option prevents individuals from judging how their personal contributions affect outcomes. When taxpayers who fund failing programmes cannot exit with their own money, then the only form of accountability left is that of democratic voice. Yet, given the minuscule chance of affecting the result of a large-number election it is rational for voters to remain ignorant about the relative effectiveness of specific programmes. It is precisely this ignorance that may allow opportunistic behaviour to go unchecked. - Mark Pennington, Robust Political Economy
Where citizens have little choice about the quality of public services supplied to them they will also have little incentive to do anything about it. The costs of attempting to do anything about the services they receive are likely to exceed any tangible benefit that they themselves will receive. As a result, individuals face situations in which anticipated costs exceed anticipated benefits. The rational rule of action in such cases is to forego the "opportunity" to accrue net losses. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices
Public choice theory, developed by George Mason University Professors Gordon Tullock and James Buchanan, recognizes that the probability of any voter's ballot making any difference in the outcome of any election, including last year's Florida election, is essentially nil. In other words, the only way my vote changes the outcome of an election is if my vote breaks a tie and the probability of a tie is close to zero. - Walter E. Williams, Rational Ignorance