Helping the poor without breaking QIRE

Reply to reply: Dağhan Carlos E. Akkar

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Your goal is to help the poor. Which is a really wonderful and important goal! But you’re trying to help poor people by breaking Quiggin’s Implied Rule of Economics (QIRE)…

QIRE: society’s limited resources should be put to more, rather than less, valuable uses

When consumers spend their hard-earned money… they endeavor to spend their money on the most valuable options. This means doing their homework and shopping around. It doesn’t mean buying the first thing that they find.

So after doing lots of homework and lots of shopping around… lots of consumers decide to give lots of money to Bob. Evidently lots of consumers highly value how he is using society’s limited resources. Evidently they want him to be able to use even more of society’s limited resources. Evidently they want him to have even more influence over society’s limited resources. Evidently they want him to have even more power and control over how society’s limited resources are used.

Then what? Then you come along and decide that too many consumers gave too much money to Bob. So you… in your infinite wisdom… decide to override their spending decisions. Not fully override…. but partially override.

You don’t fully subvert the will of the people… you partially subvert the will of the people. As if their judgement is impaired… but not entirely impaired.

What do you with all the money that you take from all these consumers? Clearly you don’t give it to Bob. That would be strange. Do you give it back to these consumers? That would also be strange. Instead… you give it to poor people.

You give it to poor people… because… why? Because… you highly value how they are using society’s limited resources? Do you really though? In this scenario you really are not giving them your own hard-earned money. You’re giving them other people’s hard-earned money.

Maybe you’re under the impression that these consumers highly value how poor people are using society’s limited resources? So then you need to explain why these consumers chose to give their money to Bob rather than to poor people. You need to explain why you can’t simply persuade these consumers to give more of their hard-earned money to poor people. You need to explain why you have to rely on partially overriding their spending decisions.

In other words… you need to explain why it’s a good idea to break Quiggin’s Implied Rule of Economics (QIRE).

I’m pretty sure that you can’t explain why it’s a good idea to break QIRE. Nobody benefits, the poor least of all, when society’s limited resources are put to less valuable uses.

Fortunately for everybody, you can achieve your worthy goal of helping the poor without breaking QIRE.

The poor are poor because they are not doing valuable things with society’s limited resources. In some cases it’s because they are dumb. But I’m pretty sure that these cases are the exception rather than the rule. If you want to argue that these cases are the rule… then we can toss your argument for basic income into the garbage.

In order to help lift the poor out of poverty… you simply need to help them do more valuable things with society’s limited resources. This can be accomplished by making everybody’s valuations more accessible.

Right now, when I scroll up, here’s what I see…

“Most popular Medium stories tagged Inequality”

Medium, in all its wonderful wisdom, wants to show me three popular stories on the topic of inequality. It’s really easy to tell just how popular these stories are. The first story has 289 hearts… the second story has 131 hearts… and the third story has 90 hearts.

This is the seen. What’s the unseen? The unseen is how valuable these stories are. Medium makes it stupid easy to “like” a story… but it’s not nearly as easy to valuate a story. Medium doesn’t make it stupid easy for readers to give their pennies, nickles, dimes, quarters or dollars to their favorite stories.

What would happen if valuing a story was as easy as liking it? People’s valuations would be more accessible. The treasure map would become more accurate. This would help everybody, but especially the poor, use society’s limited resources in more valuable ways.

If Medium, Twitter, Facebook, Youtube, Flickr, Reddit, Quora and a gazillion other websites endeavored to make people’s valuations more accessible… then the treasure map would become far more accurate…. and everybody’s decisions would be far more valuable.

Let me try and make this concept as accessible as possible. Think about an Easter Egg hunt. A little kid picks up an old white piece of dog shit. You would probably tell the kid, “Hey little dude! That’s not an Easter Egg! This is an Easter Egg! See the difference?”

Here you are reading this story of mine. Do you think it’s an old white piece of dog shit? Or do you think it’s an Easter Egg? If you think it’s an Easter Egg… just how much do you value it? I’m not a mind reader. Nobody’s a mind reader. We can only know your valuation of this story if you communicate your valuation to us. And, as the saying goes… actions speak louder than words (Tabarrok’s Rule).

We will truly eliminate poverty when everybody does a much better job of making their valuations far more accessible.

John Quiggin vs Weeds

John Quiggin is my second favorite liberal.  He's writing a book about opportunity cost!  How cool is that?  Over at Crooked Timber he's been sharing excerpts from his book so that people can share their feedback.  This is also really cool.

Here's his latest excerpt... Income redistribution: Where should we start?

Even though I love the general topic... his treatment is missing something.  The word "lackluster" comes to mind.  So does "drab".  But what, exactly, is it missing?  It's one thing to taste some soup and realize that there's something missing.  It's another thing entirely to be able to specify the missing ingredient.  Actually, nearly every dish could use more garlic!

As I was quickly scrolling through the comments... I noticed quite a few from a reader named Plume.  This is nothing new.  He is a very frequent commenter.  His comments boil down to "socialism good, capitalism bad".

What was new though was that Plume received some significant pushback from another commenter...

I know that I, at least, would be very glad if every thread even remotely related to economics didn’t devolve into an extended discussion of Plumism, or Pluminomics, or whatever it is we keep getting long dissertations on. There are lots of good topics here to be discussed, but I don’t see this as one of them. I’m almost certain that I’m not alone. I believe that it’s still free to start a blog, and perhaps starting a new one devoted just to Plumism would be a good choice for those interested in the subject. - Matt  

 Somewhat surprisingly... a few comments later... Quiggin wrote...

Plume, I agree with other commenters here. From now on, for my post, can you limit yourself to one comment per post per day.

This is the missing ingredient!  In fact, it's not just one ingredient... it's two ingredients...

Missing ingredient #1: People do different things with society's limited resources... and different people value different things differently.  This fundamentally basic but incredibly important concept is largely, or entirely, missing from Quiggin's analysis.  But there it is plain to see in the comments section!  How can any conclusion regarding the distribution/redistribution of society's limited resources possibly be correct when it doesn't take into account this essential economic truism?

Missing ingredient #2: Accessible scenarios that help convey the relevant economic concepts!  I'm pretty sure that I've read every excerpt that Quiggin has shared... and I don't think that he's ever offered an accessible scenario.  Then again... my memory isn't that great.  Then again... a really good scenario is really hard to forget!

For example...

Following a three-hour time-off-for-personal-exploration period, an excited Sylvia returns to the campsite and announces: "I've stumbled upon a huge apple tree, full of perfect apples." "Great," others exclaim, "now we can all have apple sauce, and apple pie, and apple strudel!" "Provided, of course," so Sylvia rejoins, "that you reduce my labour burden, and/or furnish me with more room in the tent, and/or with more bacon at breakfast." Her claim to (a kind of) ownership of the tree revolts the others. - G.A. Cohen, The Socialist’s Guide to Camping

It's a very simple and accessible story that wonderfully illustrates Cohen's point.  Of course I don't agree with his point... but I really admire how well he conveyed it.

Quiggin's book is the liberal sequel to Hazlitt's book... Economics In One Lesson... which was all about Bastiat's beautiful essay... What Is Seen and What Is Not Seen.  When it comes to accessible economic scenarios... nobody holds a candle to Bastiat.  He really set the standard that every economist should strive to meet.

When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even. But when James Goodfellow hands over a hundred sous to a government official to receive no service for it or even to be subjected to inconveniences, it is as if he were to give his money to a thief. It serves no purpose to say that the official will spend these hundred sous for the great profit of our national industry; the more the thief can do with them, the more James Goodfellow could have done with them if he had not met on his way either the extralegal or the legal parasite. - Frédéric Bastiat, What Is Seen and What Is Not Seen

A few other people have shared some noteworthy scenarios...

Now suppose that Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction. (Also suppose contracts run only for a year, with players being free agents.) He signs the following sort of contract with a team: In each home game, twenty-five cents from the price of each ticket of admission goes to him. (We ignore the question of whether he is "gouging" the owners, letting them look out for themselves.) The season starts, and people cheerfully attend his team’s games; they buy their tickets, each time dropping a separate twenty-five cents of their admission price into a special box with Chamberlain’s name on it. They are excited about seeing him play; it is worth the total admission price to them. Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain winds up with $250,000, a much larger sum than the average income and larger even than anyone else has. Is he entitled to this income? Is this new distribution D2 unjust? If so, why? There is no question about whether each of the people was entitled to the control over the resources they held in D1; because that was the distribution (your favorite) that (for the purposes of argument) we assumed was acceptable. Each of these persons chose to give twenty-five cents of their money to Chamberlain. They could have spent it on going to the movies, or on candy bars, or on copies of Dissent magazine, or of Monthly Review. But they all, at least one million of them, converged on giving it to Wilt Chamberlain in exchange for watching him play basketball. If D1 was a just distribution, and people voluntarily moved from it to D2, transferring parts of their shares they were given under D1 (what was it for if not to do something with?), isn’t D2 also just? If the people were entitled to dispose of the resources to which they were entitled (under D1), didn’t this include their being entitled to give it to, or exchange it with, Wilt Chamberlain? Can anyone else complain on grounds of justice? - Robert Nozick, Anarchy, State, and Utopia

Quiggin will probably disagree with Nozick's point like I disagree with Cohen's point... but perhaps Quiggin will appreciate how well this scenario conveys Nozick's point.  And if Quiggin wants to argue in favor of redistribution... it would behoove him to explain, preferably by using an equally accessible scenario, how doing so does not subvert the true will of the people as revealed by the decisions that they make as consumers.

Here's another one...

Consider the following analog to Block's gardening problem. Let there be an island that contains all the known stock of Austrian Pure Snow trees. The island is inhabited by a religious sect, the first to mix their sweat and blood with the island's soil, thus satisfying Rothbard's principle of "original ownership." They worship these trees as if they were God. Never would they let them be tampered with in any way. Unknown to anyone, these trees contain an ingredient that is a sure cure for cancer, and when this is discovered a question of the ownership of this ingredient, unavailable elsewhere, arises. The religious sect will in no way, for any compensation, allow that ingredient to be extracted. Is it "evil and vicious" to believe that it would be preferable for someone else to own the right to this ingredient, requiring instead that the religious sect purchase the inviolability of this ingredient? Might not "our most cherished and precious property rights" be still more cherished and precious if the private ownership of this new resource was not confined to those who own the rest of the island? Would the answer be much different if this ingredient not only was known to the island dwellers, but was precisely that part of the trees that they worshiped? Would the answer be different if the islanders were very poor? - Harold Demsetz, Ethics and Efficiency in Property Rights Systems

As a nature lover... I appreciate all the trees in this scenario.  And, as an economics lover... I appreciate the ownership dilemma.  Although... the scenario falls apart a bit when we consider the fact that trees have seeds.  It's hard to imagine that some group wouldn't be willing to sell one seed for any price.

Here's the most recent noteworthy scenario that I've run across...

If Robinson Crusoe and Friday are on an island, and Crusoe grows seven pumpkins and Friday grows three pumpkins, Crusoe hasn’t grabbed a bigger piece of (pumpkin?) pie. He has simply created more wealth than Friday, leaving Friday no worse off. It is dishonest to say Crusoe has “taken” 70 percent of “the island’s” wealth. - Don Watkins, Turning the Tables on the Inequality Alarmists

Short and sweet.   It's unfortunate that Watkins can't keep his story straight... Limit Socialism To California.

My favorite recently-dead economist James Buchanan wasn't exactly known for his scenarios... and perhaps this is part of the reason that he is so incredibly under-appreciated.  Consider this scenario...

At some basic psychological level of choice, the demand of the citizen for more police protection by the municipality reflects the same drive as his demand for additional door locks from the local hardware store. 

Even with such a simple analogy, however, care must be taken lest the similarities be pushed too far. The person who wants to purchase a new lock goes to the local hardware store, or to several stores, surveys the array of alternatives offered for sale, along with the corresponding array of prices, makes his purchase, and is done with it. It should be evident that the person’s act of implementing his demand for additional police protection is quite different. The citizen must communicate his desires to his elected political representative, his city councilman, who may or may not listen. If he does listen, the councilman must then take the lead in trying to convince a majority of his colleagues in the representative assembly to support a budgetary adjustment. But what about quality and price? Almost anyone would desire more police protection of high quality if this should be available to him at a zero price. At one level of reaction, the citizen must understand that additional public services can be secured only at the price of either reductions in other services or increases in taxes. How can he indicate to his political representative just what quantity-quality-price mix is most preferred? And how can his political representative, in trying to please his constituents, determine this mix? - James Buchanan, Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes

The scenario works... but it doesn't exactly stick.  Buchanan didn't even give the person a name!

Ok, so what is Quiggin's book missing?  Based on the drafts that Quiggin has shared... his book is missing two things.  First, it doesn't really address the fact that people value things differently.  Second, it doesn't have any accessible scenarios/stories.  My dollar vote is for a scenario involving Australia's wonderful epiphytic orchids.

While I'm at it... I should point out that the solution to the comment problem really isn't to limit Plume's comments.  The solution is to create a market in the comment section!  Quiggin could spend his pennies on whichever comments he values most.  Everybody else could do the same.  Then, if people wanted to, they could sort the comments by their value.  The most valuable comments would be at the top of the comment section and the least valuable comments would be at the bottom of the comment section.

If we think of Quiggin's blog entry as a home... then the comment section would be the garden.  Plume is a weed that grows everywhere in the garden.  He takes up way too much space in the garden.  The thing is... it's a really big garden... and not all the space is equally valuable.  The most valuable space is closest to the house.  So the problem really isn't that Plume is taking up too much space... the problem is that he's taking up too much valuable space.  All the valuable space that Plume takes up could be used for far more valuable plants.  Sure, Quiggin could manually limit the amount of valuable space that Plume occupies... but a far more effective approach would be for Quiggin to give more water, food and love to the plants that he values most.  They would grow more vigorously and, as a result, they would crowd out Plume and all the other weeds.  Pretty soon all the most valuable space in the garden would be occupied entirely by the most valuable plants.  The garden would still have weeds... but they would be located in the most remote part of the very big garden.

This is how and why markets work.  Consumers can't pull weeds... but they can help nourish the most beneficial plants.  The logical result of consumer choice is that resources are unevenly distributed among the unequally beneficial plants.  Redistribution might seem fair... but it simply provides more valuable space to less valuable plants.

Nobody truly benefits when society's limited resources are placed in less beneficial hands.  In other words, the opportunity cost of fairness is way too high.

Rights vs Results

Reply to: I Agree with Milton Friedman! by James Kwak


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This is kinda a strawman. A “rights” based argument for property ownership is an extremely flimsy argument. Is it even an argument? The bible says, “thou shall not steal”. That’s not an argument… it’s a divine decree.

From the economic perspective… the issue really isn’t “rights”… it’s “results” (aka abundance).

Bob calls himself a “maker”. Should Bob keep his money? From the economic perspective… the answer depends on whether taking his money increases or decreases abundance.

If you want to argue that Bob has skills… then taking his money will decrease abundance. If you want to argue that Bob doesn’t have skills and just got lucky… then why are you also arguing that we should take his money? Perhaps you’re actually arguing that Bob is always lucky?

If you want to argue that Bob is always lucky… then your redistribution argument would have some logical basis. But it sure wouldn’t have any economic basis. Taking money from Lucky Bob would decrease abundance. This is because Lucky Bob consistently manages to invest in beneficial ventures. For example, he invested in Uber from the get go. Did you? I sure didn’t.

Getting back to the bible… the most relevant story is the parable of the talents. Taking gold from the most skilled and giving it to the least skilled would certainly decrease abundance.

In terms of fighting poverty… decreasing poverty depends on increasing opportunity. And increasing opportunity depends on increasing abundance. Abundance is a function of how society’s limited resources are used.

Moreover, what is a resource today may cease to be one tomorrow, while what is a valueless object today may become valuable tomorrow. The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. — Ludwig Lachmann, The Market Economy and the Distribution of Wealth

Also…

Taxes upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, that can make the most of it. Why does one man sell his land? But because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? But because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income. — J.B. Say, A Treatise on Political Economy

Markets work because it’s up to consumers to decide how well producers are using society’s limited resources. Consumers, with their infinite variety, preferences and circumstances, are the ultimate judges. Aka “consumer sovereignty”. It’s up to consumers to decide, for themselves, whether Bob has adequately earned their money.

Let’s review…

If Bob is skilled, and you take money from him, then you’re subverting the true will of the people. You’re also decreasing abundance which decreases opportunity which increases poverty. If, on the other hand, Bob just got lucky… then there’s no point in taking money from him. Chances are just as good that his money will circulate soon enough on its own.

So I’m against taxes because I’m for abundance. Actually, I’m not against taxes per se… I’m against the absurdity of allowing congresspeople to allocate them. If 500 government planners were better than an entire nation of people at allocating for abundance… then socialism would have worked. The absolute absurdity of our age is the belief that socialism somehow manages to succeed for the public sector despite the fact that it fails for the entire economy. Socialism fails just as much for public goods as it does for private goods. Taking consumer choice out of the equation will always have logically detrimental consequences.


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Reply to: The False Tradeoff Between Efficiency and Equity by Haynes Goddard


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The heart of efficiency isn’t just opportunity cost… it’s also the choices we make… which depend largely on our preferences and circumstances.

A vegetarian looks at a menu and rules out any dishes that contain meat. Then she looks at the prices and imagines how much value she’d derive from the alternative uses of her money. She also recalls the last time that she had each dish. Perhaps she also counts calories and considers nutritional value… or lack thereoff.

After an immense amount of computation/calculation…most of which occurs as a background process… she filters out all the other options and orders a salad. The waiter brings her a steak. It’s a non sequitur because the conclusion (steak/supply) doesn’t follow from the premise (her vegetarian preference).

It’s an inefficient allocation of resources.

As we can see, efficiency is easily and reasonably defined by the supply’s distance from a consumer’s demonstrated preference.

Except, you’re not defining efficiency in terms of consumer preference. You’re just throwing opportunity cost out there without any recognition or acknowledgement of all the other relevant parts. This vagueness allows you to argue that efficiency is a type of fairness.

Efficiency really isn’t fairness. Efficiency is the most valuable uses of society’s scarce resources. And value is a function of choice, sacrifice, preference, circumstance….which can all be rolled into “demand”. How well supply matches demand is a matter of efficiency.

Fairness disregards demand. Fairness is voters reaching into each other’s pockets. Fairness is an argument made by people who think that abundance is a function of taking rather than trading. Fairness is about diverting scarce resources away from more valuable uses. Fairness is a function of economic ignorance.

There’s nothing false about the tradeoff between efficiency and equity. There’s a very distinct and concrete tradeoff. We either have efficiency and abundance or equity and scarcity. These two things are diametrically opposed.

To be clear… because of the free-rider problem… taxation can increase efficiency… if, and only if…taxpayers are free to choose where their taxes go.

Wealth Equality vs Consumer Sovereignty

If you haven't seen it yet, there's a viral video on wealth inequality on Youtube.  Max Borders, over at the Foundation for Economic Education, shared a response... Wealth Inequality: Predictably Irrational.

Here's the comment I posted followed by numerous passages on the subject of wealth distribution...


Imagine the exact same video but with the word "wealth" or "money" or "income" replaced with "skills" or "talent" or "ability". In a group of 100 people, a few people are going to be a couple standard deviations from the norm. They are going to be either really good looking or really ugly...really tall or really short...really intelligent or really stupid...really talented or really untalented.

The distribution of skills is essential to understanding the most important question: how should we use society's scarce resources?  No matter how you spin it...there's always going to be some people who are going to come up with far better answers. But unlike in the public sector, in the private sector each and every one of us has the freedom to dollar vote for the people who provide the best answers.

For example, imagine there's one kid who throws lemons at passing cars...and another kid who sets up a lemonade stand. They are both answering the question of how society's limited resources should be used.  The market works because we, the people, can use our own dollars to indicate which answer benefits us the most. The result is a distribution of resources that maximizes the amount of benefit we derive from society's limited resources.

If ignorance could randomly produce the same beneficial effects as information, economic activities would obviously be very different from what they are now. In the world in which we live, the assumption that ignorance may pay as well as information seems to be rather inappropriate to explain human action—not only in the economic field but in the other fields as well. - Bruno Leoni, Freedom and the Law

Legislation considered as a result of a collective decision by a group—even if consisting of all citizens concerned as in the direct democracies of ancient times or in some small democratic communities in medieval and modern times—appears to be a law-making process that is far from being identifiable with the market process. Only voters ranking in winning majorities (if for instance the voting rule is by majority) are comparable to people who operate on the market. Those people ranking in losing minorities are not comparable with even the weakest operators on the market, who at least under the divisibility of goods (which is the most frequent case) can always find something to choose and to get, provided that they pay its price. Legislation is a result of an all-or-none decision. Either you win and get exactly what you want, or you lose and get exactly nothing. Even worse, you get something that you do not want and you have to pay for it just as if you had wanted it. In this sense winners and losers in voting are like winners and losers in the field. Voting appears to be not so much a reproduction of the market operation as a symbolization of a battle in the field. If we consider it well, there is nothing “rational” in voting that can be compared with rationality in the market. - Bruno Leoni, Freedom and the Law

Presumably, individuals would prefer to pay less for virtually any good or service, since doing so rationally maximizes their utility from payment (Becker 1962). - Cait Lamberton, A Spoonful of Choice

Each taxpayer could be contributing to a community which would become more reflective of the kind of world in which he or she would like to live. Gaudeat Emptor! - Daniel J. Brown, The Case For Tax-Target Plans

To make more money in the private economy, you have to offer people something they want. If you do, you’ll attract customers; if you don’t, you may go out of business, or lose your job, or lose your investment. That keeps businesses on their toes, trying to find ways to better serve consumers. But bureaucrats don’t have customers. They don’t make more money by satisfying more consumers. Instead, they amass money and power by enlarging their agencies. - David Boaz, What Big Government Is All About

If past experience is any guide, the poor are not likely to get much that they do not pay for and may pay for things they do not get. The principal effect of such programs, on them as on everyone else, is to force them to pay for services that they would not buy willingly because they do not think them worth the price. This is called 'helping the poor'. - David Friedman, The Machinery of Freedom

Since voting is much more of an all-or-nothing thing than spending, such inequalities as do exist have much greater effects. This may explain why in our society, where the poor are also politically weak, they do far worse on things provided by the government, such as schooling and police protection, than on those sold privately, such as food and clothes. - David Friedman, The Machinery of Freedom

It might be objected here that even if productivity rises, the poor need not share in the gains that result from this. Mises's thinking followed an utterly different line: in his opinion, capitalism was primarily a system of "mass production for the masses" and the unhampered operation of this system would be to nearly everyone's advantage. Because of their large numbers, the less well off when acting as consumers control much of the economy by indicating through their dollar votes what they want. In brief, Mises's argument against redistribution is that it is not the best means to aid the poor. - David Gordon, Justice and Redistributive Taxation: James Buchanan versus Ludwig von Mises

Individuals express preferences about changes in the state of the world virtually every moment of the day. The medium through which they do this is the market place. A vote for something is revealed by the decision to purchase a good or service. A vote against, or an expression of indifference, is revealed by the absence of a decision to purchase. Thus the market place provides a very powerful indicator of preferences. Moreover, market-place preferences have two features of direct relevance to the process of economic valuation. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

First, the stronger the preference is for something the greater is the willingness to pay. Thus purchase decisions reflect willingness to pay (WTP) and WTP reflects intensity of preference. This is an important modification of the majority voting system in which all preferences count equally, however strongly or weakly they are held. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

No one denies that contributors to private charities also fail to monitor those charities diligently and that those charities often fail to make the best possible use of the money they spend. But there is an important difference. If the word gets out that the American Red Cross, for example, is not making good use of donations, people can shift their contributions to other private charities that are doing a better job. We don’t have this option with FEMA. Instead of getting less money because of its poor performance, FEMA will almost surely get more, with the justification that more is needed to do a better job. - Dwight R. Lee, Mitigating Disaster: Abolish FEMA and Let Gas Prices Rise

Austrians believe that we get more solutions – and better, more creative solutions – if the energy, imagination, alertness and specialist knowledge of many individuals are engaged on the task. In economics, this is achieved through the process of competition, which gives diverse entrepreneurs the incentive to seek out new and better ways of enhancing value to consumers. By the same reasoning, our social and political problems may also be best solved if we give individuals the widest possible freedom to come up with a variety of creative responses, rather than hoping that a single collective approach will suffice. - Eamonn Butler, Austrian Economics

Mises described the market as a daily referendum on what should be produced and who should produce it. Every penny spent by consumers, in countless daily transactions, acts like a vote in a continual ballot, determining how much of each and every thing should be produced, and drawing production to where it is most highly valued. It is much more efficient than taking decisions through political elections, where people get to vote only every few years, and even then are voting for a package of disparate measures. In the market, every penny really does count, and it counts every day. - Eamonn Butler, Austrian Economics

If we now turn to consider the immediate self-interest of the consumer, we shall find that it is in perfect harmony with the general interest, i.e., with what the well-being of mankind requires. When the buyer goes to the market, he wants to find it abundantly supplied. He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall. In all these respects, the immediate self-interest of the consumer follows a line parallel to that of the public interest. He may extend his secret wishes to fantastic or absurd lengths; yet they will not cease to be in conformity with the interests of his fellow man. He may wish that food and shelter, roof and hearth, education and morality, security and peace, strength and health, all be his without effort, without toil, and without limit, like the dust of the roads, the water of the stream, the air that surrounds us, and the sunlight that bathes us; and yet the realization of these wishes would in no way conflict with the good of society. - Frédéric Bastiat, Abundance and Scarcity

Men have a natural propensity to make the best bargain they can, when not prevented by an opposing force; that is, they like to obtain as much as they possibly can for their labour, whether the advantage is obtained from a foreign producer, or a skillful mechanical producer. - Frédéric Bastiat, That Which Is Seen, And That Which Is Not Seen

This is not all; if this doctrine is true, since all men think and invent, since all, from first to last, and at every moment of their existence, seek the cooperation of the powers of nature, and try to make the most of a little, by reducing either the work of their hands, or their expenses, so as to obtain the greatest possible amount of gratification with the smallest possible amount of labour, it must follow, as a matter of course, that the whole of mankind is rushing towards its decline, by the same mental aspiration towards progress, which torments each of its members. - Frédéric Bastiat, That Which Is Seen, And That Which Is Not Seen

Third, in an ideally competitive free enterprise system, only the most efficient firms survive; for example, if the level of a firm's costs were independent of output and varied from firm to firm, only the firm with the lowest costs would survive. - Gary S. Becker, The Economic Approach to Human Behavior

In the market place minorities have "representation" and the number of "votes" a person has is related to his "proportioned productivity," so the incentives to act wisely are greater here than in the political sector. Therefore, it is relatively easy for an efficient firm to survive since it need only gain the support of creditors and consumers who have a direct personal interest in making wise decisions. - Gary S. Becker, The Economic Approach to Human Behavior

While the market conduces to learning by concentrating the costs of mistakes on those who make them, politics diffuses costs and thereby encourages the perpetuation of ignorance. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision

Le Grand suggests that where patients are dissatisfied with the quality of treatment they are getting, they have only a limited range of options available: they can switch to private provision if they can afford it; or they can complain, which depends upon the goodwill (or knightliness) of the person to whom they are complaining. However, a knavish doctor or manager may have no incentive to respond, and complaint, being based on voice, favours the ‘selfconfident and articulate middle classes’ (2007: 98). He then contrasts this with a world where choice and competition are the norm; patients who do not like the service they are receiving move instead to another provider ‘who can provide them with better service’, and if money follows the patient, ‘then the hospital or practice that provides the best service will gain resources; that which provides the inferior service will lose’. - Ian Greener and Martin Powell, The Other Le Grand? Evaluating the ‘Other Invisible Hand’ in Welfare Services in England

I answer, that whenever taxation diverts capital from one mode of employment to another, it annihilates the profits of all who are thrown out of employ by the change, and diminishes those of the rest of the community; for industry may be presumed to have chosen the most profitable channel. I will go further and say, that a forcible diversion of the current of production annihilates many additional sources of profit to industry. Besides, it makes a vast difference to the public prosperity, whether the individual or the state be the consumer. A thriving and lucrative branch of industry promotes the creation and accumulation of new capital; whereas, under the pressure of taxation, it ceases to be lucrative; capital diminishes gradually instead of increasing; wealth and production decline in consequence, and prosperity vanishes, leaving behind the pressure of unremitting taxation. Ricardo has endeavored to introduce the unbending maxims of geometrical demonstration; in the science of political economy, there is no method less worthy of reliance. - J.B. Say, A Treatise on Political Economy

Taxes upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, that can make the most of it. Why does one man sell his land? But because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? But because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income. - J.B. Say, A Treatise on Political Economy

So likewise of the public consumption; consumption for the mere purpose of consumption, systematic profusion, the creation of an office, for the sole purpose of giving a salary, the destruction of an article, for the mere pleasure of paying for it, are acts of extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure. - J.B. Say, A Treatise on Political Economy

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

Individuals differ, one from another, in important and meaningful respects. They differ in physical strength, in courage, in imagination, in artistic skills and appreciation, in basic intelligence, in preferences, in attitudes toward others, in personal life-styles, in ability to deal socially with others, in Weltanschauung, in power to control others, and in command over nonhuman resources. No one can deny the elementary validity of this statement, which is of course amply supported by empirical evidence. We live in a society of individuals, not a society of equals. We can make little or no progress in analyzing the former as if it were the latter. - James M. Buchanan, The Limits of Liberty

Wal-Mart can’t charge more; if it does, its customers will go elsewhere. The same is true of Target and Costco. In a sense, Wal-Mart is the elected representative of tens of millions of hard-bargaining shoppers, and, like any representative, it serves only at their pleasure. - James Surowiecki, The Customer is King

First of all, the economy consists of buyers and sellers. You think about why we spend in the first place. We spend in order to produce satisfaction for buyers. We don't spend in order to help sellers. It's fine if we do help sellers, but we're trying to produce satisfaction. If the spending we engage in doesn't produce any satisfaction, then it's hardly a measure of well-being. I'm not against the spending. But whatever amount of spending we do, we should get as much satisfaction out of it as we possibly can. - Joel Waldfogel, Why We Shouldn't Give Christmas Gifts

First, if properly administered, it makes citizens aware of the costs of public services, both in general and to them personally. The opaqueness consequent on the pooling of revenue would be lifted. Information is an essential element to being an active and autonomous citizen, and hypothecation is a way of ensuring that a key part of that information is available. Second, it restricts the power of government relative to that of its citizens. Governments cannot simply do what they like with the tax revenues; instead, they have to allocate those resources in a pre-specified way. The balance of power between citizens and their government is shifted in the direction of citizens. - Julian Le Grand, Motivation, Agency, and Public Policy

The difference is that the socialist model of education is not designed to serve his interests, while the private enterprise model, which must compete for customers and their money, has no choice but to serve its customers' interests. The free-market model has its shortcomings, too, but in most cases a bad product or defective service is driven out of the marketplace by competition. Under a socialist model, there is no competition to drive out bad products and rotten services, which is why a visitor from 1929 would recognize your public schools but would be amazed by the cell phones they give away for free at your local mall. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

In a highly competitive marketplace, consumers make decisions for themselves and - most important - are forced to spend their own resources in accordance with those decisions. Under a socialist system, consumers of government-provided goods and services use the power of politics to consume at a higher level than they would if they had to pay the entire cost themselves. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

This process of redistribution of wealth is not prompted by a concatenation of hazards. Those who participate in it are not playing a game of chance, but a game of skill. This process, like all real dynamic processes, reflects the transmission of knowledge from mind to mind. It is possible only because some people have knowledge that others have not yet acquired, because knowledge of change and its implications spread gradually and unevenly throughout society. - Ludwig Lachmann, The Market Economy and the Distribution of Wealth

These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on "social" grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called "the circulation of elites." Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Ludwig M. Lachmann, The Market Economy and the Distribution of Wealth

The capitalist society is a democracy in which every penny represents a ballot paper. It is a democracy with an imperative and immediately revocable mandate to its deputies. It is a consumers' democracy. By themselves the producers, as such, are quite unable to order the direction of production. This is as true of the entrepreneur as of the worker; both must bow ultimately to the consumers' wishes. And it could not well be otherwise. People produce, not for the sake of production, but for the goods that may be consumed. As producer in an economy based on the division of labour, a man is merely the agent of the community and as such has to obey. Only as a consumer can he command. - Ludwig von Mises, Economic Democracy

In the terminology of anticapitalism the words selfish and unselfish are used to classify people from the point of view of a doctrine that considers equality of wealth and income as the only natural and fair state of social conditions, that brands those who own or earn more than the average as exploiters, and that condemns entrepreneurial activities as detrimental to the common weal. To be in business, to depend directly on the approval or disapproval of one’s actions by the consumers, to woo the patronage of the buyers, and to earn profit if one succeeds in satisfying them better than one’s competitors do is, from the point of view of officialdom’s ideology, selfish and shameful. Only those on the government’s payroll are rated as unselfish and noble. - Ludwig von Mises, Human Action

If it is in the jurisdiction of the government to decide whether or not definite conditions of the economy justify its intervention, no sphere of operation is left to the market. Then it is no longer the consumers who ultimately determine what should be produced, in what quantity, of what quality, by whom, where, and how but it is the government. For as soon as the outcome brought about by the operation of the unhampered market differs from what the authorities consider "socially" desirable, the government interferes. That means the market is free as long as it does precisely what the government wants it to do…. Thus the doctrine and the practice. Of interventionism ultimately tend to abandon what originally distinguished them from outright socialism and to adopt entirely the principles of totalitarian all-round planning. - Ludwig von Mises, Human Action

The unsurpassed efficiency of capitalism never before manifested itself in a more beneficial way than in this age of heinous anticapitalism. While governments, political parties, and labor unions are sabotaging all business operations, the spirit of enterprise still succeeds in increasing the quantity and improving the quality of products and in rendering them more easily accessible to the consumers. In the countries that have not yet entirely abandoned the capitalistic system the common man enjoys today a standard of living for which the princes and nabobs of ages gone by would have envied him. A short time ago the demagogues blamed capitalism for the poverty of the masses. Today they rather blame capitalism for the “affluence” that it bestows upon the common man - Ludwig von Mises, Human Action

The consumers are not prepared to satisfy anybody’s pretensions, presumptions, and self-conceit. They want to be served in the cheapest way. - Ludwig von Mises, Human Action

For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power. - Mary L. G. Theroux, Public and Private Responses to Katrina

Consumers calculate over the entire range of available public goods - some for which they have zero demand and others for which they have varying positive demand - whether the taxes they pay are worth the utility they enjoy from the public goods. If consumers determine that the taxes are not worth it, most do not exit from the system. Rather, they agitate and form coalitions. Because their wants are increasingly differentiated, they choose private or club-based rather than collective provision for some goods, then resent taxes to finance the provision of goods they are never likely to consume - Meghnad Desai, Providing Global Public Goods

I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore

General motors cannot get a dollar out of your pocket unless you voluntarily pay it over. The government can, and that's the fundamental difference. (30:00) - Milton Friedman, What is Greed?

The government should not help to save Chrysler, of course not. This is a private enterprise system. It's often described as a profit system but that's a misleading label. It's a profit and loss system. And the loss part is even more important than the profit because it's what gets rid of badly managed, poorly operated companies. When Chrysler loses money...it's got to do something. When Amtrak loses money it goes to congress and gets a bigger appropriation. [...] It's the stockholders of Exxon who ultimately are buying it. If they don't like what Exxon is doing with their money, they have a perfectly good alternative...they can sell the stock. And as the stock went down, if the stockholders didn't like it, they would pay somebody to change the policy which Exxon is following. We have a far greater degree of control over what Exxon does than we have over what a lot of our government corporations do. - Milton Friedman, What is Greed?

The economic miracle that has been the United States was not produced by socialized enterprises, by government-union-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline. - Milton Friedman

I don't know whether Marx ever said waste is theft from the working class, but he should have. - Patricia Hewitt

Today it is demand that determines supply, and private enterprise is always on the alert to meet it. - Paul Leroy Beaulieu, Collectivism: A Study of Some of the Leading Social Questions of the Day

Economists who take up public finance have to face it at the outset. And instinctively they look for a particular kind of answer: the answer which treats "the public sector" as in some sense an extension of the "the private sector". The expenditure and revenue activities of Governments, like those of private enterprises, ought to be an expression of the preference of the sovereign consumer. Government services are to be assimilated to sales over the counter. Taxes must be prices with a difference. The "benefit principle", to draw on the traditional language of public finance, should be the economist's key. - R.C. Tress, Classics in the Theory of Public Finance: A Review

Most of the people who receive high incomes earned them in free markets by providing something of value to people free to buy or not to buy. - Richard B. McKenzie, Bound to Be Free

The poor can be better off by having the wealth unevenly distributed than by having a much lower quantity of wealth equally distributed. - Richard B. McKenzie, Bound to Be Free

Fifth, people's abilities to produce differ. Those with greater abilities tend to have higher incomes, by definition. Again, we should remember that trades in free markets tend to benefit both parties to the trades. People with lower abilities tend to benefit from others' greater abilities. Would the disadvantaged of the country be better or worse off if, for some reason, the gifted disappeared? On average, the disadvantaged would be worse off. - Richard B. McKenzie, Bound to Be Free

In the market an individual needs to only convince a few to back his idea financially; but in the socialist state, it will be required to gain the approval of the entire planning agency to direct a portion of "the society's" resources in a new manner. This same reluctance to change and innovate would result in the demise of the market principle that it is demand that determines the allocation of resources. - Richard M. Ebeling, Economic Calculation Under Socialism

Under the market system individuals possess free rein within the constraints of their income to choose and demand whichever products they desire. Since, it was the provision of desired commodities that was the source of the seller's own income, self-interest was harnessed to the satisfaction of consumer demand. - Richard M. Ebeling, Economic Calculation Under Socialism

Second, where residual claimancy and control rights are closely aligned, market competition provides a decentralized and relatively incorruptible disciplining mechanism that punishes the inept and rewards high performers. Markets are a way of increasing what biologists call selective pressure: they have the effect of reducing the variance of performance and hence (under suitable conditions) increasing average performance. - Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution

Led by groundbreaking philanthropists like Bill and Melinda Gates, this new class of givers is taking its cue from the efficiency of the markets, plowing money into the brightest ideas and withdrawing it from the weakest initiatives. - Simon Hobbs, Executive Vision - Philanthropy

There is a case for saying that there are certain kinds of spending which are more efficient when carried out by government... because of the economies of scale that government posses. However, this is almost always outweighed (and I would argue in fact always outweighed) by the huge inefficiency costs that come with the less productive public management and the fact that public provision does not face the profit and loss incentives which lead private providers to constantly look to improve the quality of their service and cut out waste and unnecessary costs. - Stephen Davies, How Government Crowds Out Private Investment

Politics and the markets are both ways of getting people to respond to other people’s desires. Consumers deciding which goods to spend their money on have often been analogized to voters deciding which candidates to elect to public office. However the two processes are profoundly different. Not only do individuals invest very different amounts of time and thought in making economic vs. political decisions, those are inherently different in themselves. Voters decide whether to vote for one candidate or another but they decide how much of what kinds of food, clothing, shelter, etc. to purchase. In short, political decisions tend to be categorical, while economic decisions tend to be incremental. - Thomas Sowell, Applied Economics

The producer whose product turns out to have the combination of features that are closest to what the consumers really want may be no wiser than his competitors. Yet he can grow rich while his competitors who guessed wrong go bankrupt. But the larger result is that society as a whole gets more benefit from its limited resources by having them directed toward where those resources produce the kind of output that millions of people want, instead of producing things that they don't want. - Thomas Sowell, Basic Economics 4th Ed: A Common Sense Guide to the Economy

The fundamental difference between decision-makers in the market and decision-makers in government is that the former are subject to continuous and consequential feedback which can force them to adjust to what others prefer and are willing to pay for, while those who make decisions in the political arena face no such inescapable feedback to force them to adjust to the reality of other people’s desires and preferences. - Thomas Sowell, Intellectuals and Society

Taking an alternative point of view, however, we see a whole set of public goods that people are forced to consume, whether they like them or not, and this gives rise to the problem of the "forced rider," When the consumer can choose to consume the good or not, no problem arises, since no consumer will choose voluntarily to consume an item which reduces individual well-being. - Todd Sandler, William Loehr, Jon T. Cauley, The political economy of public goods and international cooperation

The title of merit is an action which is useful to another; and whenever there is not question of moral merit (with God), but of physical merit (with man), its value is determined according to the usefulness of the action performed for the benefit of our fellow men or society - always supposing, of course, that the action is free and imputable to the subject. - Victor Cathrein, Socialism: Its Theoretical Basis and Practical Application

If the necessary production would be impossible in the state of socialism, progress would be much more impossible. That private industry based on private property is conducive to progress is a fact which in our days is palpable. What wondrous progress has been made within the last century! We need only recall the invention of steamboats, railroads, telegraphs, telephones, phonographs, and all the recent results achieved in the field of electro-dynamics. Almost every day brings unexpected improvements; for every one is bound by his own interest to make himself useful to his neighbor and, if possible, to outdo his competitors. Therefore every one is bent on inventing more comfortable, useful, cheaper appliances. He who offers the best and most useful commodities at the lowest price finally takes the lead in the race of competition. - Victor Cathrein, Socialism: Its Theoretical Basis and Practical Application

You might say, “That’s okay, Williams, if you have enough dollar votes. But what about poor people?” Poor people are far better served in the market arena than the political arena. Check this out. If you visit a poor neighborhood, you will see some nice clothing, some nice cars, some nice food, and maybe even some nice homes—no nice schools. Why not at least some nice schools? The explanation is simple. Clothing, cars, food, and houses are allocated through the market mechanism. Schools are allocated through the political mechanism. - Walter E. Williams, Where Does Your Vote Really Count?

To satisfy our wants to the utmost with the least effort - to procure the greatest amount of what is desirable at the expense of the least that is undesirable - in other words, to maximize pleasure, is the problem of economics. - William Stanley Jevons, The Theory of Political Economy

A further potential advantage of this initiative is that it can generate useful information. Policymakers will learn what taxpayers support most enthusiastically. After all, the way people spend money is a meaningful indication of what they value – in ways, more meaningful than how they answer opinion polls. Taxpayers obviously will gravitate to different programs. If our political process is functioning properly, the budget should track, at least in a rough way, the distribution of preferences among taxpayers. If it does not, then that is information our legislators should have. It also should be disclosed, so the media and voters will have this information as well. - Yair Listokin and David Schizer, I Like to Pay Taxes: Lessons of Philanthropy for Tax and Spending Policy

Obama vs Equal Treatment

Liberals have a thing for equal treatment.  But if Obama had a life threatening illness...would they want him to receive the same exact treatment that he would receive at any given hospital?  Or perhaps the idea is that each and every average Joe should have access to the same quality of medical treatment that Obama currently has access to?

Sorry.  It's just not possible for everybody to have equal access to the best doctors.  So what's the most fair way of determining who deserves access to the best care?  We vote.

No no no...not the literal way...the meaningful way.  You reach into your wallet and give your own hard-earned money to the people who use society's limited resource for your benefit.  For example, you dollar vote for the kid who mows your lawn as well as for the loan officer who helped you purchase your home.

Why is this way of voting more meaningful than the other way?  Because it involves sacrificing alternative uses of your own money (aka opportunity cost).

Markets work because you have the freedom to give people positive and accurate feedback on their activities.       

Markets fail because you can benefit from some activities, like me writing the world's most awesome blog entries, without even having to contribute a dime!  You free-riders you!

Well...maybe my blog isn't the most awesome?  Could that explain why I'm not swimming in donations?  Your guess is as good as mine.  Or is it?

The solution is simple.  We force people to pay taxes but allow them to choose which public services they give their positive and accurate feedback to.

How much positive feedback would the president receive?  Why wouldn't we want to find out?  How else can we truly determine exactly how much of society's limited resources he should have at his disposal?

Perspectives Matter - Economics in One Lesson

Does your perspective matter?   Your perspective represents your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge.  Does all that matter?  Here are your options...

1. No, your perspective does not matter
2. Yes, your perspective does matter

Let's consider both possibilities.

1. No, your perspective does not matter

If your perspective does not matter then one use of your limited resources is as good as any.  Therefore, it shouldn't matter if congress uses your taxes to clog toilets.

2. Yes, your perspective does matter

If your perspective does matter, then one use of your limited resources is not as good as any.  Therefore, it's entirely up to you to decide whether it matters if congress uses your taxes to clog toilets.

Here's the paradox.  You can't choose which government organizations you give your taxes to.  Therefore, your perspective does not matter.  In order to resolve this paradox you have to figure out why your perspective matters in the private sector but not in the public sector.  Why would the "best" use of your limited resources matter in the private sector but not in the public sector?  Why would economics, otherwise known as the study of scarcity, matter in the private sector but not in the public sector?  Either economics matters...or it does not.  Either your limited resources matter...or they do not.  Either your perspective matters...or it does not.

Too Many Eggs in One Basket

Let's consider a situation where people's perspectives did not matter at all...socialism.  A committee of government planners tried to determine the "best" uses of an entire nation's resources.  The result?  Epic fail.  Why though?  Simply because putting too many eggs in one basket minimizes rewards and maximizes risks.  We all have unique perspectives...yet we all make mistakes...aka fallibilism.  This is why it's not a good idea to put too many resources in the hands of government planners.

What about our system though?  Our system is a mixed economy.  We have two sectors...the private sector and the public sector.  In the private sector your perspective matters...you can determine the best use of your limited resources.  In the public sector, however, your perspective does not matter...you cannot determine the best use of your limited resources.  In essence, we follow the rules of economics in the private sector but not in the public sector.  What do you think the results are of disregarding the rules of economics in the public sector?  What do you think the consequences are of disregarding 150 million taxpayer's unique perspectives?

The consequences are substantial fails, depressions and recessions, which represent the misallocation of substantial resources.  Think about it on the individual level.  Let's say that you make a mistake and gamble your home on a failed business idea.  What are the results of putting all your eggs in one basket?  What are the consequences of misallocating your resources?  You lose your home.  But do any of your neighbors suffer from the consequences of your mistake?  Nope.

It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors.  This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah, Fallibility in Human Organizations and Political Systems

Individuals and corporations simply do not control enough resources to cause substantial failures.  On the other hand, our committee of government planners, aka congress, does.  If the tax rate is 25% then we can imagine that 538 people control 1/4 of our nation's resources.  That is too many eggs in one basket.  Our mixed economy is part socialism...and we understand exactly why socialism fails...so why is it any surprise when our system substantially fails?  Yet, what happens when substantial failures occur?  Each party conveniently blames the other party.  And guess what?  You believe them and the pattern repeats itself.

As long as we disregard 150 million taxpayer's unique perspectives, we will have to deal with substantial failures.

Humility vs Conceit

The best analogy of economics, that I know of, is Buddha's parable of the blind men and the elephant.  Each blind person was touching a different part of the elephant.  We all have access to an essential part of the truth...which is our own unique perspective.  Economics, the study of scarcity, only has meaning in terms of our perspectives.

The trick is understanding that our perspectives, while unique, are extremely limited.  It requires humility for us to appreciate just how limited our perspectives truly are.  People that fail to appreciate just how limited their perspective truly are, can be said to suffer from conceit.  These conceited people erroneously believe that other people's perspectives do not matter.

In order to understand the dynamic between humility and conceit, let's consider Frederic Bastiat's perspective and then compare it to Elizabeth Warren's perspective.  Here's Bastiat's perspective...

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." -  Frederic Bastiat, The Seen vs the Unseen

What difference do the results make?  That depends entirely on your perspective.

 In the first place, justice always suffers from it somewhat. Since James Goodfellow has sweated to earn his hundred-sou piece with some satisfaction in view, he is irritated, to say the least, that the tax intervenes to take this satisfaction away from him and give it to someone else. Now, certainly it is up to those who levy the tax to give some good reasons for it. We have seen that the state gives a detestable reason when it says: "With these hundred sous I am going to put some men to work," for James Goodfellow (as soon as he has seen the light) will not fail to respond: "Good Lord! With a hundred sous I could have put them to work myself." -
Frederic Bastiat, The Seen vs the Unseen

What are some good reasons for taxes?   That depends entirely on your perspective.

When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even. But when James Goodfellow hands over a hundred sous to a government official to receive no service for it or even to be subjected to inconveniences, it is as if he were to give his money to a thief. It serves no purpose to say that the official will spend these hundred sous for the great profit of our national industry; the more the thief can do with them, the more James Goodfellow could have done with them if he had not met on his way either the extralegal or the legal parasite. - Frederic Bastiat, The Seen vs the Unseen

Which brings us to Elizabeth Warren's perspective.  As I mentioned in my post on the opportunity costs of public transportation...she provides a perfect example of somebody who is conceited.  Here's the famous bit from her speech...

I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!  There is nobody in this country who got rich on his own. Nobody.  You built a factory out there—good for you! But I want to be clear.  You moved your goods to market on the roads the rest of us paid for.  You hired workers the rest of us paid to educate.  You were safe in your factory because of police forces and fire forces that the rest of us paid for.  You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.  Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.  But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along. - Elizabeth Warren

Do you think that Elizabeth Warren knows better than James Goodfellow what is and isn't essential for the successful operation of his business?  Why would anybody want their business to fail?  Why would anybody want their country to fail?  If Goodfellow has to pay taxes anyways...then why wouldn't he spend his taxes on the public goods which benefit his business the most?  If we have to pay taxes anyways....then why wouldn't we spend our taxes on the public goods which benefit our country the most?

If our perspectives do not matter then our country does not matter.  Value only has meaning in terms of our  perspectives.  We can maximize our country's value by allowing 150 million taxpayer's unique perspectives to determine the distribution of public funds.

Personal Shoppers

Congress functions as our personal shoppers for public goods.  Unlike in the private sector however, we do not have the option to shop for ourselves.  If you believe that congress is wasting your taxes then you should have the option to directly allocate your own taxes.  There's absolutely nothing wrong with having public personal shoppers...as long as taxpayers have the freedom to skip the middlemen and directly give their taxes to the government organizations that produce the "best" results.

What About Fairness?

Fairness is wonderful and admirable and desirable...but it does not trump certain failure.  Ignoring the rules of economics always results in failure.  If you want to support fairness...then it has to be with your own taxes.  No matter how you spin it...supporting fairness with other people's hard-earned taxes is nothing more than conceit.  You're assuming that your perspective is not as limited as somebody else's perspective.  We all have limited perspectives, which is exactly why we should strive to tolerate, if not respect, other people's perspectives.  Here's what Milton Friedman strongly emphasized...

If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it.

If we can't persuade other taxpayers that fairness is desirable...then we shouldn't impose our perspective on them even if we had the power to do it.  This is because it's entirely possible that we might be wrong.  Therefore, we should hedge our bets by incorporating a multitude of unique perspectives into the public sector.

What About Information?

Persuasion isn't just valuable in terms of tolerance...it's also valuable in terms of the exchange of information.  In order to try and persuade other taxpayers that fairness matters...you would have to share your partial knowledge with them.  In order to try and persuade you that perspectives matter...I have to share my partial knowledge with you.  In order for government organizations to try and persuade us that their responsibilities matter...they would have to share their partial knowledge with us.  This is how we solve problems and make significant progress.

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich Hayek, The Use of Knowledge in Society

What is the total amount of information contained within the perspectives of 150 million taxpayers?  Does congress even know your name...let alone your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge?  All that information is not conveyed by voting.  It can only be conveyed by allowing you to choose which government organizations you give your limited resources to.

It's important to be really clear on this...so here's a bit of redundancy.  Taxpayers should not serve the government...the government should serve taxpayers.  We should not exist to satisfy the demands of the government...the government should exist to satisfy our demands.  The government should not shape the perspectives of taxpayers....the perspectives of taxpayers should shape the government.  The government should not be the sculptor and taxpayers should not be the medium   The relationship between taxpayers and the government should not violate the rules of economics.  The longer that the government disregards our perspectives...the longer that we'll have to suffer the economic consequences.

Conclusion

Hedging our bets by allowing taxpayers to directly allocate their taxes minimizes the risk and maximizes the reward for our country as a whole.  It shouldn't matter whether an organization is public or private...what matters is whether it produces results.  Results only have meaning in terms of your perspective, which is exactly why you should have the freedom to choose which government organizations you give your limited resources to.  Sacrifice without reward is waste...and nobody wants their taxes wasted.

What is the value of 150 million taxpayers, each with their own unique perspective, striving to ensure that their sacrifices are not in vain?   From my perspective, the value of pragmatarianism is 150 million times greater than the value of 538 people spending money that they did not toil, strive, labor, sweat and sacrifice to earn.

The question then remains...does your perspective matter?

Fallibilism vs Fairness

Here's my comment on Matt Zwolinski's entry on What We Can Learn from Drowning Children.  The subsequent discussion between Zwolinski and myself prompted Zwolinski to ban me from the Bleeding Heart Libertarian website.

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Xerographica

You didn't even skim the surface of the problem.   The problem isn't just that there is a child drowning in a pool...the problem is that there is also a baby that a parent left in the car with the windows rolled up during summer.  The problem doesn't end there.  The problem is also that you only have $1 to spend correcting the problem.  Does the problem end here?  Of course not.  You also have the option to spend that dollar on a procreation licencing program.  If you think the problem ends here then you'd be wrong.

We're dealing with n+1 problems multiplied by n+1 solutions.  YOU see a drowning child so you think everybody should have a moral obligation to do something about that drowning child.  Do what though?  Should people spend their limited time/money trying to save that one child or spend their limited time/money trying to prevent future children from drowning?  Or should they spend their limited time/money trying to solve the problems that THEY see?

That's the thing...you don't realize how truly limited your perspective is.   You don't see all the other problems that other people have access to and you don't see all the other possible solutions that other people have considered.  That's why you failed to understand the point of this comment of mine.

If you want me to spend my $1 on trying to fix your problem then you need to convince me that your problem is more important than my problem.  Not only that but you need to convince me that your proposed solution to your problem will actually solve the problem.  Why should you have to persuade me?  Because in the process of doing so you might learn that my problem is more important than your problem and/or my solution is more effective than your solution.

Having studied International Development Studies at UCLA I can promise you that a ridiculous amount of your money was wasted on failed solutions to problems that you weren't even aware of.  From my limited perspective the only tried and true method of lifting people in other countries out of poverty was when we sent them our jobs.  American unions have unintentionally done more to help people in developing countries than any intentional effort by government.  This was the point of my blog entry on the Dialectic of Unintended Consequences.

Well...this is probably the gazillionth time I've brought up Hayek's partial knowledge and Bastiat's opportunity cost...yet your posts still haven't put 2 + 2 together.  That's ok though...because maybe I'm wrong.  So...even though it's frustrating when you continue to ignore these basic but important concepts...the possibility that I might be wrong encourages me to embrace tolerance.  If you're willing to entertain the possibility that perhaps you might be wrong then check out the Wikipedia entry on tax choice.  It has links to Hayek's partial knowledge and Bastiat's opportunity cost.

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Zwolinski

You didn't even skim the surface of the problem.   The problem isn't just that there is a child drowning in a pool...the problem is that there is also a baby that a parent left in the car with the windows rolled up during summer.  The problem doesn't end there.  The problem is also that you only have $1 to spend correcting the problem.

No, that's not the problem. That's a problem you just made up. You're welcome to create your own hypotheticals. But in the one I presented, you're faced with a drowning child and the question is whether you have an obligation to rescue him or not.

If you're willing to entertain the possibility that perhaps you might be wrong then check out the Wikipedia entry on tax choice.  It has links to Hayek's partial knowledge and Bastiat's opportunity cost.

You do realize that I'm familiar with Hayek and Bastiat, right? So perhaps if I'm ignoring your ad nauseum appeals to their ideas, the explanation has to do with something other than my ignorance or close-mindedness?

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Xerographica

Economics is the study of scarcity.  I just made that problem up?  Fallibilism is the understanding that everybody makes mistakes.  I just made that problem up as well?

Why would you want to separate morality from reality?  That's the very problem that we need to deal with in the first place.  What we need is for voters to understand the value of allowing every single person to directly bear the costs of every moral and proper thing that they want the government to TRY and do.

It's fine if you think the government should be responsible for TRYING to save drowning kids.  But it's not fine if you don't understand the value of putting your own, individual taxes where your heart is.  Why isn't it fine?  Because it's one thing to make a mistake with your limited resources but it's another thing for you to make a mistake with my limited resources.  Scarcity+fallibilism = hedge our bets.  This is the same conceit vs humility concept you ignored last time.

So no, you're not at all familiar with Bastiat or Hayek if you think there's any value in pretending that there aren't price tags attached to every single good...moral or otherwise...that people want.  That means that, unless I'm mistaken, you're only making the problem worse.   If you do think I'm mistaken then for goodness sake just point out the error in  my logic.

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Zwolinski

Economics is the study of scarcity. I just made that problem up? Fallibilism is the understanding that everybody makes mistakes. I just made that problem up as well?

No. That's not what I said. The problem I said you made up was this:

The problem isn't just that there is a child drowning in a pool...the problem is that there is also a baby that a parent left in the car with the windows rolled up during summer. The problem doesn't end there. The problem is also that you only have $1 to spend correcting the problem. Does the problem end here? Of course not. You also have the option to spend that dollar on a procreation licencing program.

Like I said, you're free to make up whatever hypotheticals you want. But this one doesn't have anything to do with the hypothetical I presented. In that hypothetical, you have a choice between rescuing the child or not. Getting a baby out of a locked car or sending money to a parental licensing program isn't an option. So bringing them up is just dodging the issue.

Why would you want to separate morality from reality?

I have no idea what this means or why you think I'm trying to do it.

So no, you're not at all familiar with Bastiat or Hayek if you think there's any value in pretending that there aren't price tags attached to every single good.

For someone who talks so much about the value of humility, you display shockingly little of it.

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Xerographica

My hypothetical situation addressed morality, scarcity and fallibilism.  Your hypothetical situation only addressed morality.  That's why I asked you why you wanted to separate morality from reality.

Reality = morality + scarcity + fallibilism + + +

Yet...you have no idea what I meant when I asked you why you wanted to separate reality from morality.  You read my hypothetical situation but thought that I was just attempting to dodge the issue of morality by highlighting other extremely important issues that we HAVE to consider....scarcity and fallibilism.

So let me break my hypothetical situation down bit by bit and show you exactly where the scarcity and fallibilism are located.

Scarcity - In my hypothetical situation you only had $1.  This reflects that in real life you have limited resources.  Having limited resources forces you to prioritize how you spend your limited resources.    Do you spend that $1 on TRYING to rescue the drowning child or on TRYING to rescue the child in a car?  Having multiple options forces you to make hard decisions with your limited resources.

There is an opportunity cost to every thing you want in life.  If you spend that $1 on TRYING to save the drowning child then you forgo the opportunity to spend that $1 on TRYING to save the child in the car.  This is where partial knowledge comes into play.  Maybe you don't know how to swim.  Maybe the car is locked.  Your partial knowledge and opportunity cost decisions are unique to you.

Scarce resources are efficiently allocated when everyone makes opportunity cost decisions.  These decisions naturally incorporate people's  unique/partial knowledge.  This is how the invisible hand works.

Fallibilism - I keep typing TRYING in all caps to emphasize that there's no guarantee that A) your effort will be successful or B) your choice was the best possible use of your limited resources.  Maybe it would be a mistake to require that people obtain licences if they want to procreate.  Maybe it would be a mistake not to.

Reality - The problem with our current political system is that voting only deals with morality...much in the same way as your hypothetical situation.

For instance the private consequences of fulfilling "her duty" towards the poor will emerge with certainty if a rich woman votes for higher tax redistribution favoring the poor.  She can "consume" the "warm glow of fulfilling her duty" while her vote itself will be insignificant for whether or not she will indeed have to pay higher taxes. - Hartmut Kliemt, The Encyclopedia of Public Choice

If you want to help the poor...then  you need to put your own, individual, hard-earned taxes where your heart is.  This is the only way we can help ensure that scarce resources are efficiently allocated.  You need to decide what other valuable things that you are personally willing to forgo in order to help the poor...

Nevertheless, the classic solution to the problem of underprovision of public goods has been government funding - through compulsory taxation - and government production of the good or service in question. Although this may substantially alleviate the problem of numerous free-riders that refuse to pay for the benefits they receive, it should be noted that the policy process does not provide any very plausible method for determining what the optimal or best level of provision of a public good actually is. When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money? There is a whole economic literature dealing with the willingness-to-pay methods and contingent valuation techniques to try and divine such preference in the absence of a market price doing so, but even the most optimistic proponets of such devices tend to concede that public goods will still most likley be underprovided or overprovided under government stewardship. - Patricia Kennett, Governance, globalization and public policy

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

This is why taxpayers should be allowed to choose which government organizations receive their individual taxes.  We need them to consider the opportunity costs of their tax allocation decisions.  We need all their partial knowledge to help determine what the public sector should produce.  Morality...and bleeding hearts are wonderful...but only when combined with a firm understanding of scarcity and fallibilism.  If we don't factor scarcity and fallibilism into the equation then we're divorcing morality from reality.  This is the equivalent of shooting ourselves in the feet.  Fairness is not worth failure.

Regarding humility...really?  I display shockingly little of it?  Look at my comments on  Kevin Vaillier's entries on contractualism.  I have no problem admitting when I don't understand a concept.  We would have resolved this issue long ago if you displayed the same willingness to admit when you don't understand a concept.  You're a philosophy guy.... no one expects you to understand economic concepts as well as you understand philosophical concepts. Yet you completely ignore me when I try and bring these essential economic concepts to your attention.  Maybe because you think you're familiar enough with them...but your posts sure indicate otherwise.

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Zwolinski

Go back and read this thread again, starting with my original post.Your original reply accused me of missing the point. But on closer examination it turns out that what that means is that I didn't discuss the point that you wanted to talk about.

And this is how it always is with you on this blog. You're a true believer. You've got your one idea about how to change the world, and the only thing you're interested in is convincing other people of its truth, usually with a healthy dose of links to your own blog. You can't approach a conversation with an openness to learning something new, to talking about something besides your own pet issue.

And this makes me tired. And I think it makes other people on this blog tired. Do you ever wonder why people aren't more responsive to pragmatarianism than they are? Do you wonder why people don't engage with your comments more than they do? Is it possible, in your mind, that perhaps the fault is not entirely with them?

At any rate, I'm tired of this. You've got your truth, and I wish you the best of luck with it. But please, preach it somewhere else.

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Xerographica


Read your post again.  Your point was that libertarians should support government efforts to help people in need.  How was my question to you not valid?  Why do you want to separate morality from reality?  All you had to say was..."here are my arguments for why we should only focus on the moral issues..."

You say that I'm not open to learning something new...but what did you try and share with me that I wasn't open to?  Can you list any concepts that I rejected or ignored?  Can you show me a single discussion between us where this occurred?

No, I don't wonder why more people don't engage with my comments.  Look at how you engaged with my comments.  You never once responded to a single economic argument that I made.  You couldn't respond because...obviously you lack an understanding of the economic concepts that I tried to share with you.

Let's take a walk down memory lane together...

Exhibit A - we discussed whether business owners should be allowed to discriminate
Exhibit B - we discussed if foreign intervention was ever justified
Exhibit B1 - this is the continuation of our discussion on foreign intervention
Exhibit C - I brought up my concern regarding the issue of conceit vs humility but your response was...

Believe it or not, not every book deals with your pet issue. Not every blog post on this site deals with it. And yet, sometimes, you can still learn something from them.

Exhibit D - you made a joke about pragmatarianism and I ran with it but no discussion followed

And that's it.  That's the extent of our interactions on your blog.  You were perfectly willing to discuss discrimination and foreign intervention with me but you never once discussed any economic issues with me.

So what do you do?  You block me from your blog.  But by blocking me from your blog you separate morality from reality even more!