Murray Rothbard VS James Buchanan

Earlier today Adam Gurri and I had an extended exchange on Twitter.  What set it off was when he shared this article by Paul Crider...  Beyond the Freedom of the Void.  The article blurred the lines between positive liberty and negative liberty.  Perhaps Crider made a valid point, but I didn't quite see what difference it would make.  Gurri responded that it would help people resist anarcho-capitalism (AC).  We went back and forth for a while and eventually ended up here...

You don't assume gov is more effective than not?

— Pragmatarian (@Pragmatarian) July 26, 2017

My thinking is not nearly that categorical. In the libertarian(ish) sphere, think Ostrom, Coase, and Hayek, not Mises or Rothbard.

— Adam Gurri (@adamgurri) July 26, 2017

What do you disagree with in "The Myth of Neutral Taxation" and "Toward a Reconstruction of Utility and Welfare Economics"?

— Pragmatarian (@Pragmatarian) July 26, 2017

I don't know---I haven't read those ones.

— Adam Gurri (@adamgurri) July 26, 2017

You can't make an adequately informed decision about Rothbard/AC without reading them.

— Pragmatarian (@Pragmatarian) July 26, 2017

lol if you say so. "You're not informed enough to have an opinion unless you read THE SPECIFIC THINGS I SAY YOU HAVE TO" doesn't fly with me

— Adam Gurri (@adamgurri) July 26, 2017

Rothbard's argument that parents have no duty to feed their children tells me all I really need to know about his property rights absolutism

— Adam Gurri (@adamgurri) July 26, 2017

Oh deja vu.  In a recent post I shared this blog entry by Matt Bruenig... #NotAllLibertarians: An Illustration.  He defended his wife's attack on Rothbard's argument that parents should not be forced to feed their children.  I left this comment on his entry...

If you're going to go after Rothbard.... then it's probably a good idea to attack his strongest argument... Football Fans vs Nature Fans... rather than his weakest one. Because, if you don't attack his strongest argument... then it appears that you're incapable of doing so.

It's true that a chain is only as strong as its weakest link.  It's also true that an argument is only as strong as its weakest link.  However, it's important to understand that Rothbard's deontological arguments ("rights") and consequential arguments (results) are entirely different chains.  Destroying an argument in the "rights" chain really doesn't destroy the results chain.  If it did, then the results chains created by Ostrom and Buchanan would also be destroyed.

Is Bruenig familiar with Rothbard's results chain?  I'm not sure.  It's not like he responded to my comment.  Gurri, on the other hand, did respond to my comment.  So I know for a fact that he has not read either "Toward a Reconstruction of Utility and Welfare Economics" (1956) or "The Myth of Neutral Taxation" (1981).  He is under the impression that he doesn't need to read them because Rothbard's crappy "rights" argument is all he needs to know to make an adequately informed decision about Rothbard and AC.

Personally, my first impression of AC and Rothbard was super negative.  I detested him.  But I perfectly understood that the only way to beat him and his followers was to truly understand him.  So I took the time and made the effort to familiarize myself with his work.  Much of it was garbage "rights" arguments, but there were also some solid results arguments here and there.  By the time that I read his two papers that I mentioned earlier, I had come to the conclusion that he had correctly diagnosed the government.  His remedy though was to abolish the government.  It was quite drastic.  Effectively evaluating his drastic remedy depends on fully understanding the disease.

In 1954 the Nobel economist Paul Samuelson wrote a really short paper... "The Pure Theory of Public Expenditure".  He pointed out that it's possible to benefit from some goods without paying for them.  For example, you can benefit from environmental protection (EP) even if you don't help pay for it.  Why buy the cow when you can get the milk for free?  The problem is... if you, and too many other people, don't pay for EP, then not enough will be supplied.  The amount supplied will be less than the amount that everybody truly wants.   So we can't expect people to voluntarily donate enough money to EP.  Therefore... taxes.  You don't have a choice whether you pay for goods like EP.  Paying taxes though doesn't reveal your valuation of EP. What Samuelson did was simply assume that planners would be able to adequately guess your true valuation of EP.

The Nobel economist James Buchanan agreed with Samuelson that the free-rider problem reasonably justifies taxation.  But as far as Samuelson's assumption of omniscient planners was concerned, Buchanan strongly disagreed.  In 1963 he wrote "The Economics of Earmarked Taxes".  He argued that earmarking would allow taxpayers to honestly reveal their true valuations of public goods.  Say that your valuation of EP is $1000 of your tax dollars.  If you only earmark $100 tax dollars to EP it doesn't mean that you'll be able to spend the difference on private goods (ie clothes).  It means that you'll have $900 tax dollars to earmark to other public goods (ie national defense)... which you value less than EP.  Therefore, there's absolutely no incentive to give a false signal.

In his 1956 paper Rothbard wrote, "Individual valuation is the keystone of economic theory."  This is entirely consistent with Buchanan.  Both thinkers strongly agreed that it's absurd to assume that planners can correctly divine or adequately predict people's valuations.  Also from Rothbard's paper...

The prime error here is the assumption that the preference scale remains constant over time. There is no reason whatsoever for making any such assumption. All we can say is that an action, at a specific point in time, reveals part of a man’s preference scale at that time. There is no warrant for assuming that it remains constant from one point of time to another. - Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics

We can compare it to Buchanan in 1982...

Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post (after the choices), in terms of "as if" functions that are maximized. But these "as if" functions are, themselves, generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange. The potential participants do not know until they enter the process what their own choices will be. From this it follows that it is logically impossible for an omniscient designer to know, unless, of course, we are to preclude individual freedom of will. - James Buchanan, Order Defined in the Process of its Emergence

Rothbard thoroughly understood that valuations can't be adequately/accurately conveyed by surveys/voting...

One of the most absurd procedures based on a constancy assumption has been the attempt to arrive at a consumer’s preference scale . . . Through quizzing him by questionnaires.  In vacuo, a few consumers are questioned at length on which abstract bundle of hypothetical commodities they would prefer to another abstract bundle, etc. Not only does this suffer from the constancy error, no assurance can be attached to the mere questioning of people. Not only will a person’s valuations differ when talking about them than when he is actually choosing, but there is also no guarantee that he is telling the truth. - Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics

Buchanan obviously agreed.  He certainly never said, "Planners aren't omniscient, therefore voting."  No economist in their right mind would argue that the optimal supply of defense can be determined by direct democracy.  Otherwise they'd have to argue that the optimal supply of milk can also be determined by direct democracy.

In the absence of people's valuations of government goods, many people will end up paying a lot of money for goods that they really don't value.  Here's Rothbard in 1981...

But this argument generates far more difficulties than it solves. It proves too much in many directions. In the first place, how much of the deficient good should be supplied? What criterion can the State have for deciding the optimal amount and for gauging by how much the market provision of the service falls short? Even if free riders benefit from collective service X, in short, taxing them to pay for producing more will deprive them of unspecified amounts of private goods Y, Z, and so on. We know from their actions that these private consumers wish to continue to purchase private goods Y, Z, and so on, in various amounts. But where is their analogous demonstrated preference for the various collective goods? We know that a tax will deprive the free riders of various amounts of their cherished private goods, but we have no idea how much benefit they will acquire from the increased provision of the collective good; and so we have no warrant whatever for believing that the benefits will be greater than the imposed costs. The presumption should be quite the reverse. And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people's good their "bad?" Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service. - Murray Rothbard, The Myth of Neutral Taxation

Here's Buchanan in 1968...

Over time, any individual in the community will expect this rule to produce unfavorable results in particular instances, results that run counter to his own preferences. Public-goods projects which he urgently desires may not be undertaken because a majority of his fellow citizens does not agree with his evaluation. Or, conversely, he may be required to contribute to the costs of projects that he considers to be worthless. - James Buchanan, The Demand and Supply of Public Goods

Buchanan and Rothbard both agreed that the forced-rider problem is a real problem.  They also agreed that fiscal illusion is a real problem.  Here's Rothbard in 1981...

A second important point is that, in contrast to the market, where consumers pay for received benefits (or, in nonprofit organizations, where members pay for psychic benefits), the State, like the robber, creates a total disjunction between benefit and payment. The taxpayer pays; the benefits are received, first and foremost, by the government itself, and secondarily, by those who receive the largess of government expenditures. - Murray Rothbard, The Myth of Neutral Taxation

Here's Buchanan in 1967...

The apparent splitting of the fiscal process into two parts was shown to produce potential gaps between preferred spending on public goods and services and preferred levels of taxation. Until and unless these gaps are eliminated, budget deficits tend to emerge from democratic decision processes. - James Buchanan, "Fiscal Policy" and Fiscal Choice

Let's compare their thoughts on congestion.  Here's Rothbard in 1974...

If there is an increased demand for a privately-owned good, consumers pay more for the product, and investors invest more in its supply, thus "clearing the market" to everyone's satisfaction. If there is an increased demand for a publicly-owned good (water, streets, subway, and so on), all we hear is annoyance at the consumer for wasting precious resources, coupled with annoyance at the taxpayer for balking at a higher tax load. Private enterprise makes it its business to court the consumer and to satisfy his most urgent demands; government agencies denounce the consumer as a troublesome user of their resources. Only a government, for example, would look fondly upon the prohibition of private cars as a "solution" for the problem of congested streets. Government's numerous "free" services, moreover, create permanent excess demand over supply and therefore permanent "shortages" of the product. - Murray Rothbard, The Fallacy of the 'Public Sector'

Here's Buchanan in 1955...

The answer to the whole highway problem lies in “pricing” the highway correctly. The existence of congestion on our streets and highways is solely due to the fact that we do not charge high enough “prices” for their use. This is one of the main functions of price in our free enterprise economy… [p]rice relieves potential congestion around our meat counters, our motels, and our models. Why do we shun its usage in the case of highway services?  - James Buchanan, Painless Pavements: Highways by High Finance

Rothbard and Buchanan agreed on many things.... individual valuation, prices, fiscal equivalence and the forced-rider problem.  They both understood the point and purpose of markets so it shouldn't be a surprise that they both came to the same correct conclusion that the fundamental problem with government is that it isn't a market.  The solution to this problem is where the two thinkers diverged.  Rothbard's solution was to abolish the government while Buchanan's was to repair it.  Here's Rothbard in 1974...

Government, in short, acquiring its revenue by coerced confiscation rather than by voluntary investment and consumption, is not and cannot be run like a business. Its inherent gross inefficiencies, the impossibility for it to clear the market, will insure its being a mare's nest of trouble on the economic scene. - Murray Rothbard, The Fallacy of the 'Public Sector'

As far as I know, this is the closest he came to critiquing the idea of repairing the government.

Ok, now let's jump over to Vincent Ostrom and Elinor Ostrom.  Here they are in 1971...

PPB analysis rests upon much the same theoretical grounds as the traditional theory of public administration. The PPB analyst is essentially taking the methodological perspective of an "omniscient observer" or a "benevolent despot." Assuming that he knows the "will of the state," the PPB analyst selects a program for the efficient utilization of resources (i.e., men and material) in the accomplishment of those purposes. As Senator McClelland has correctly perceived, the assumption of omniscience may not hold; and, as a consequence, PPB analysis may involve radical errors and generate gross inefficiencies. - Vincent Ostrom and Elinor Ostrom, Public Choice: A Different Approach to the Study of Public Administration

No surprise, they agree with Rothbard and Buchanan that it's a problem to assume that government planners are omniscient.

Here's what the Ostroms wrote in 1999 about individual valuation...

Whereas the income received for providing a private good conveys information about the demand for that good, taxes collected under the threat of coercion say little about the demand for a public good or service.  Payment of taxes indicates only that taxpayers prefer paying taxes to going to jail.  Little or no information is revealed about user preferences for goods procured with tax-supported expenditures.  As a consequence, the organization of collective consumption units will need to create alternative mechanisms to prices for articulating and aggregating demands into collective choices reflecting individuals' preferences for a quantity and/or quality of public goods or services. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices

Let's compare it to Rothbard in 1981...

We have no idea how much the taxpayers would value these services, if indeed they valued them at all. For example, suppose that the government levies a tax of X dollars on A, B, C, and so on, for police protection—for protection, that is, against irregular, competing looters and not against itself. The fact that A is forced to pay $1,000 is no indication that $1,000 in any sense gauges the value to A of police protection. It is possible that he values it very little, and would value it less if he could turn to competing defense agencies. Moreover, A may be a pacifist; so he may consider the State's police protection a net harm rather than a benefit. But one thing we do know: If these payments to government were voluntary, we can be sure that they would be substantially less than present total tax revenue. - Murray Rothbard, The Myth of Neutral Taxation

Also...

Since "benefits" are subjective, we cannot measure anyone's benefit on the market either, but we can conclude, from a person's voluntary purchase, that his (expected) benefit was greater than the value to him of the money given up in exchange. If I buy a newspaper for 25 cents, we can conclude that my expected benefit is greater than a quarter. But since taxes are compulsory and not voluntary, we can conclude nothing about the alleged benefits that are paid for with them. Suppose, in analogy, that I am forced at gunpoint to contribute 25 cents for a newspaper and that that newspaper is then forcibly hurled at my door. We would be able to conclude nothing about my alleged benefit from the newspaper. Not only might I be willing to pay no more than 5 cents for the paper, or even nothing on some days, I might positively detest the newspaper and would demand payment to accept it. From the fact of coercion there is no way of telling. Except that we can conclude that many people are not getting 25 cents' worth from the paper or indeed are positively suffering from this coerced "exchange."   Otherwise, why the need to exercise coercion? Which is all that we can conclude about the "benefits" of taxation. - Murray Rothbard, The Myth of Neutral Taxation

The Ostroms also agreed with Rothbard and Buchanan that fiscal illusion is a problem.  Here the Ostroms are in 1999....

The working out of financial arrangements between collective consumption units and production units is one of the most difficult problems faced by entrepreneurs in the public economy.  Without market prices and market transactions, the act of paying for a good generally occurs at a time and place far from the act of consuming the good: individual costs are widely separated from individual benefits.  Yet a principle of fiscal equivalence--that those receiving the benefits from a service pay the costs for that service--must apply in the public economy just as it applies in a market economy.  Costs must be proportioned to benefits if people are to have any sense of economic reality.  Otherwise beneficiaries may assume that public goods are free goods, that money in the public treasury is "the government's money," and that no opportunities are foregone in spending that money.  When this happens the foundations of a democratic society are threatened.  The alternative is to adhere as closely as possible to the principle of fiscal equivalence and to proportion taxes as closely as possible to benefits received. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices

Here's Elinor Ostrom in 2005...

There are two principle means to assess equity: (1) on the basis of the equality between individuals' contributions to an effort and the benefits they derive and (2) on the basis of differential abilities to pay.  The concept of equity that underlies an exchange economy holds that those who benefit from a service should bear the burden of financing that service.  Perceptions of fiscal equivalence or a lack thereof can affect the willingness of individuals to contribute toward the development and maintenance of resource systems. - Elinor Ostrom, Understanding Institutional Diversity

Rothbard, the Ostroms and Buchanan would perfectly agree...

1. The efficient allocation of resources depends on everyone's valuations
2. Neither taxation nor voting adequately/accurately reveals people's valuations
3. Government planners can't adequately/accurately divine or predict people's valuations

These three things mean that the government won't optimally supply any goods.  Here are the Ostroms in 1999...

Because most public goods and services are financed through a process of taxation involving no choice, optimal levels of expenditure are difficult to establish. The provision of public goods can be easily over-financed or under-financed. Public officials and professionals may have higher preferences for some public goods than the citizens they serve. Thus they may allocate more tax monies to these services than the citizens being served would allocate if they had an effective voice in the process. Under-financing can occur where many of the beneficiaries of a public good are not included in the collective consumption units financing the good. Thus they do not help to finance the provision of that good even though they would be willing to help pay their fair share. - Vincent Ostrom and Elinor Ostrom, Public Goods and Public Choices

We can see exactly where the Ostroms converge with Buchanan and diverge from Rothbard.  Rothbard was certain that the only way to give citizens an effective voice was to abolish the government.

Rothbard allocated a lot of time and intelligence to trying to abolish the government.  What if he had redirected his limited resources to trying to repair the government?  What if he had thrown the full weight of his support behind the solution offered by Buchanan and the Ostroms?

In any case, it should be really straightforward that it's stupid for Bruenig, Gurri and anybody else to attack Rothbard's weakest argument.  They should attack his strongest arguments.

On Twitter, Gurri has been sharing many critiques of Nancy MacLean's book Democracy In Chains.  In her book she attacks Buchanan.  But does she attack his strongest arguments?  No.  Unfortunately she doesn't.  Instead she attacks things like his association with the Koch brothers.  I certainly appreciate that she chose to attack Buchanan, but it would have been far more beneficial if she had actually attacked his strongest arguments.

Part of the problem is that there really isn't a market for arguments.   There isn't a system in place for people to use their money to publicly help determine/reveal the strength of an argument/paper.  I tried to explain this to Gurri a few months ago... Commerce As Communication.  In that entry I shared a potential solution that could be used for the Liberal Currents website.  In my example I even included "The Myth Of Neutral Taxation".  Evidently my explanation wasn't that effective though because Gurri didn't see the benefit of turning his website into a market.

Admittedly, it's entirely possible that I'm misreading Rothbard, Buchanan and the Ostroms.  But it's certainly the case that Gurri hasn't even read Rothbard's best work.  And by "best" I mean that it closely corresponds with much of the work done by Buchanan and the Ostroms.  These more credible thinkers shared many of Rothbard's concerns about the government.  Can Gurri make an adequately informed decision about Rothbard or AC without actually having read his best work?   Well... in this entry I have shared several of the most relevant passages.  They should be enough to help Gurri see Rothbard and AC in a new light.

Let's imagine that Rothbard, Buchanan and the Ostroms are 100% correct about the fundamental problems with the government.  In this case, Rothbard will be widely recognized for his role in helping to uncover the truth.  The immense importance of this truth will eclipse Rothbard's mistakes.

What about Gurri?  He should help to uncover the truth.  The more responsible he is for doing so, the greater his place in history.

Now let's imagine that Rothbard, Buchanan and the Ostroms are 100% incorrect about the fundamental problems with the government.  In this case, Rothbard will be counted among the many people who spent their entire lives barking up the wrong trees.

What about Gurri?  He should help to uncover the truth.  The more responsible he is for disproving Rothbard, Buchanan and the Ostroms, the greater his place in history.

The Democratic Definition Of "Love"

Comment on: Sovereignty Is Not Property by Adam Gurri

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I'm happy that your website is back. Free-riders are a always a problem because producers are never mind-readers. True or false?

I don't spend very much time worrying about the immigration debate. Maybe I'm undervaluing it though.

One time you told me this... "The point is that thinking about alternatives is not all, or even most, of what love is about."

I didn't reply... but I can't remember why. I'm an atheist but I grew up reading the bible... a lot. When I was a little kid I didn't understand why God rejected Cain's sacrifice. Now I understand that Cain's willingness to pay (WTP) was inadequate. Abel was willing to make a much larger sacrifice.

Later on in the Old Testament we saw the same theme when Abraham was willing to sacrifice his only son Isaac. And also in the New Testament... "For God so loved the world, that he gave his only begotten Son." As opposed to... "For God so loved the world, that he voted for it." I don't think that Christianity would have spread so far so fast with the democratic definition of "love".

We're definitely not mind-readers so it sure makes sense that God used his WTP to clearly communicate his love for us. But...... God also required us to use our WTP to clearly communicate our love for him. As if God isn't a mind-reader? Solomon seemed to believe otherwise, "for thou, even thou only, knowest the hearts of all the children of men."

You seemed to argue that this... "Should anyone who wants be allowed into your home?"... is not a valid argument because of democracy. Does this mean that it would suddenly become a valid argument if we did happen to replace voting with spending?

Recently I made a fun argument on a forum full of liberals. I argued that, because of the free-rider problem, everybody should be forced to spend X% of their income on digital goods. But... we would be able to choose which digital goods we spent our "daxes" on. How cool would it be to have a "digital sector"? For sure I would spend some of my daxes on your website! Yet, as the poll demonstrates, the idea was really unpopular. It was a fun argument though because every argument that the liberals made against a digital sector was equally applicable to the public sector. It was magical. Voila! All of a sudden a bunch of liberals were deeply concerned with the forced-rider problem. But I'm pretty sure that I wouldn't spend my daxes on digital goods that I didn't value... would you?


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Comment on Keynesianism in Democracy by Jason Briggeman

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Neither this entry nor your entry on bullshit in economics textbooks...

https://sweettalkconversation.com/2016/03/09/on-bullshit-in-economics-textbooks/

... includes any acknowledgement of "Tabarrok's Rule": actions speak louder than words.  Your solution to bullshit in economic textbooks was.... ironically... a cheap-talk survey.

In this entry you're considering Buchanan and Wagner... which is wonderful.  But you're not quite acknowledging or appreciating "Buchanan's Rule": using a resource one way means sacrificing the other ways that it could also be used.

Because of Buchanan's Rule... we need Tabarrok's rule in order to ensure that we don't massively violate "Quiggin's Rule": society's limited resources should be put to more, rather than less, valuable uses.

The logical, but extremely detrimental, consequence of massively violating Quiggin's Rule is the major misallocation of society's limited resources.  Keynesianism tries to solve recessions/depressions by violating Quiggin's Rule even more.

If you're interested in learning more...

http://forum.nationstates.net/viewtopic.php?f=20&t=369166

Clarifying The Demand For Defense

Merry Christmas.  Here's my reply to: effectively directing the bulk of government spending

... and some relevant passages.

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After 9/11, if taxpayers had been free to directly allocate their taxes, then defense would have received even more funding than it actually received?  Even though the DoD failed to do its job... not only would taxpayers have rewarded the DoD... but they would have rewarded it more than congress did?

The bottom line up front: Taxpayers are the people least likely to spend the wrong amount of money on defense.  In other words, taxpayers are the people most likely to correctly discern whether any given expenditure will provide a real or imaginary advantage.

Perhaps the best place to start would be to compare federal income tax receipts (source) with the amount of money that defense actually received (source)...

The numbers are in billions.  Here's the chart data along with defense as a percentage of income tax...

Is this right?  I'm not 100% confident that I did this correctly.  If it is correct....then, in order for taxpayers to have spent more money on defense than defense actually received... it would have been necessary for them to spend, on average, more than 55% of their taxes on defense.  Does that sound plausible?

Right now people can't choose where their taxes go.  This means that we don't know the demand for public goods.  I refer to this as demand opacity.  Even though we don't know the demand for defense... I'm pretty sure that taxpayers wouldn't have spent as much money on defense as congress did.

Let's consider some of the relevant economic concepts...

Wicksellian Interest vs Wicksellian Benefit

Scott Sumner posted yet another blog entry on Wicksellian Interest.  Why is Sumner far more interested in Wicksellian Interest than he is in Wicksellian Benefit?  In his entry Sumner asks what he's missing.  Here's my guess...

It would seem to be a blatant injustice if someone should be forced to contribute towards the cost of some activity which does not further his interests or may even be diametrically opposed to them. - Knut Wicksell, A New Principle of Just Taxation

Justice would thereby have been done at least to the extent that each man received his money’s worth.  - Knut Wicksell, A New Principle of Just Taxation

It is impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other.  - Knut Wicksell, A New Principle of Just Taxation

For Buchanan, Wicksell is “the intellectual father of modern public finance” (Buchanan, 1968: 192), and he states: “In any overall evaluation of the history of fiscal thought, Wicksell alone commands the heights of genius” (Buchanan, 1967: 285).  Buchanan’s Nobel-prize speech honored Wicksell with the accolade that Wicksell deserves designation as the most important precursor in public finance theory. (Buchanan, 1987: 243). - Bernd Hansjürgens, The Influence of Knut Wicksell on Richard Musgrave and James Buchanan

The effect (of the Finanztheoretische Untersuchungen, B.H.) on me was dramatic. Wicksell laid out before me a set of ideas that seemed to correspond precisely with those that I had already in my head, ideas that I could not have expressed and would not have dared to express in the public-finance mindset of the time.  - James Buchanan, Economics from the Outside in: "Better Than Plowing" and Beyond

A second analytical principle emerged more than a century after Smith’s Wealth of Nations, and it was not explicitly incorporated into the norms for policy. But it may have been implicitly recognized. It is important because it reinforces the classical principles from a different and essentially political or public-choice perspective. In 1896, Knut Wicksell noted that an individual could make an informed, rational assessment of various proposals for public expenditure only if he were confronted with a tax bill at the same time. Moreover, to facilitate such comparison, Wicksell suggested that the total costs of any proposed expenditure program should be apportioned among the individual members of the political community. These were among the institutional features that he thought necessary to make reasonably efficient fiscal decisions in a democracy. Effective democratic government requires institutional arrangements that force citizens to take account of the costs of government as well as the benefits, and to do so simultaneously. The Wicksellian emphasis was on making political decisions more efficient, on ensuring that costs be properly weighed against benefits. A norm of balancing the fiscal decision or choice process, if not a formal balancing of the budget, emerges directly from the Wicksellian analysis. - James Buchanan, Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes

Essential though the efficiency model of public goods is as a theoretical construct, standing by itself it has little practical use.  The omniscient referee does not exist and the problem of preference revelation must be addressed.  The Wicksellian perspective is thus needed. -  Richard Musgrave, The Nature of the Fiscal State

The only reason for recalling the Wicksellian Connection in this chapter is the long and solidly held conviction of many Public Finance economists that vertical fiscal imbalance and the intergovernmental flows of funds that it necessarily implies breaks the connection between revenue and expenditures and leads to fiscal illusion, bureaucratic manipulation, and waste. - Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance

The Forced-Free-Rider Problem

Reply to: The Reality of War Prosperity by Gina Arnold

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The unseen is really difficult to see! Imagine if we replaced the green “Recommend” button with four coin buttons… penny, nickle, dime and quarter. If I clicked the quarter button then a quarter would be instantly transferred from my digital “wallet” to your digital “wallet”. And the value of your story would increase by a quarter. Then we would be able to search Medium for “Mises” or “Bastiat” and sort the results by value. Whose story would be the most valuable? Can you guess how valuable it would be? $10 dollars? Maybe the author would have received a total of $10 dollars for their story? That $10 dollars should be in their pocket right now… but it isn’t. This is the unseen.

Here on Medium we don’t know what the demand is for stories related to Bastiat or Mises. Is this a problem? Does the demand even matter? Do we really need to see and know the demand for stories in order for the supply of stories to create the maximum possible value?

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. -  Ludwig von Mises, Omnipotent Government

Medium is a socialist community. There’s no compass. There aren’t any micropayments. There should be, there could be, but there aren’t.

Maybe “Recommendations” adequately function as a compass? How could they when the person “spending” them isn’t sacrificing anything in the process? Value is a function of sacrifice. Sacrifice is how we communicate value. If all it takes is one click to sacrifice a penny to a story… if you don’t click the penny then either you don’t value the story or you’re a free-rider. Right now I’d click a quarter button for your story. But I can’t… because there isn’t one. This is the forced-free-rider problem.

A while ago I wrote a lengthy story about how Medium, and other sites, should facilitate micropayments. Obviously Medium didn’t get the message. So I recently launched RudeBagel. It’s the first micropayments forum. You should join! Then we can see how many Medium writers we’ll have to poach before Medium starts facilitating micropayments. After that happens we’ll watch the dominoes fall one by one until there’s only one place left that doesn’t have a compass… the public sector. But by then everybody will understand the value of a compass.

John Quiggin And David Boaz Fusion Food For Thought

John Quiggin and David Boaz recently shared some tasty thoughts.  Initially my plan was to respond to their thoughts in separate blog entries.  But then Tyler Cowen shared this link... The development of Mexican-Chinese fusion food.  It sure sounds delicious!  If fusion food can work... then why not give fusion food for thought a try?

So welcome to my experimental kitchen!  Imagine there's a table that has different ingredients on it.  Some ingredients are from Quiggin and others are from Boaz.  Our conceptual culinary challenge is to select the best ingredients and figure out how to combine them in order to create the most delicious and nutritious brain food ever.

Here are some of Quiggin's ingredients... Locke’s Theory of Just Expropriation and Kelo v. City of New London and here are some of Boaz's ingredients... We should get to decide how the government spends our taxes.

For those of you who didn't hear it the first or second time that I shouted it from the rooftops... Quiggin is writing the sequel to the libertarian bible... Henry Hazlitt's Economics in One Lesson.  Hazlitt's book is largely based on Frédéric Bastiat's exceptionally wonderful essay What Is Seen and What Is Not Seen.  And Bastiat's essay is so wonderful because it's all about opportunity cost.

There's a terrifically tantalizing twist though.  Quiggin isn't a libertarian!  He's a liberal!  What?  A liberal is writing the sequel to the libertarian bible?  Yes!  And it's all kinds of wonderful because he's actually addressing/acknowledging/analyzing one of the strongest libertarian arguments.  As opposed to say, for example, the liberal Matt Bruenig who vigorously attacks Rothbard's weakest argument and conveniently ignores Rothbard's strongest argument...

In the first place, how much of the deficient good should be supplied? What criterion can the State have for deciding the optimal amount and for gauging by how much the market provision of the service falls short? Even if free riders benefit from collective service X, in short, taxing them to pay for producing more will deprive them of unspecified amounts of private goods Y, Z, and so on. We know from their actions that these private consumers wish to continue to purchase private goods Y, Z, and so on, in various amounts. But where is their analogous demonstrated preference for the various collective goods? We know that a tax will deprive the free riders of various amounts of their cherished private goods, but we have no idea how much benefit they will acquire from the increased provision of the collective good; and so we have no warrant whatever for believing that the benefits will be greater than the imposed costs. The presumption should be quite the reverse. And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people's good their "bad?" Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service. - Murray Rothbard, The Myth of Neutral Taxation

Rothbard clearly understood that the problem with government is that allocation occurs in a valuation vacuum.  And he did an excellent job of articulating this problem.  But unfortunately, he got the solution really wrong.  Rather than advocating that we simply add the missing ingredient to the government, Rothbard advocated that we eliminate the government entirely.

Rothbard's solution was extremely erroneous and it resulted in the massive misallocation of a significant amount of libertarian effort/energy/excellence.  He inadvertently sent way too many libertarians on a wild goose chase... barking up the wrong trees... tilting at windmills...

Libertarians should have been attacking the idea that the optimal (most valuable) allocation could be determined without earner valuation.  Libertarians should have been endeavoring to destroy the assumption of omniscience and benevolence.  A few were... but far too many were wasting their time building up strawmen.  And liberals have consistently chosen to attack these easy targets.

It's been 34 years since Rothbard wrote "The Myth of Neutral Taxation" and finally, at long last, there's an influential libertarian who's made the case for truly fixing, rather than eliminating, the government.

In his WP article, Boaz argued that taxpayers should be free to choose where their taxes go.  This solution is consistent with Rothbard's strongest argument... which is consistent with Hazlitt's and Bastiat's arguments... which are based on earner valuation.  Earner valuation is where individuals weigh the alternative uses of their own hard-earned money (consider the opportunity costs) and choose the most valuable options.

So Boaz is an exceptional libertarian just like Quiggin is an exceptional liberal.  Boaz is exceptional for being the only influential libertarian to suggest that we add earner valuation to the government... and Quiggin is exceptional for being the only influential liberal to seriously consider opportunity cost.  They are both converging on economic reality/truth from opposite directions.

And when I say "converging"... I'm trying to say that they've both placed an unnecessary ingredient on the table.  Consider this passage from Bastiat...

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. - Frédéric Bastiat, Justice and Fraternity

As far as I know, Bastiat never argues that taxation is unnecessary.  His main concern was the absence of earner valuation...

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." - Frédéric Bastiat, What Is Seen and What Is Not Seen

Bastiat was all about the benefit principle...

When it is a question of taxes, gentlemen, prove their usefulness by reasons with some foundation, but not with that lamentable assertion: "Public spending keeps the working class alive." It makes the mistake of covering up a fact that it is essential to know: namely, that public spending is always a substitute for private spending, and that consequently it may well support one worker in place of another but adds nothing to the lot of the working class taken as a whole. Your argument is fashionable, but it is quite absurd, for the reasoning is not correct. - Frédéric Bastiat, What Is Seen and What Is Not Seen

So Bastiat wasn't concerned with taxation itself... he was concerned with the government vigorously violating Quiggin's Implied Rule of Economics (society's limited resources should be put to more, rather than less, valuable uses).

With this in mind... consider Quiggin's first paragraph in his recent blog entry...

For quite a few years now, I’ve been working on a response to Henry Hazlitt’s Economics in One Lesson, a defence of free-market economics first published in 1946, but still in print and popular among libertarians. Hazlitt, as he says, is essentially just reworking Bastiat’s analysis of opportunity cost, represented by the broken window parable. What I’m trying to do is take the idea of opportunity cost seriously, and apply it across the board, including to issues of income distribution and property rights. It’s obvious (to me, at any rate) that any allocation of property rights to one or more people has an opportunity cost, namely the benefits that could be realised if the property rights were allocated to someone else. This is a live issue when property rights are being created explicitly right now, as they are with various kinds of intellectual property. But it is just as relevant when we come to consider the historical origins of property. I’ve spent a fair bit of time debating the question of whether property rights have a basis (say, in natural law) for existence independent of the states or governments that typically define and enforce them. I don’t want to talk about that issue right now, but it explains why I’m taking an interest in (I think) the most prominent proponent of natural law in relation to property, John Locke.

There's a few different ingredients in here.  Taking opportunity cost seriously?  Deeeeelish!  Natural law?  Yuck!  Bastiat's arguments aren't based on nonsense on stilts.  Which is what makes them so good.  So by bringing up the "issue" of natural law... Quiggin is being less like Quiggin and more like Bruenig.  Which is unfortunate because there's a surplus of Bruenigs and a shortage of Quiggins.

Now let's take a look at this ingredient supplied by Boaz...

Real budget democracy, of course, means not just that the taxpayers can decide where their money will go but also that they can decide how much of their money the government is entitled to. Thus the last line on the 1040-D form must be “Tax refund.”  The form would indicate that none of the taxpayer’s duly calculated tax should be refunded to him; but under budget democracy the taxpayer would have the right to allocate less than the amount requested for some or all programs in order to claim a refund (beyond whatever excess withholding is already due him).

What do you think?  Does it taste like natural law?  Kinda?

I could be wrong... but I really don't think that any truly delicious and nutritious dish could have natural law as an ingredient.  It's like stuffing a turkey with foam peanuts.  I'm pretty sure that Martha Stewart would say, "It's not a good thing".

So Boaz's unnecessary ingredient tastes like natural law.  And Quiggin's unnecessary ingredient is natural law.  Let's remove all natural law type ingredients from the table.

What ingredients are left on the table?  Well... there's certainly Boaz's consumer choice.  What a wonderful ingredient!  If you'd like proof then consider this comment that was left on Boaz's article...

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

Dear Washington Post editors,

Please remove $0.15 off my my monthly subscription. In return, I would like you to remove any op-eds that amount to demagoguery, supported by half baked arguments. I'm sure you'll know which ones I'm referring to.

Sincerely,
Broprah Winfrey

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

Awesome idea!!!

Boaz was like, "Hey, what about consumer choice in the public sector?".  Winfrey replied, "Oh yeah, what about consumer choice here at Washington Post?"

Boaz was like, "What about adding earner valuation to the public sector?"  Winfrey replied, "Oh yeah, what about adding earner valuation to the Washington Post?"

Boaz was like, "What about adding garlic to steak?"  Winfrey replied, "Oh yeah, what about adding garlic to salad?"

Right now there isn't a market in the public sector.  Boaz showed readers of the Washington Post what a market in the public sector might look like.  Winfrey took this logic and ran with it in an excellent direction.

If you start thinking about creating a market in the public sector... then you start to see all the other places that are really missing markets.

In Thumbs Up vs Quarters Up I argued that we should create a market in Youtube...

... and in Netflix...

... as well as in Fee.org, Liberty.me, Medium and a bunch of other websites.

In Visualizing The Economics of Education I argued that every school should be a market...

Markets everywhere and in everything!  Why?  Enlightenment.  So we can shed light on everything.  Communication.  So we can know what's truly important to other people.  So other people can know what's truly important to us.

Just in case you were wondering how a market in the Washington Post (WP) would work... when you paid for a subscription... your WP "wallet" or "bank account" would be credited accordingly.  Then, with one click, you could allocate as little as a penny to an article (see the Youtube picture above for a very rough idea of what "one click giving" might look like).  Each article would show you the amount of money that you allocated to it and the amount of money that the crowd allocated to it.  WP would take its cut and pass the rest onto the authors.

When you searched WP for articles.... you could sort the results by date, popularity ("likes") or value (allocations).  

Right now there's an article on WP that's more valuable than all the other WP articles.  And we don't know which article it is.  And we don't know how valuable it is.  Is it worth $1,000 dollars?  Or $10,000 dollars?

Quiggin's been allocating a lot of brain power to the opportunity cost concept.  How would he describe the most valuable WP article in terms of opportunity cost?  Wouldn't you like to know?

Here's a couple of my attempts...

The most valuable WP article is the article that readers have been willing to sacrifice the most for.  The most valuable WP article is the article that the crowd has been willing to give up the most for.

Carefully chew on the fact that we don't know which WP article is most worthy of people's sacrifice.  We don't know... because... it's not important to know?  The amount of money that people are willing to sacrifice for an article is frivolous information?

Here's my most relevant illustration...

In my response to James Kwak's response to Steven Levy's story... I shared this passage...

Chwe’s concept is readily apparent in the dynamics of social media. When a media organization posts a link to an online article on Facebook, for example, and people begin “liking” it, others will begin to assign some level of importance to the story and some will be compelled to share it and discuss it. The idea of “common knowledge” may also lend itself to thinking about advertising strategies on social media. — Richard Feloni, Mark Zuckerberg hopes this book will help shape his vision for Facebook

... and here's a passage from Steven Levy...

So what’s the solution? We need a great artificial intelligence effort to comb through our information, assess the urgency and relevance, and use a deep knowledge of who we are and what we think is important to deliver the right notifications at the right time.

There's all these intelligent people thinking about determining importance... and there's Quiggin over at Crooked Timber with his opportunity cost and Boaz over at WP with his tax choice.

It's all about creating value signals...

The most valuable WP article would be the article that the crowd would want Batman to read the most.  Does Batman even read the WP?  He would if WP allowed its members to crowdfund articles.

Check out this tweet from Quiggin...

Two views on the frontier in libertarian thought. Patri Friedman http://t.co/fyqOKDYW4L and me (final para) http://t.co/hU6sfTxrck
— JohnQuiggin (@JohnQuiggin) April 19, 2015

It's a bite size fusion food for thought!  The tweet combines Quiggin's liberal thoughts with Friedman's libertarian thoughts.

If you read Friedman's article... you'll learn that he agrees with Margaret Flowers...

Each of us has a finite number of resources.  So where are you going to put your resources?  Where are you going to put your time and your money?  Are you going to put it into trying to elect somebody into this current system that's broken?  Or are you going to put that into building something?

Friedman offers four alternatives to traditional activism...

• Free State Project - libertarians voting with their feet for New Hampshire 
• Crypto-Anarchy - using bitcoin subversively 
• Market Anarchism - making the government redundant
• Seasteading - libertarians voting with their feet for artificial islands

Here's an updated version by Max Borders and Jeffrey Tucker... Fifty Ways to Leave Leviathan.  What you won't find in that list is the idea of creating a market within WP, Fee.org, Liberty.me, Youtube, Netflix or any other website.

If more libertarians follow Boaz's lead... then it's a given that more and more people will start seeing market mirages.  Market mirages?  Like you're crawling around the desert seeing an oasis where there is none?  It's kind of hard to create a real oasis but it's easy enough to create a virtual oasis.  Cato could put its considerable funding to good use by creating a website where members can submit articles and allocate money to their favorite articles.  The best writers will earn the most money and this will create a bright value signal that will attract better writers.  As more and more talent foot votes for Cato's virtual oasis... and consumers follow... the Washington Post will clearly see the brilliance of Broprah Winfrey's suggestion.  When WP creates its own virtual oasis... maybe Wired will follow suit.  Who's next?  Maybe the Economist?  Eventually Huffington Post and the New York Times will suffer enough brain drainage that they will adapt or go extinct.  The same is true of Netflix, Youtube and Spotify.  Until the only sector left without an oasis will be the public sector.

They say that states are the laboratories of democracy.  There are only like 50 states so it's no wonder that democracy and states still suck.  When websites become the laboratories of markets... given that there are a gazillion websites... we're going to see markets improve exponentially.  Everybody's going to want to participate in better markets and the costs of virtual foot voting will be vanishingly small.  Better market traits will be identified and adopted at a furious pace.  It will be survival of the fittest markets.

This is relevant...

I’d make a different point: the way I’ve learned how things operate is to work with a government or organization to try out a policy and succeed or fail. This kind of trial and error seems crucial to me. Karl Popper called this the piecemeal social engineer. Deng Xiaoping called it crossing the river by feeling each stone. 

This sounds like a good way to figure out the way your world works (your model), and then to reform. A lot of people would say this is China’s secret to success: informal experimentation on a grand scale. The problem, as I see it, is that most governments and aid organizations I’ve worked with are really, really bad at this. They don’t use the lessons from past failures to try again a different, better way. They don’t throw out bad programs. - Chris Blattman, The mistakes made by most development reformers

If there's widespread failure to evolve/adapt/improve... then the problem always boils down to inadequate selection pressure...

This diagram is relevant to Washington Post, schools and the government.  As you can see, producers are not directly subject to the massively powerful selective pressure/force of consumer choice.  Nobody benefits from protecting producers from consumers.  The solution is to eliminate the bottleneck...

Bottleneck removed.  Doing so facilitates trades.  And facilitating trades is the same thing as facilitating communication.

Washington Post, schools and the government all need greater granularity.  Is there such a thing as too much granularity?  I'm sure there is... but so what?  Any website/market/sector that offers too much granularity will take itself out of the market gene pool.  Will their failure negatively impact the system?  How could it?  When the failure of a single node in a network impacts the entire system... then it's because the system isn't adequately decentralized.  Inadequate decentralization is an issue now... but it won't be by the time Crooked Timber allows readers to allocate their money to Quiggin's entries.  Once we have a gazillion markets... then none of them will ever be too big to fail.

Command economies result in the uniformity of products.   Market economies result in the diversification of products.  That's why this ingredient from Boaz's article is probably my favorite...

There would be quite a bit of debate, of course, over how to list programs in the 1040-D program. Spending interests would want to use broad categories–national defense, health, education, job training. Opponents of spending would prefer to narrow the categories so taxpayers can see what they’re really buying– defense of Japan and Korea, war in Iraq, farm subsidies, mass-transit “demonstration” projects in West Virginia, and so on. Libertarians and the arts establishment might agree on listing just “arts,” while the religious right might lobby to have the category broken into “fine arts,” “pork-barrel arts,” and “obscene art.” Language would be an issue – “corporate welfare” or “loans for small businesses”?

Compare it to this recent passage from my favorite liberal (Quiggin's my second favorite liberal)...

Bakers and florists who refuse service are colorful instances. They are burdening customers with their orthodoxies when they could be acting as ‘commmon carriers’ of whatever good/service they provide. Tax issues are less exciting but more wide-spread and consequential. Any organization that enjoys tax-exempt status is, in a sense, being subsidized by citizens who may not approve of what that organization does, or stands for. The issue here is structurally similar to the NEA ‘piss christ’ and Robert Maplethorpe controversies of yore. Should ordinary citizens, scandalized by this stuff, be forced to pay for it via taxes (or even just tax exemptions for organizations than sponsor it)? There is a certain logic to the notion that state-sponsored art should be bland, agreeable art. But if that logic is good logic, there would be a certain logic to extending it to all education and religion (that involves tax-supported or just tax-exempt status.) Most everyone is in favor of a bit of unorthodoxy somewhere along the line. Spice of life! So we would want the bland mandate of pan-agreeableness to lapse at some point. But at what point? - John Holbo, Religious liberty and the Romance of Orthodoxy

Compare it to this recent and excellent blog entry by Don Boudreaux... Insipidness Guaranteed.  I really want to quote the entire thing but I'll just share the punchline...

It’s intriguing that the people who most self-righteously criticize the likes of McDonald’s, Anheuser-Busch, pop rock, and builders of ‘cookie-cutter’ houses for being bland and failing to experiment with the Bold and the Edgy – those who condemn conformity, sneer at the crowds in Wal-Mart, and trumpet their devotion to diversity – are especially likely to be among those who glorify politics and to find in democratic elections the possibility of transcendence and of discovering and empowering the bold, the different, and the courageous trend-bucking leader. 

No one should be surprised that candidates for the U.S. presidency transact mostly in platitudes and are forever performing deeds on the campaign trail that any self-respecting person with independent judgment and a genuine sense and appreciation of his or her uniqueness would never in a million years dream of doing.  And the closer a candidate gets to the political promised land, the more intense becomes the pressure for him or her to be the political equivalent of a Bud Lite.

The forced-rider problem ties back to Rothbard's passage that I shared earlier...

And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people's good their "bad?" Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service. - Murray Rothbard, The Myth of Neutral Taxation

 Again, Rothbard wrote that 34 years ago.  Can you clearly see the pattern/process of truth converging/diverging/converging?

Quiggin, given that he's a liberal who has seriously studied Hazlitt and Bastiat, is in a unique position to facilitate converging on the truth.  I'm not saying that he has to agree with my version of the truth... I'm just saying if he's going to critique the true frontiers of libertarianism... then he needs to focus his efforts on Boaz's solution.  This is because Boaz's solution is entirely consistent with Bastiat.  Well... minus the hint of natural law.

Well there you go!  Some fusion food for thought!  If you can find any room for improvement then please grab these ingredients, grab some other ingredients, grab your apron and start cooking!

A couple more things...

Results of a survey/poll from this thread... Tax Choice Discussion Thread

According to this highly credible/reliable survey... more than 1/3 of the population wants some tax choice.

And how cool is this passage?

We've gone beyond the capacity of the human mind to an extraordinary degree. And by the way, that's one of the reasons that I'm not interested in the debate about I.Q., about whether some groups have higher I.Q.s than other groups. It's completely irrelevant. What's relevant to a society is how well people are communicating their ideas, and how well they're cooperating, not how clever the individuals are. So we've created something called the collective brain. We're just the nodes in the network. We're the neurons in this brain. It's the interchange of ideas, the meeting and mating of ideas between them, that is causing technological progress, incrementally, bit by bit. However, bad things happen. And in the future, as we go forward, we will, of course, experience terrible things. There will be wars; there will be depressions; there will be natural disasters. Awful things will happen in this century, I'm absolutely sure. But I'm also sure that, because of the connections people are making, and the ability of ideas to meet and to mate as never before, I'm also sure that technology will advance, and therefore living standards will advance. Because through the cloud, through crowd sourcing, through the bottom-up world that we've created, where not just the elites but everybody is able to have their ideas and make them meet and mate, we are surely accelerating the rate of innovation. - Matt Ridley, When ideas have sex

Compare it to...

The principle that the multitude ought to be supreme rather than the few best is capable of a satisfactory explanation, and, though not free from difficulty, yet seems to contain an element of truth. For the many, of whom each individual is but an ordinary person, when they meet together may very likely be better than the few good, if regarded not individually but collectively, just as a feast to which many contribute is better than a dinner provided out of a single purse. For each individual among the many has a share of virtue and prudence, and when they meet together they become in a manner one man, who has many feet, and hands, and senses; that is a figure of their mind and disposition. Hence the many are better judges than a single man of music and poetry; for some understand one part, and some another, and among them, they understand the whole. There is a similar combination of qualities in good men, who differ from any individual of the many, as the beautiful are said to differ from those who are not beautiful, and works of art from realities, because in them the scattered elements are combined, although, if taken separately, the eye of one person or some other feature in another person would be fairer than in the picture. - Aristotle, The Politics

Compare it to...

It is through the mutually adjusted efforts of many people that more knowledge is utilized than any one individual possesses or than it is possible to synthesize intellectually; and it is through such utilization of dispersed knowledge that achievements are made possible, greater than any single mind can foresee. It is because freedom means the renunciation of direct control of individual efforts that a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend. - Friedrich A. Hayek, The Case for Freedom

...and...

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. We must solve it by some form of decentralization. But this answers only part of our problem. We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used. But the "man on the spot" cannot decide solely on the basis of his limited but intimate knowledge of the facts of his immediate surroundings. There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger economic system. - Friedrich A. Hayek, The Use of Knowledge in Society 

Scott Alexander vs Adam Smith, J.S. Mill, Alex Tabarrok, Don Boudreaux, David Friedman, Murray Rothbard, Jason Brennan, Elizabeth Warren, Geoffrey Brennan, Loren Lomasky

This seems to me overly optimistic. After all, back when only a tiny percent of the country was tolerant of homosexuality, it might be that church groups could raise a lot of money to enforce anti-gay laws, and gay people were mostly poor and couldn't raise very much money to defend themselves. I think I know what Friedman’s response would be, which is “Yes, and during that time in your real-world statist society, homosexuality was also illegal. Yes, you would have to wait for cultural norms to change before homosexuality would be legalized, but it would very likely be easier to do my way than yours.” I think he’s possibly right. - Scott Alexander, Book Review: The Machinery of Freedom

In 1973, when The Machinery of Freedom was published... what was the demand for anti-gay laws?  We don't know.  After 911, what was the demand for war?  We don't know.

The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired would occur more rarely, and be of shorter continuance. Those, on the contrary, during which the ability was in the highest vigour would be of much longer duration than they can well be under the system of funding. - Adam Smith, Wealth of Nations

Was there a real or solid interest for Christians to fight for the enforcement of anti-gay laws?  This is the question that each and every Christian would have asked themselves if they had been given the opportunity to endure the complete burden of their morality.

They will not indeed submit to more labours and privations than other people, for the relief of distressed fellow creatures: but they make amends by whining over them more.  It is not difficult to trace this sort of affectation to its cause. It originates in the common practice of bestowing upon feelings that praise which actions alone can deserve. - J.S. Mill

Christians had feelings against gays... but would they have been willing to work longer hours to pay for their feelings?  Would they have been willing to put their money where their feelings were?

Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge. - Alex Tabarrok, A Bet is a Tax on Bullshit

What's the total amount of money that Christians would have bet on anti-gay laws?  How much would they have been willing to gamble?

With respect, I respect any preference that reflects a genuine willingness of those with the preference to bear personally all necessary costs to indulge the preference.  But I do not respect ‘cheap’ preferences — preferences that are merely expressions backed-up with no personal stake in indulging the preferences. - Don Boudreaux, To Want or Not to Want

How many Christians would have been willing to personally bear the cost of indulging their anti-gay preference?

But market demands are in dollars, not votes. The legality of heroin will be determined, not by how many are for or against but by how high a cost each side is willing to bear in order to get its way. People who want to control other people's lives are rarely eager to pay for the privilege; they usually expect to be paid for the 'services' they provide for their victims. And those on the receiving end— whether of laws against drugs, laws against pornography, or laws against sex—get a lot more pain out of the oppression than their oppressors get pleasure. They are willing to pay a much higher price to be left alone than anyone is willing to pay to push them around. - David Friedman, The Machinery of Freedom

How much money would gays have been willing to pay to be left alone?

Only the free market, then, can determine different qualities or degrees of a service. Second, and even more important, there is no indication that for a particular taxpayer, the government is supplying a "service" at all. Since the tax is compulsory, it may well be that the  "service" has zero or even negative value for individual taxpayers.  Thus, a pacifist, philosophically opposed to any use of violence, would not consider a tax levied for his and others' police protection to be a positive service; instead, he finds that he is being compelled, against his will, to pay for the provision of a "service" that he detests. In short, equal pricing on the market reflects demands by consumers who are voluntarily paying the price, who, in short, believe that they are gaining more from the good or service than they are giving up in exchange. But taxation is imposed on all people, regardless of whether they would be willing to pay such a price (the equal tax) voluntarily, or indeed whether they would voluntarily purchase any of this service at all. - Murray Rothbard, The Myth of Neutral Taxation

How much money did gays have to pay for the enforcement of anti-gay laws?  How could anything over $0.00 be acceptable?

Democrats are not united in their moral and political outlooks. High information Democrats have systematically different policy preferences from low information Democrats. Rich and poor Democrats have systematically different policy preferences. Compulsory voting gets more poor Democrats to the polls. But poor Democrats tend to be low information, while affluent Democrats tend to be high information voters. The poor more approved more strongly of invading Iraq in 2003. They more strongly favor the Patriot Act, of invasions of civil liberty, and torture, of protectionism, and of restricting abortion rights and access to birth control. They are less tolerant of homosexuals and more opposed to gay rights. In general, compared to the rich, the poor—including poor Democrats—are intolerant, economically innumerate, hawkish bigots. If compulsory voting were to help Democrats at all, it would probably help the bad Democrats. The Democrats would end up running and electing more intolerant, innumerate, hawkish candidates. - Jason Brennan, The Demographic Argument for Compulsory Voting, with a Guest Appearance by the Real Reason the Left Advocates Compulsory Voting

The poor would have been willing to pay for anti-gay laws?  What would the rich have been willing to pay for?

There is nobody in this country who got rich on his own. Nobody.  You built a factory out there—good for you! But I want to be clear.  You moved your goods to market on the roads the rest of us paid for.  You hired workers the rest of us paid to educate.  You were safe in your factory because of police forces and fire forces that the rest of us paid for.  You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. - Elizabeth Warren

The rich wouldn't have spent their money on anti-gay laws because, according to Warren, they'd have spent their money on all the public goods that their profitable businesses depend on.  Markets work because the opportunity cost of tilting at windmills is always too high.

As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market.  A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision

Everybody wants a free lunch.  If they didn't, then taxes wouldn't be necessary.

What would have happened if, in 1973, every taxpayer in the world had been free to shop in their country's public sector?

Gays wouldn't have spent their taxes on anti-gay laws.  Uh, what government agency was responsible for enforcing anti-gay laws?  The police?  So gays would have boycotted the police?  Police weren't just responsible for enforcing anti-gay laws though.  I'm pretty sure that they are responsible for enforcing all the laws.  We refer to police as "law enforcement".  Not, "partial law enforcement" or "selective law enforcement".

Maybe some gays really hated anti-gay law enforcement... but they also really loved anti-liter law enforcement.  Then what?  Soul-searching?  Perhaps not much of a dilemma in this case.

Gays definitely wouldn't have been the only people who detested certain laws.  I'm sure recreational drug users weren't fans of the anti-drug laws.  And jaywalkers weren't fans of anti-jaywalking laws.

Maybe a significant shortage in law enforcement funding would have encouraged the police to suspect that they could earn more money apart rather than together.  So the police would have been unbundled.  This law enforcement division of labor would have allowed the gays to only boycott the enforcement of anti-gay laws.  Gays wouldn't have been forced to throw the baby out with the bath water.

With law enforcement unbundled... gays would have been able to easily learn which country in the world had the least amount of demand for the enforcement of anti-gay laws.  Which country was it?  Maybe Denmark?  And then all the gay people in the world would have foot-voted for Denmark?  Probably not.  But chances are good that they wouldn't have foot-voted for whichever country had the greatest amount of demand for the enforcement of anti-gay laws.

In a pragmatarian system, as soon as some Christian saw the light (realized the opportunity cost)... they would have been free to immediately stop spending their own taxes on the enforcement of anti-gay laws.  Their enlightenment would have instantly made the public sector a little less dark.  Markets facilitate marginal improvements.  With the current system in the public sector... it's binary.  We either do... or do not... allocate society's limited resources to the enforcement of anti-gay laws.

What a primitive time I was born into.  Here I am scratching my head trying to figure out how to better explain the importance of knowing what the demand is for public goods.  Like having to explain the importance of fire... or a wheel.

Knowing what the demand is for public goods is important because then we can know what the fuck is wrong with the people in our world.  If it turns out that there isn't enough demand for conservation... then we'll know that people don't have information regarding the importance of conservation.   If people aren't free to put their taxes where their hearts are, then we really can't accuse them of having their hearts in the wrong place.

We can't make informed decisions without information.  And the demand for public goods is fucking important information.  In the absence of this information... we're all puppets tilting at windmills.

In a previous entry, or two, I argued that payments have two functions... compensate and communicate.  I pointed out that these two functions are inseparable.  But what in the world is compensation?  Isn't it just the opportunity to speak louder?

A market is basically people passing modular megaphones around.   The more money you earn... the larger your megaphone.

Boudreaux recently shared this passage...

When Richie [Rich] and his dad build a mansion, they use bricks, mortar, and cement that might have otherwise become part of a hospital, a community center or a housing development.  They hire masons, carpenters, and electricians who might otherwise have been employed building roads, shopping centers, or – with a little retraining – automobiles.  The food served at the Rich’s extravagant feasts is food that nobody but the Riches and their guests can eat; the fuel burned by their private jets is made from oil that will never heat their neighbors’ houses. 

But when Scrooge bathes in his dollar bills, the only thing he keeps from his neighbors is a lot of cheap paper.  As long as he hoards his money instead of spending it, there are more bricks and mortar, more ready workmen, more food, and more fuel for Scrooge’s neighbors to enjoy. 

There are some who get this exactly backward: They believe that lavish spending spreads prosperity, while a miser is a burden to the community. - Steven Landsburg, Fair Play

At first this seemed really right... but then it seemed kinda wrong.  The part about scarcity and opportunity cost is right... but then it seems to be making the argument that abundance is a function of saving.  It's commendable that Landsburg was trying to highlight the absurdity of liberal economics... but the way he puts it is somewhat misleading.

When Afghanistan Richie spends his money on bricks... then the owner of the brick factory is given a larger megaphone... some of which he passes on to this guy...

The guy in this picture is making bricks.  And the guy in the next picture is not using bricks... he's using stone instead...

Incidentally, the mortar in this wall was partly made from shit gathered by the girl in this photo that I shared in Subsistence Agriculture vs Sweatshops...

Having an abundance of shit is only desirable if there's an abundant demand for stone walls.   Because... we really don't want an abundance of irrelevant things.  This means that we only transfer our dollars/volume over to the people who are responsible for supplying relevant things.

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. - Adam Smith, Wealth of Nations

Getting the balance right is what abundance is all about.  And we really can't get the balance right if we don't know what the demand is for public goods.

Afghanistan felt as if I had been transported back to more primitive times.  More primitive times?   What's primitive is having to try and explain to Scott Alexander why it's so important to clarify the demand for public goods.