Xerographica wrote:Cosmopoles wrote:But the person who is paying for the public goods is not the same as the person who is receiving the public goods. If I choose to direct my taxes to unemployment benefits I don't see the direct benefit because I'm not unemployed.
As I mentioned in my OP...the state is the new god...and we put our lives in the state's hands. With religion, there's prayer and sacrifice. The prayer communicates your concerns/wants/needs and your sacrifice communicates the intensity of your concerns/wants/needs.
It's a matter of anxiety and uneasiness...the same principle behind insurance. If you're worried about losing your job...then you can help decrease your anxiety by giving your taxes to unemployment. If your family member has lost their job...then you can help decrease your anxiety by giving your taxes to unemployment.
And you see, here is your central problem. Peoples' "worry" over losing their job does not correlate very well with the probability that they will lose their job. People, on average, do not make decisions that involve risk rationally. Only "Market firms" can even claim to approximate this, and they still often fail.
Potential job loss also tends to overwhelm their thoughts on other matters. If I'm about to get layed off (say on April 13th), I will definitely consign all of my taxes to unemployment benefits (Unless you can convince me that a human would not do this, I will take this as an assumption). In doing so I ignore very real threats to my well being - roads, health and safety regulations, consumer regulations, fire departments, etc. Moreover every person making this decision will think the same, and there is a real chance of severely under-funding one of these things resulting in large amounts of death or at least a significantly decreased economic output. This is the central information problem - it is not that the market lacks access to decentralized information - it is that it lacks access to useful information.
In this case the useful information would be "how much the roads need" and "what percent of everyone else's taxes are going to roads." The second one cannot be decided until all taxes are collected and therefore is a piece of information that only a central dispersal agency could have.
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No two private goods provide you with the same exact benefit. It's the same exact concept with public goods. The difference is...with public goods...the benefit is shared. If you derive a lot of benefit from contributing to public education...then people who also value public education would also benefit from your contribution. And who else should be in charge of determining exactly how much money public education should receive if not the people who value public education?
But what if everybody who has received a public education is unemployed? Obviously that's not the case...but it's necessary that we think along these lines. If our taxes are being used to churn out people with degrees that have absolutely no relevance to the actual labor demands for our society...then that's a problem. And tax choice would reveal the extent of this problem because obviously unemployed people wouldn't be directing very much money to public education. Then, people who valued public education would have to figure out what has to be changed for public education to educate the public in such a way that the public actually benefits. If their changes generate more revenue for public education...then they are on the right track. If their changes generate less revenue for public education...then they are on the wrong track.
And here is another problem. The people who value public education are precisely those less able to contribute to it. The only people that derive an economic benefit from public education are parents and kids.* All others contributions are dependent on "charity" (people failing to maximize their own tangible profits for an emotional benefit). Parents tend to be young and they have kids, both of which contraindicate their ability to pay a large amount of tax (and thus have their preference heard). Similarly, the people worried about needing welfare are probably those least equipped to fund it.
*Large tech companies may also benefit from higher education - but this is a second order effect. That is, they will not see a problem for decades if they defund education. And markets are absolute crap at reacting to what will happen multiple decades in the future - see global warming if you are not convinced. Also, see the fact that recessions and depressions happen. This problem with the markets is normal, as they are made of humans who have the same blindness.
In a market system...when we give our money to an organization...we are saying that we want that organization to be able to use more of society's limited resources. We all gave our money to Bill Gates which is why he can use far far far more of society's limited resources than you or I can. But the system works because clearly we value how he is using society's limited resources. We value how he is using a good portion of our brightest minds. And if we stop valuing how he is using society's limited resources...then we'd stop giving him our money.
If we created a market in the public sector...then people would be able to use their tax dollars to indicate which government organizations should be using more of society's limited resources. Yes, Bill Gates definitely has more of a say than us...but that's because WE all agree that he SHOULD have more of a say than us. We all agree that we value how he is using society's limited resources in the private sector. So if we benefit from his freedom to indicate which private organizations should be using more of society's limited resources...then why wouldn't we benefit from his freedom to indicate which public organizations should be using more of society's limited resources?
Where does he think the bottleneck is in the public sector? Which link in the chain does he perceive to be the weakest? Markets allow resources to flow to where they create the most value. If we want far more value as a society...then we should create a market in the public sector. From my perspective, the absence of a market in the public sector is our weakest link.
Here you are assuming that the effect is, for lack of a better term, linear, when it is not. We value Bill Gates in as much as he is able to create and distribute a standardized operating system. This, however, says nothing of his ability to allocate public goods in a way that maximizes value - perhaps he isn't so great at that. Really he could only maximize his own value (And I dispute that as an absolute truth, but lets assume it). Bill Gates does not really act like a firm (He started a club whose members give away half of their fortunes), but lets assume he did. His entire set of taxes would go towards things relevant to his interests (Perhaps antipiracy, training a generation of people who did nothing but code backwards compatible c, maybe defunding antimonoply laws). Then he would benefit, but people as a whole would not see this benefit - part of the reason he does so well is that the OS market is particularly inefficient - so people are going to keep using windows, and he won't have to lower his prices.*
*The OS market, by the way, is an excellent example of a "free" market that tends towards inefficiency. The switching cost of an OS is incredibly high (and gets higher the more you use your computer), so the market will tend towards monopoly. If you want proof, examine the lack of nvidia drivers for Linux.
OK, lets, for a moment, sweep all of the above under the rug and assume that everyone can precisely compute the value that each and every public good has to them relative to their taxes. Lets even ignore the fact that the system you propose turns the tax system into a prisoners dilemma and necessarily fails to provide important information. Even stipulating all of that: How long would it take each person to compute this? Remember, they have to compute the probability that they will need each government service in the next year (there are at least 10^3 and I suspect its greater that 10^4). They have to integrate everything that might happen to them and how that interacts with the myriad possible services available. Even if they could, it would certainly take months (I suspect it would take more than a year, but I'm not sure). There is no way around this. If you propose a firm that advises people, then you have centralized the decision making process again (like a government, but without the purpose of making life better for people and with less accountability).