Helping Liberals Understand the Opportunity Cost Concept

[PapaJacky]

Considering the plurality of Federal Revenue comes from a minority of citizens, the opportunity cost is first between allowing the rich to decide what they want to be done with their money v.s. what an elected congress want to do with their money. Frankly, reinforcing a plutocracy might seem unappealing to Liberals.

Words (votes) determined who our political leaders are while actions (dollars) determined who our taxpayers are. Show me your receipts and I'll show you who your true representatives are. That's the opportunity cost concept.

Again, there's an opportunity cost, one which Liberals have examined indirectly (at the very least), of allowing tax payers to choose directly where their tax dollars go.

[Ralkovia]

I suppose what I'm asking is that people refrain from using preschool economics to make political arguments.

Let's see if you grasp preschool economics. Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Because no one would give money to "Social Equality" programs and many liberals would be out of a job.

However, I wouldn't put it past a key number of people in certain states to just put 100% Defense.

The main problem with such a thought though is that, key organizations would be overlooked and the administrative costs of filing "Where money goes" would waste even more money.

[Desperate Measures]

Let's see if you grasp preschool economics. Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Because no one would give money to "Social Equality" programs and many liberals would be out of a job.

However, I wouldn't put it past a key number of people in certain states to just put 100% Defense.

I wouldn't be surprised if people wrote in "100% kill terror".

[Tubbsalot]

Let's see if you grasp preschool economics.

Oh boy.

[Ifreann]

I suppose what I'm asking is that people refrain from using preschool economics to make political arguments.

Let's see if you grasp preschool economics.

Let's see if you can post without insulting everyone who doesn't agree with you.






Guess not.

[PapaJacky]

Let's see if you grasp preschool economics. Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Because no one would give money to "Social Equality" programs and many liberals would be out of a job.

However, I wouldn't put it past a key number of people in certain states to just put 100% Defense.

There'd also be a lack of interstate funding. 74% of Federal revenue in 2011 was paid by states that Obama won in 2008.

[Ralkovia]

Because no one would give money to "Social Equality" programs and many liberals would be out of a job.

However, I wouldn't put it past a key number of people in certain states to just put 100% Defense.

I wouldn't be surprised if people wrote in "100% kill terror".

LOL

100% Stoppin' Mexican.

[The Void realm]

I wouldn't be surprised if people wrote in "100% kill terror".

LOL

100% Stoppin' Mexican.

100% nuke funding.

[Xerographica]

I'm fairly sure we understand.
(Whether or not people would shove me in the liberal box is another matter.)
We understand because that's the basic point of market systems. The contention is, you don't have shit-all choice if you are dirt poor and can't afford either a sandwich OR a book.

No reply to this then, Any reason?

Dirt poor people don't spend their time/money? Who do they give their money to? They give their money to the people who provide them with food, shelter, clothes and entertainment. The people they give their money to are their true representatives...aka taxpayers. This is exactly why taxpayers should be given the freedom to choose how they spend their taxes in the public sector.

You want to help dirt poor people? Fine, go ahead...just give your own taxes to whichever government organization is truly helping dirt poor people the most. Believe you me not all liberals will give their taxes to the same government organization. This very fact...which is known as heterogeneous activity...will do far far far more than 538 congresspeople could ever do to help dirt poor people.

I know that the very best thing that I can do to help dirt poor people...is to give you the freedom to consider what you...and you alone...would be willing to sacrifice in order to help dirt poor people. Which other public goods will you be willing to forgo? That's the opportunity cost concept. Without it we're simply wasting massive amounts of limited resources. That, more than anything, is what hurts dirt poor people the most. Because they have the most to gain from the opportunities that will result from maximizing the benefit of funds in the public sector.

[Xerographica]

Explain to me why having people decide how their tax money is spent would not lead to a situation where those who pay the vast majority of taxes get all sorts of government benefits, while those at the bottom, who don't make enough to pay taxes, would be shafted

Actions speak louder than words. Every time you spend a dollar you're voting for who should be on top. Every time you buy gas, every time you buy shoes, every time you get a haircut, every time you buy a sandwich, every time you watch a movie...you're voting for the people who use resources to benefit you. You're putting your money where your mouth is.

Which should I believe...your words or your actions? Economics doesn't care about who you vote for and neither do I. We just care about how you spend your money. And how we spend our money is reflected in who our taxpayers are. Taxpayers should spend their taxes in the public sector because we voted for them with our dollars. We voted for them with our actions. And our actions speak louder than our words.

Clearly you appreciate what they are doing with your money in the private sector. You value how they spend our limited resources. And guess what? You're going to benefit even more by allowing them to choose how they spend their taxes in the public sector. This is a simple economic fact. We make progress by productively spending our limited resources. Without our opportunity cost decisions...we merely waste limited resources. Without the feedback of your spending decisions...there's just no way for producers to know what you want more of. Without the feedback of taxpayer's spending decisions...there's just no way for government organizations to know which public goods they should produce more of.

[PapaJacky]

Explain to me why having people decide how their tax money is spent would not lead to a situation where those who pay the vast majority of taxes get all sorts of government benefits, while those at the bottom, who don't make enough to pay taxes, would be shafted

Actions speak louder than words. Every time you spend a dollar you're voting for who should be on top. Every time you buy gas, every time you buy shoes, every time you get a haircut, every time you buy a sandwich, every time you watch a movie...you're voting for the people who use resources to benefit you. You're putting your money where your mouth is.

Which should I believe...your words or your actions? Economics doesn't care about who you vote for and neither do I. We just care about how you spend your money. And how we spend our money is reflected in who our taxpayers are. Taxpayers should spend their taxes in the public sector because we voted for them with our dollars. We voted for them with our actions. And our actions speak louder than our words.

Clearly you appreciate what they are doing with your money in the private sector. You value how they spend our limited resources. And guess what? You're going to benefit even more by allowing them to choose how they spend their taxes in the public sector. This is a simple economic fact. We make progress by productively spending our limited resources. Without our opportunity cost decisions...we merely waste limited resources. Without the feedback of your spending decisions...there's just no way for producers to know what you want more of. Without the feedback of taxpayer's spending decisions...there's just no way for government organizations to know which public goods they should produce more of.

The difference, however, is that just because 100,000 of the richest households want to buy a Mercedes-S class, doesn't mean every other household could afford it. Actions, my friend, are not words. Money isn't speech.

[Neu California]

Explain to me why having people decide how their tax money is spent would not lead to a situation where those who pay the vast majority of taxes get all sorts of government benefits, while those at the bottom, who don't make enough to pay taxes, would be shafted

Actions speak louder than words. Every time you spend a dollar you're voting for who should be on top. Every time you buy gas, every time you buy shoes, every time you get a haircut, every time you buy a sandwich, every time you watch a movie...you're voting for the people who use resources to benefit you. You're putting your money where your mouth is.

Which should I believe...your words or your actions? Economics doesn't care about who you vote for and neither do I. We just care about how you spend your money. And how we spend our money is reflected in who our taxpayers are. Taxpayers should spend their taxes in the public sector because we voted for them with our dollars. We voted for them with our actions. And our actions speak louder than our words.

Clearly you appreciate what they are doing with your money in the private sector. You value how they spend our limited resources. And guess what? You're going to benefit even more by allowing them to choose how they spend their taxes in the public sector. This is a simple economic fact. We make progress by productively spending our limited resources. Without our opportunity cost decisions...we merely waste limited resources. Without the feedback of your spending decisions...there's just no way for producers to know what you want more of. Without the feedback of taxpayer's spending decisions...there's just no way for government organizations to know which public goods they should produce more of.

You say that as if there are always options available, which just isn't realistic. Sometimes your only choice is to got the things you need from one specific place, and you're saying that the people who ae going there support it regardless of working conditions, quality, and such.

Also, you didn't answer my question, why should the poor get shafted, while the rich control everything? That's what your system would lead to (also, you seem to ignore that the fact that some are poor is far from always their fault). Someone who's out of work permanently, such as if they became disabled, for example needs to focus on bare necessities, and can't really be expected to "vote with their wallet" as you seem to think they can, after all

[Neu Leonstein]

Let's see if you grasp preschool economics.

Considering your perspective, I would think your answer to that question, largely depends on how much formal teaching you've had.

Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Well, firstly to step outside of economics, societies tend to have preferences for how they are organised. These aren't like individual preferences, more like usually accepted societal norms of behaviour. Those then translate into the kind of institutions that are built over time, and there is a wide range of institutional setups that appear to be doing a fairly good job of promoting economic growth (though there's an even wider range of setups that don't). The way we pay taxes and those taxes are distributed is one of those things that has developed not as a result of economic analysis, but other historical and cultural effects. Whether you agree with that or not, a good economist tends to try and work with the constraints that exist in the real world (eg Dr Roth, who just received the Nobel Prize, among other things for dealing with people's unwillingness to let organ transplants be traded in a traditional market).

Secondly, it's a combination of externalities and free-rider issues. Maybe most easily demonstrated with a prisoner's dilemma.

Let's take national defense (though the same argument can apply to virtually any type of government program). Let's say it costs $10 to run a military capable of supplying national defense. There is just you and me in the country, so we can either each pay $5, or we don't. If we have national defense, we live our lives less $5. If we only have a poorly-funded military, we lose $2 because we have to build ourselves an underground bomb shelter, or some reason like that (it's just reflecting the fact that it's worse to have an underfunded institution than to have a properly funded one). And if we have no military, we get invaded and both lose $10.

So the payoffs from our choices are as follows (for final node, the first number applies to me, the second to you):

........................................YOU
...............................Pay...........Don't Pay
Me..Pay......................-5, -5...........-7, -2
......Don't Pay...............-2, -7.........-10, -10

Say we both get the individual choice to decide whether or not we pay. We both would ideally like the other person to pay for some protection, while we ourselves don't have to pay anything. So we both refuse to pay, which is the rational choice.

But if we both decide not to pay, then actually we are both worse off than we could have been, had we both paid. In other words, the option to free ride off the other person's paying has actually led to no institution being provided at all.

You will find that a surprisingly large number of social (and legal, and political) constructs are attempts to commit everyone in a group to do something in order to avoid problems like the above. The requirement for everyone to pay taxes for the programs that are decided around election time is necessary because you would find that pretty much nothing would be provided if people could choose whether or not to spend money on it. We can't coordinate with each other if a country is made up of millions of people and our decisions can be made independently and/or anonymously.

As an aside, I actually agree with you that there should be many more 'user-pays' and 'opt-out' functions provided by governments. But even that is difficult to achieve, because some programs (like healthcare and unemployment insurance) actually have significant externalities: I also benefit from people around me not having infectious diseases, having an income sufficient to stop them from committing crimes out of desperation and remaining accepted members of society with applicable skills even during economic downturns. If I, having a pretty stable job, good income and generous healthcover, choose not to opt into such programs, they would still be underfunded compared to a 'socially optimal' level that actually reflected all the benefits enjoyed by everyone in the country.

[Xerographica]

The main problem with such a thought though is that, key organizations would be overlooked and the administrative costs of filing "Where money goes" would waste even more money.

At any time throughout the year taxpayers could go to the EPA website and submit a tax payment. The EPA would give them a receipt and they would submit their receipts to the IRS by April 15. Of course, nobody would force taxpayers to directly allocate their taxes. They would still have the option to just give their taxes to congress.

Maybe people see congress as policy experts like people see doctors as medical experts? Why wouldn't we want to find out? Who cares if somebody is an expert if nobody values their expertise enough to give them their money? If taxpayers don't give their taxes to congress then we really really really do not want congress to be spending our taxes...just like we really really really do not want somebody operating on us who only plays a doctor on TV.

Key organizations will not be overlooked. We'll have 150,000,000 taxpayers in every possible field and sector of our society. If you really don't want things to be overlooked then you'll spend as much time as I do advocating that taxpayers be given the freedom to choose which government organizations they give their taxes to.

[PapaJacky]

The main problem with such a thought though is that, key organizations would be overlooked and the administrative costs of filing "Where money goes" would waste even more money.

At any time throughout the year taxpayers could go to the EPA website and submit a tax payment. The EPA would give them a receipt and they would submit their receipts to the IRS by April 15. Of course, nobody would force taxpayers to directly allocate their taxes. They would still have the option to just give their taxes to congress.

Maybe people see congress as policy experts like people see doctors as medical experts? Why wouldn't we want to find out? Who cares if somebody is an expert if nobody values their expertise enough to give them their money? If taxpayers don't give their taxes to congress then we really really really do not want congress to be spending our taxes...just like we really really really do not want somebody operating on us who only plays a doctor on TV.

Key organizations will not be overlooked. We'll have 150,000,000 taxpayers in every possible field and sector of our society. If you really don't want things to be overlooked then you'll spend as much time as I do advocating that taxpayers be given the freedom to choose which government organizations they give their taxes to.

Again, you'd be advocating for a plutocracy. The Federal Income taxes (the plurality of Federal revenue) collected about $550b from the 99% of taxable households[1]. That's not enough to support National Defense in 2009[2].

[AiliailiA]

I'm having difficulty seeing the connection between the broad concept of Opportunity Cost, and the policy proposal "let taxpayers decide how their taxes are spent". Yes, I understand Opportunity Cost quite well, and yes I have read all the posts to this thread (I skipped some of the quotes in the OP, but otherwise I read it).

Let's examine the latter idea though. I have some questions:

1. Does a taxpayer allocate their desired spending by the names of existing departments of government ?
2. Or do they have more fine-grained control (eg, Navy but not Air Force or Army) ?
3. How do they get a new department (or program) started that they can allocate to ?
4. Do you see a problem with departments (or programs) becoming hostile to each other (as they have different constituencies) and wasting money undoing each others' work ?
5. How does a taxpayer verify that the money was actually spent the way they demanded, and wouldn't that require public disclosure of their choice ?
6. What recourse do they have against a political party promising to maintain funding of departments the way it is, then getting elected (this would be a rather popular platform compared to the essentially undemocratic "let taxpayers decide how government functions") ?
7. What can a taxpayer do if for every dollar they allocate to a department or program, the elected government deliberately de-funds that department or program by the same amount?
8. If the uptake of the choose-how-taxes-are-spent option is sufficient and preferences for a department or program exceed the budget which an elected government would otherwise spend on that department or program, what recourse does the taxpayer have against the Department of Defense now building schools, or the Department of Justice issuing food stamps to reduce crime ?
9. Are you proposing to prevent the above things happening by limiting the power of elected governments to do what they promised voters they would do ?
10. If not, do you think this proposal would stand a realistic chance of being implemented by a democratic government, or maintained once its effects were seen ?
11. Would you consider a compromise where the taxpayer's preference is only advisory, ie preferences by department (or program) are collated and published but are not binding on government ?

I don't demand answers to all of these questions, or any of them really. But if the OP is serious about the proposal they must have considered them already.

[Rainbows and Rivers]

I suppose what I'm asking is that people refrain from using preschool economics to make political arguments.

Let's see if you grasp preschool economics. Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Because budgeting is complicated and having three hundred million people do it from their living room is guaranteed to have a worse outcome than having a roomful of experts look at all the issues over the course of a month?

Because everyone will figure that it's okay if they send their money to their pet cause because surely other people will fund all the boring but necessary things?

Because the entire point of having a representative democracy was to avoid that entire mess?

Take your pick.

[Trotskylvania]

I suppose what I'm asking is that people refrain from using preschool economics to make political arguments.

Let's see if you grasp preschool economics. Can you explain to me why taxpayers should not be allowed to choose which government organizations they give their taxes to?

Neu Leonstein is an economist.

You're also asking a question with normative implications. Economics alone cannot give an answer.

[Frisbeeteria]

A blog post that contains a whine how he got banned from another site for making blog posts?

That's some seriously meta shit right there

Pretty much this. Unofficial warning for trolling, blogspaming, and flamebaiting. Also, thread locked.