Are Congresspeople Omniscient?

[Xerographica]

1) Massive strawman

Our system is not based on the assumption that congresspeople are omniscient, yet taxpayers are not allowed to choose where their taxes go. It just doesn't follow.

2) You are denying the division of labour and division of knowledge. It is possible for me to be the world's leading expert on widgets and have perfect knowledge about their supply and value, but know absolutely nothing about sprockets and their supply and value.

The division of labor is not a critique of consumer sovereignty. That you think it is reveals how little you know about how or why markets work.

3) Congresspeople could probably very easily get the supply of milk pretty much right; and they would certainly get the supply right after a very short number of cycles. Milk is essentially a commodity, with demand not going to change much from year to year, and after two years congress would be just as good at producing the right quantity of milk as the free market is. Really, milk would be orders of magnitude easier to provide than public education, where the value derived is more transcendent.

If they can get the supply "better" than consumers can, then obviously we should want them to determine exactly how much milk, forums and Brittney Spears is supplied.

4) They don't need to get the amount *exactly* right. They need to get it 'good enough', and create more value by taking advantage of collective buying power and methods of wealth creation that would be unavailable/unattractive to the free market.

In the absence of consumer decisions, how in the world can you know how close congress gets? What in the world are you comparing their decisions to? An alternate reality where taxpayers can shop for themselves?

[Xerographica]

But instead of saying that goods provided or economic resources managed by government should be passed to markets, he says tax payers should instead choose to allocate their tax money where they wish (tax choice).

Rather than move public goods to the private sector (market)...I support creating a market in the public sector.

What I don't understand about his argument is how this system deals with the free rider problem. What if I want to use schools or roads, but not pay any taxes for it? If the OP could flesh out his argument and explain what the system in practice would look like, that would be nice.

You can argue that somebody benefits from public education, but you can't know their utility function. If you could then you would be omniscient. Nobody is omniscient so we have to allow people to indicate exactly how much they value public education. If you value public education, but you feel it's adequately funded, then it doesn't make you a free-rider if you give your tax dollars to the EPA instead. If you value public education...and feel it's inadequately funded...but you give your taxes to the EPA instead...then clearly you feel that protecting the environment is a more important priority. You're still not a free-rider given that you're contributing to the common good.

Do you just get a tax return and fill out what you want? Are you obligated to provide a set amount of taxes to the state, but choose how it is allocated? Are your choices limited to certain things authorized by law?

Check out the pragmatarianism FAQ. Voters would determine what's on the "menu" and taxpayers would choose which "items" they wanted to spend their tax dollars on.

[Xerographica]

You still haven't responded to my initial situation (or, to my eyes, even attempted to refute it). So I have to ask, are you debating to seek truth and help others find truth, or are you debating to promote tax choice/pragmatarianism? I realize you likely believe these two things to be equivalent, but if I could prove to you that they weren't, which would you choose?

I would certainly choose truth over pragmatarianism. Your initial situation fails to take into account that values are subjective. Beauty is in the eye of the beholder. One person's trash is another person's treasure.

Also, just to confirm, you advocate utilitarian solutions? That is, the best policies are those that create the greatest good for the greatest number (for some suitable summing of goods/value)?

Yup.

Nothing is definitive. Including the market. It is merely the best way we have of allocating resources in many cases. If the market were definitive, you would not see crashes.

1. our current system is based on the assumption that congresspeople are omniscient (no need for taxpayers to choose where their taxes go)
2. 300 congresspeople allocate half our nation's resources
3. when a crash occurs you want to blame the market

Allowing 300 people to allocate half a country's resources is a recipe for disaster. It take infinitely more insight/foresight than they have as a group to successfully allocate all those resources. The market works because it's the epitome of a group effort. You want to keep millions and millions of people from adding their insight/foresight to the public sector...and then you want to blame the market when failures occur.

Please go to the mall, watch people for a long time, talk with them, ask them why they are buying one thing instead of another, and tell me exactly how much information goes into people's spending decisions. You want to keep all that information out of the public sector and then you want to say that markets are the cause of extremely inefficient allocations of resources (depressions/recessions). It's logically impossible.

You think all that information that shoppers have is wrong and superfluous...and we're better off without it. You want to disregard everything that people know and value and then you want to say that extremely inefficient allocations have nothing to do with the assumption that people's unique circumstances are irrelevant.

Drop the assumption that congresspeople are omniscient, allow taxpayers to shop for themselves in the public sector...and we'll hedge our bets against failure.

The military is an excellent example of how nonlinear return messes with market pricing. Lets say I could prove with relatively simple logic that the US pouring 70% of it's tax budget into attacking Syria would lead to 1000+ years of peace and prosperity for not only for the world, but for the US especially.

It is almost a certainty that more than 30% of people would not fund it. We, apparently, cannot be convinced by simple logic (what should be the most convincing argument).

Taxpayers wouldn't fund the DoD...and this is a recipe for 1000 years of war? American taxpayers would be the only ones who would decide that they had more valuable ways to invest their tax dollars?

Why? Why, in all cases, do we have to let people go there own way? If a person believes that burning down my house is best for everybody, then should I let them? Conversely, if putting one (otherwise innocent) person in jail for 1 day would save 90% of the population from painful deaths, should we let them walk free if they want to? If your answer to this is "property rights," then why are those for sure the best way to allocate resources, and why shouldn't violence be a perfectly valid negotiation tactic?

The rate of progress depends on...

1. how much difference there is between people's perspectives
2. how much freedom people have to apply their perspectives to their own resources

If you need more explanation then check out my rule.

[Xerographica]

Your premise is that, if congresspeople know the correct allocation of X then they should also know the correct allocation of Y & Z. Division of labour means that it is their job to know about X, but not to know about Y and Z.

The moral of the story is that with contrived examples you can prove anything the government didn't know the 'correct' quantity to supply, but still ended up being far more efficient than consumers would have been on their own.

The division of labor concept means that people can only buy things that they know how to produce? Are you kidding me? Please go to the mall and enforce your hilarious misinterpretation of the division of labor concept. Ask people whether they know how their selected items were made. If they admit that they are clueless, then force them to put the items back on the shelves. Have fun.

The correct interpretation of the division of labor concept would still be in effect if pragmatarianism was implemented. The EPA would still have its environmental experts and the DoD would still have its defense experts. The difference is that taxpayers would have the opportunity to shop for themselves. If more, rather than less, taxpayers chose to shop for themselves then it would mean that they were trying to correct the allocative inefficiencies caused by the incorrect spending decisions of congresspeople.

Voting and other democratic procedures can help to produce information about the demand for public goods, but these processes are unlikely to work as well at providing the optimal amounts of public goods as do markets at providing the optimal amounts of private goods. Thus, we have more confidence that the optimal amount of toothpaste is purchased every year ($2.3 billion worth in recent years) than the optimal amount of defense spending ($549 billion) or the optimal amount of asteroid deflection (close to $0). In some cases, we could get too much of the public good with many people being forced riders and in other cases we could get too little of the public good. - Tyler Cowen, Alex Tabarrok, Modern Principles of Economics

The optimal amounts of public goods depends on people's preferences. The further that congress has deviated from the optimal provision of public goods...the greater the incentive there would be for taxpayers to shop for themselves. If many taxpayers shop for themselves then we would be able to definitively say that the allocation as determined by congress was extremely inefficient.

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

Why did this Nobel Prize economist argue that the provision of public goods can be easily over-financed or under-financed? Because people don't have the freedom to choose where their taxes go.

Again, the optimal provision of public goods depends on people's preferences for public goods.

Government production of a public good has a main advantage, because a government can impose taxes and fees to pay for the public good. Still, the main problem of deciding the optimal level of public good production remains. To determine it, the government would need to know its citizens' preferences. - Laura Razzolini, Public Goods

Again, the optimal provision of public goods depends on people's preferences for public goods. And in economics, preferences aren't "votes"...they aren't "opinions"...they are "dollars". However you spend your money reveals your preferences...which is basically the same thing as demand.

Therefore, the optimal supply of public goods can only follow from the demand for public goods. If we give taxpayers the option to shop for themselves in the public sector...and many people decide to do so, then this would indicate that the allocation as determined by congress was extremely inefficient. It really did not reflect the actual demand for public goods. Good thing we allowed taxpayers to shop for themselves.

If few people decided to shop for themselves, then you were right! Congress was pretty good at guessing the preferences of taxpayers. The bottom line is...we have absolutely nothing to lose and everything to gain by testing your theory out.

[Xerographica]

I see a horrible flaw in that system. It does not represent people equally. Those who are rich would in such a system simply by virtue of being rich and thus paying larger taxes have many times over the "voting" power of others. Thus instead of everyone money being used for everyone good you would have welfare funded by poor, burger flipping, 3 job holding single mothers and corporate subsidies funded by billions of dollars. Can you not see the social suicide in that?

There is a reason why modern states operate on the principle of collect -> divide -> distribute. And that is to ensure that what the people want and not only what they can pay for is satisfied.

Is every bakery going to be a success? Obviously not...right? If that were the case then poverty would be eliminated because everybody who lacked money would be guaranteed money simply by starting a bakery. No need for redistribution.

So what factors determine whether a bakery will be successful or not? Maybe it simply boils down to luck? That can't be right. The fact of the matter is that it's a given that some bakers are going to make less mistakes than other bakers. As a result, some bakeries are going to be more successful than others.

It boils down to insight and foresight. A successful baker sees more accurately than an unsuccessful baker. And it's up to consumers to determine which baker sees more accurately.

You want to redistribute wealth from a wealthy baker to a poor baker? You want to give more influence to people who see less accurately? You want to take flour from a successful baker and give it to an unsuccessful baker?

Your intentions are good, but unfortunately, because you're failing to think things through you're simply increasing the severity of the problem you're trying to solve.

If you truly want the poor to have better options in life...then you have to think things through. Better options depend on people doing better things with society's limited resources. Consumers determine who exactly are the people who are doing better things with society's limited resources. The people they give their positive feedback (money) to are the people with the most insight/foresight. Therefore, we all will greatly benefit by allowing taxpayers to choose where their taxes go.

[Xerographica]

Your 'solution', as I understand it, is to let every government agency itemize their services as much as they feel like, and put the entire itemized list from all government services onto some kind of ballot or fundraising bar. Everyone still pays the same amount of tax they they previously were. They then spread the money around the departments and services they like. Do I have that about right?

Not quite, it might help to read the pragmatarianism FAQ.

Seeing as you like shopping analogies so much, isn't that like forcing people into McDonalds and telling them they MUST spend $100? The don't have a choice as to what is on the menu. It doesn't matter if $100 gets them more than they want.

Isn't the private sector like forcing people into McDonald's and telling them that they MUST spend $100? Errrrr...yeah? Kinda? Why else are they earning money if not to spend it at McDonald's?

In case you missed it, the public sector is half the economy. If you're making the analogy because you think there's a limited supply of crappy options in the public sector...then you might want to consider why there are so many more choices in the private sector. Do you think it might have anything to do with the fact that people can shop for themselves?

Do you think that in 1978 when Deng Xiaoping started to help China transition from a planned economy to a mixed economy...that the Chinese people had as many options as they do today? Perhaps they have a few more options? Perhaps it has something to do with the fact that they can now shop for themselves at least in the private sector?

When you only allow 300 people to shop for themselves in either half the economy or the entire economy...then it should be a no-brainer that the result will be the wrong quantities of an extremely limited selection of crappy options. Unfortunately, it's not a no-brainer. So here I am.

If people aren't free to shop for themselves...then the specificity and ranking of their preferences and the uniqueness of their circumstances will not be input into the function which determines how society's scarce resources are used. As a result, the output will be the wrong quantities of an extremely narrow selection of poor quality products/services. Pseudo-demand, pseudo-supply. Garbage in, garbage out.

None of your quotes say that we the optimum provision of goods would come from people choosing where to spend their taxes. They say that government allocation is probably non-optimal (which I agree with), and that if we allowed people to express their preferences better the allocation would be more optimal (which I agree with). But allocation of money is NOT a direct or even particularly good indicator of people's preferences. Value derived and price of goods does not have a 1 to 1 relationship: price of goods is primarily driven by cost of production, but value derived is intrinsic to the buyer.

Shopping isn't a good indicator of people's preferences? Are you kidding me?

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

Click on that link and read every single passage that contains the term "opportunity cost". And then read the entire handbook. And then you'll have read one of the millions of books that I've read on the subject.

I'm really not making it up when I say that our current system is based on the assumption that congresspeople are omniscient. Just like I'm really not making it up when I say that we'd be infinitely better off by allowing taxpayers to shop for themselves in the public sector. It's really worth it to think things through and research the topic on your own if you don't believe me.

[Xerographica]

As you've been told many times, there's no apparent reason for a person in location A to help pay for a bridge in location B. Person A possibly doesn't even know where location B is. The government and Person B, however, are aware that a bridge is needed in Location B. The govt. is probably aware because of people like Person B (this is where that division of labour point comes up, govt. is compartmentalised and ultimately there are far more than 300 people in charge of how money is spent in the US, frankly it's naive to think that's true) that a bridge is needed (what is the point of electing representatives that don't represent your interests?). They take money from persons alphabet and then distribute it so that the bridge gets better. The multiplier effect says that this then benefits even Person A.

If the bridge doesn't get built because taxpayers can't be persuaded that it's worth the alternative uses of their tax dollars...then what happens to their money? Their money just disappears? It vanishes? Obviously not...it's put to uses that they value more than the bridge. Is it really so difficult for you to understand and comprehend that perhaps people value something more than the bridge you love so much? Or is it impossible for you to imagine a world where a bridge isn't always going to be the most valuable use of society's limited resources?

You really don't grasp the concept of opportunity cost...

But, no matter whether a particular society has a capitalist price system or a socialist economy or a feudal or other system, the real cost of anything is still its value in alternative uses. The real costs of building a bridge are the other things that could have been built with the same labor and material. This is also true at the level of a given individual, even when no money is involved. The cost of watching a television sitcom or soap opera is the value of the other things that could have been done with that same time. - Thomas Sowell , Basic Economics 4th Ed: A Common Sense Guide to the Economy

How many other things could have been built with the same labor and materials? Do you think it's a small list? Do you think that at any given point in time that something on this list of alternative uses might provide more value than your bridge would? Is it really so hard for you to imagine the possibility?

When people can shop for themselves, they evaluate the alternative uses of their money and determine which use provides them with the most value. If they can't shop for themselves then you can't know which use of their money provides them with the most value. Except, clearly you're under the impression that you can. Which is exactly why our current system is based on the assumption that congresspeople are omniscient.

[Xerographica]

Our current system is based on the assumption that congresspeople are omniscient. (True/False)

False, your current system isn't based on that assumption. That's why you have committee hearings with experts.

So you're calling Richard Musgrave a liar?

Essential though the efficiency model of public goods [Samuelson] 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. - Richard A. Musgrave, The Nature of the Fiscal State

Determining the efficient level of public goods requires knowing consumer preferences. That knowledge is often assumed as given in theoretical models of optimal provision [Samuelson], but obtaining it is a major challenge when it comes to actual policy. - Richard A. Musgrave, Peggy Musgrave, Providing Global Public Goods

[Xerographica]

The US system has to be based on some theory. Right? We don't just take people's money without having a reasonably good explanation. Samuelson is the guy that provided the theory that our current system is based on.

That's funny... I don't see Paul Samuelson's name on the list of people who helped write the Constitution.

<pause>

Are you laboring under the delusion that Congress is a recent addition to our system of government?

The theory used to be that the king should have the power of the purse because he had divine authority. That theory was trashed. Now the theory is that congresspeople should have the power of the purse because they are omniscient. If you think there's a better public finance explanation for our current system then feel free to share it.

[Xerographica]

Shouldn't the task of explaining our system of government fall into the laps of political scientists rather than economics?

Or would that be a problem, given that you haven't yet taken a Political Science course?

Taxation falls under the purview of public finance. What do you know about public finance?

[Xerographica]

Have you considered the possibility that there might be some things in life that might not be suitable for rationalization through the marketplace?

If it's funded then it's within the scope of economics. Government organizations are funded, therefore they are well within the scope of economics.

Proof that our system of representative government is based on Samuelson's theories, please?

His paper...The Pure Theory of Public Expenditure...has been cited over 5000 times.

Or — as an alternative — proof that the people who wrote our Constitution based our system on the notion that the People's representatives were omniscient?

Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Frédéric Bastiat

[Xerographica]

Explaining government falls under the purview of political science, son.

We're talking about the rationale of having 300 personal shoppers decide how half our country's income is spent.

I hold a degree in economics and would have minored in political science, had the university at which I obtained my degree (over 30 years ago) offered minors. And yes, I've read Samuelson. He's pretty much required reading for economists.

So... what's your background in political science look like?

Who cares about background? If you've studied the topic then I shouldn't have to explain to you that Samuelson's paper is the most widely cited paper on the topic.

[Xerographica]

What the OP wants is for us to say, "Oh, well, yes — people should be able to allocate their tax dollars to whatever they think their tax dollars should be spent on."

The OP wants us to then either ignore the fact that the wealthies 10% of Americans pay 70% of all income taxes and that close to half of all Americans pay no income taxes — or, alternately, just buy into the notion that it's right and proper for 10% of the Nation to effectively control 70% of the government while close to half have no say whatsoever in what their government does to them. It is an argument for plutocracy, based on a badly thought-out "market" justification in which it is assumed that such a plutocracy will be more efficient because markets are supposed to be more efficient.

No no no...I want people to assume that everybody is equally effective at using society's limited resources. In other words, I want people to be entirely delusional. Oh...that's not right. That's what you want. You want people to ignore the fact that some people are better at using society's limited resources than other people. You want people to assume that having resources is more important than what is done with them. And then you want people to blame the market when resources are inefficiently allocated.

[Xerographica]

That doesn't mean that their operation should be decided on the basis of market forces. Tell me: Can market forces determine the proper number of nuclear attack submarines the Navy should deploy to the Western Pacific, or the number of American servicemen who should be stationed on Korea's DMZ? Do you really want to try and make some kind of argument in favor of basing military deployments on the competing ideas of a myriad of uniformed decision-makers?

What in the world? Yes, because a market means putting consumers in charge of Apple. Seriously? Are you kidding me?

You do realize that our current system of government was established in 1788, whereas Samuelson's paper was written in 1954, right?

Many things have been said about Paul Samuelson, but I don't recall anyone ever claiming that he had a time machine.

<pause>

Do you want to try again to explain where our theories of government come from — before I flunk you?

What are you talking about? Some theories are better than other theories. Samuelson's theory is widely regarded as the best economic theory for government.

I don't recall Frédéric Bastiat playing a significant role in the creation of our system, either — which is really not surprising, considering that be wasn't born until 1801.

Why do you keep talking about the creation of our system? Do you really not grasp that our understanding of economics has improved slightly since then?

[Xerographica]

So your argument in favor of plutocracy is that the proven wealth and income of the Nation's top 10% makes them the best people to decide what society ought to do, while the proven poverty of the Nation's bottom 50% justifies their disenfranchisement?

Consumers are the best people to decide what society ought to do...and producers are the best people to figure out how society's limited resources can be used to make it happen. By limiting this sanity to the private sector, you're hamstringing producers and screwing consumers. Why do you want to do that? Do you think that the poor benefit when you waste society's limited resources?

[Xerographica]

You're talking about the foundation of our system, and in particular where we got the idea that Congress should have the power of the purse.

Nearly 1000 years ago some barons stole the power of the purse from the king because they were fed up with him wasting their money on war after war. I'm really not talking about this.

If you had any understanding of that system, you'd know that the power of the purse belongs to Congress because that's what we arranged in our Constitution.

So again I ask: Did Paul Samuelson write our Constitution? Yes or no?

Right, because I'm going to really want to debate the economic rationale of the constitution instead of the economic rationale of the preeminent liberal economist. Are you serious? If you want to talk about the economic value of the constitution...then be my guest. But don't try and argue that it's something that I find value in discussing.

[Xerographica]

Consumers are the best people to decide what society ought to do...and producers are the best people to figure out how society's limited resources can be used to make it happen. By limiting this sanity to the private sector, you're hamstringing producers and screwing consumers. Why do you want to do that? Do you think that the poor benefit when you waste society's limited resources?

how do I decide what is the best engine to put into the new fighter jet?

You don't, you're a consumer...not a producer. You just decide for yourself whether the DoD is doing more harm than good. And if you don't want to figure it out then you'd simply just give your tax dollars to your personal shoppers (congress).

[Xerographica]

What's stopping me from saying "You're doing a good job, government, but I really want this iPhone" and just not pay taxes because I can?

You bringing this possibility up would incentivize some taxpayers to give some of their tax dollars to the IRS.

[Xerographica]

If by "calling someone a liar" you mean "disagreeing with someone's opinions", then yes, I do. I also think his opinions on the matter are a bunch of idiocies, and that some self-appointed "experts" are nothing but pundits trying to cater to the political faction they chose as a target area.

So are all public finance economists liars?

[Xerographica]

So are all public finance economists liars?

Not necessarily.
Are you just able to resort to strawmen? Because that's the second in a row. Really, you should learn some logic before even attempting at debating.

Can you name any public finance economists that aren't liars?

[Xerographica]

Me bringing this up highlights what a stupid idea it is.

I'm actually overdoing it by bringing this up. It would have sufficed to say it' stupid.

It's pretty sad if equating pragmatarianism to anarcho-capitalism is overdoing it for you.

[Xerographica]

A group of 100 congressmen will never be quite as stupid as a group of 314 million citizens. Letting citizens decide how the country will be run is sort of like letting a child plan it's meals. It will shovel candy into it's mouth until it dies of diabeetus because even though it knows what it likes it doesn't appreciate the tradeoffs necessary to get what it needs.

So the people you voluntarily give your money to on a daily basis don't appreciate the trade-offs necessary to supply what you're actually willing to pay for?

[Xerographica]

Can you name any public finance economists that aren't liars?

If I could, that wouldn't imply that some (or even the majority) of them aren't liars.
If I could not, that wouldn't imply that I consider all of them to be liars - then again, by "calling them liars" meaning, as YOU do, "disagreeing with them" - because it could be because of a lack of data.
I refuse to play the petty games of someone that incompetent at debating.

Really, learn logic; you're only making a fool yourself here so far.

Hmmm...you have yet to name a single public finance economist. I think it's pretty clear that you're more the fool for pretending that you know anything about the subject. Why not go educate yourself and come back when you can say something intelligent about the topic?

[Xerographica]

While I don't at all agree with Xerographica, I can't agree with you either. You're attacking direct democracy, which isn't Xero's argument (tax choice is probably worse than direct democracy, being more like direct plutocracy) and the rhetorical device you use to do so is quite disgusting. Voters are like children? Stand back while I vomit.

No no no...let's be honest. We both agree that children should be allowed to vote. So clearly you don't entirely disagree with me. And regarding plutocracy...well...I think you might eventually come to see the necessity of consumer sovereignty. Consumer sovereignty really isn't the one percent. It's the masses buying loaves of bread...and shoes...and cell phones...and a gazillion other things that they feel help make their lives better. In fact, it's you choosing whether or not you participate in my threads. This isn't so bad is it? It's consumer sovereignty.

[Xerographica]

So the people you voluntarily give your money to on a daily basis don't appreciate the trade-offs necessary to supply what you're actually willing to pay for?

The average citizen doesn't, a congressman generally does.

But I'm talking about taxpayers choosing where their taxes go. In case you missed it, taxpayers are the people you sacrifice to and worship on a daily basis. They are your true gods.