Are Congresspeople Omniscient?

[Xerographica]

Fine, If you refuse to answer my yes or no question, I'll state this is another way. Present me with a peer reviewed paper that shows Part 1 of your claim is true for all markets (and irrational humans). That would be an equally ground breaking economic discovery and you should publish it if you can prove it.

That's a statement about economics from a peer reviewed paper that contradicts your claim to have proven anything. It was the thing that seemed most relevant to this discussion.

That's the very first sentence in a peer reviewed paper. Do you think Buchanan's entire point of his paper is that some economists disagree about the effects of earmarking? Really? His paper is really nothing more than a review of what economists know about the topic?

The reason I largely don't bother with Forsher is because he doesn't even make it to the first sentence. But I'm hardly going to want to make much of an effort to bother with you either if you're incapable of making it past the first sentence to understand the actual point of a peer reviewed paper.

Demonstrate that you're capable of making the effort to understand Buchanan's actual argument...and then we can move on to other peer reviewed papers...of which there are many.

Have you even considered that your understanding of opportunity cost might be wrong? If you believe 1 is universally true, then I would argue that it is.

So present your argument. In doing so you will for the very first time articulate your understanding of the the concept's significance, meaning and relevance.

Your insistence on doing things that you know annoy me is, however, revealing with regards to noble intent on your part.

Nobility? Share a peer reviewed paper that substantiates your claim and I'll actually read the entire thing. Is that nobility? If not, then what is it? Basic courtesy perhaps? An honest and genuine effort to understand your point of view?

You asked me to guess. I told you it was ill-defined. Every unique post on every public internet site could also be considered a separate public good as well.

I decided to attempt to try to roughly divide up both sectors into competing but not overlapping goods. So all movies/bands/etc in a specific subgenre is one good in my estimation. I obviously can't be very accurate. Regardless, pick as big of a number as you want to make your point. I suspect I know what it is, and I suspect the ratio isn't the only parameter.

If you're going to throw out that you suspect my point, then, by all means, don't let me stop you from proving to me how intuitive your are. What's my point?

Sacrifice is generally a poor measure of value in multiplayer games.

This is a multi-player game. You're not willing to sacrifice the alternative uses of your time to read more than the first sentence of a peer reviewed paper. It's a pretty darn good measure of how much you value actually learning about the subject. In fact, sacrifice is the only real measure of value...no matter how many people are "playing".

If you're not willing to sacrifice anything to help ensure that your most valued public good is adequately funded, then clearly you don't value it at all. Real economics is all about sacrifice and sacrifice is the opportunity cost concept. What you're willing to give up/exchange/trade/forego/sacrifice/pay reveals how much you value something...

For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life. - John 3:16

The current system doesn't permit me to defect. Some fraction of my taxes fund roads regardless of how I could allocate in pragmatarianism.

Right, some fraction of your taxes fund roads regardless of how much you would truly be willing to sacrifice for them. In other words, regardless of reality. Misallocations are allocations which have absolutely no relevance to the reality of people's true preferences.

And the polls have no incentive to defect - I can't get someone to over-commit their vote because they believe I'll under-commit mine.

This is your claim, so find me a peer review paper that substantiates it. In case you missed it, Samuelson's paper argued that we can't trust contingent valuation techniques. If we could, then there would be absolutely no need to force people to pay taxes...we could simply ask them to state their preferences for public goods.

1) This does not follow. I know you want it to, but it doesn't. Most private inputs for private concerns are purchased and consumed within <5yrs. Many public goods (Military, Highways, Police) have their value realized over decades or more. Sometimes more than a human lifespan. Being good at selecting one doesn't make someone good at selecting the other (even if it's just in the limited domain of shoes).

So somehow, only the people who work in the public sector are capable of making long term investments? LOL. That's funny. Firms never engage in long term planning...how could they? The public sector stole everybody with any degree of foresight.

Nope, did you miss the part where the shoe maker's ability to predict that somebody, at some point, would need shoes is not a ringing endorsement of his ability to determine the optimal US military readiness?

Right, because it's that easy to predict future demand for any given good/service. Businesses never fail. Government organizations never fail. Oh wait, they can't fail because their allocations are so superior that there's absolutely no need for them to be vetted by consumers. This must be because the government stole everybody who has any degree of foresight.

I understand opportunity cost, but I also understand that other things inform decisions. Especially where other actors are involved. If you and I are playing a game of prisoners dilemma, my opportunity cost for defecting is completely dependent on your choice (and vice versa).

You don't understand it or else you would have integrated it into your arguments...even if only to disprove the universality of the concept.

I'm willing to sacrifice $500 for that car. I will not, however, pay $500 for that car (unless I am a bad negotiator). I have every incentive to tell "trusty" that I only value the car at $325 and make him feel like he's picking my pocket at $350. If I tell him I value it at $500 (i.e. tell the truth), I will end up spending considerably more on it. If I bought it at a "market set" price of $350, did I value it at $350 or $500?

See...proof that you don't understand the opportunity cost concept. If you bought it at $350, then, unless you made a mistake, you obviously valued it more than all the alternative uses of that $350. That's all that matters. That's all we need in order for resources to be put to their most valuable uses.

All the man made ills throughout history were major misallocations of resources. And major misallocations are only possible when you remove the fail safe device of people having costless exit.

I would like to see proof of this. Even if I accept the first sentence, which requires a misleadingly broad definition of "major misallocations," I am uncertain if the second follows. It is certainly not obvious.

Look at you, doubting the sanity of pragmatarianism, telling me that the value of costless exit is certainly not obvious.

Maybe videos are easier for you than peer reviewed papers on economics? Here's a relatively short video of Milton Friedman discussing the proper scope of government. In one part of the video the interviewer starts to ask Friedman a hypothetical "if you were king for a day" question and Friedman's reaction is priceless. Even before the interviewer can finish asking the question Friedman interrupts him and says with great emphasis, "If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it."

Friedman and I both know something...that you don't. What is it? Why, even if I had the power to do so, would I not force pragmatarianism to be implemented? Here's the long answer...Milton Friedman on Fallibilism.

Sure they can, and Sure they would be. As a rule people on SNAP (the new food stamps) pay less into taxes than they receive in benefits (just based on a quick internet scan). If the people who paid enough taxes refused to fund SNAP (as it provides them no obvious benefit), there is an excellent chance that many people (especially children) would starve to death. Or die of exposure if they bought food instead of shelter. Would you call that a major misallocation of resources?

You see abundance all around you and have no idea why it exists. What causes there to be an abundance or shortage of food? Obviously it depends on how resources are used. And the market is how consumers indicate which producers are doing the best things with society's limited resources. The more benefit that a producer creates with society's limited resources, the more positive feedback (money) he'll receive...and the more influence he'll have over how society's limited resources are used. And then you go and take 50% of the influence away from the people we have to thank for an abundance of food...and give it to congresspeople. What do you think the consequences are? None? There are no negative consequences? If so, then abundance has absolutely nothing to do with how well somebody uses society's limited resources. That's really your theory? That's what you want to argue?

Why would anyone vote for someone if they have the slightest hint it's going to turn into a tyranny? It's because predicting the future is hard. If Hitler could have convinced 20-30% of the tax base to fund him, he could take the guns and seize control before the rest could react.

How do you seize control when power is decentralized? Right now we know exactly where you'd have to go to seize control...Washington DC. Why? Because that's where the power of the purse is. But where would the power of the purse be in a pragmatarian system? It would be dispersed all over the country. If you want to seize control then you'll have to do what every business owner has to do...advertise. You'd have to persuade people to give you their control, which, because of costless exit, they could easily take back from you whenever they suspected that there were more valuable things to do with their money.

Hitler was only possible because voters did not have to put their money where their mouths were...

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.

[...]

The market choice has been the object of extensive study by economists and needs little analysis here. It is to be emphasized, however, that in the market setting the chooser is decisive: The opportunity cost of choosing a is b forgone. It is this latter fact that enables the observer to conclude that the chooser prefers a or b and, equivalently, that allows the economist to speak of the individual's choice as "revealing" her preference.

[...]

There are, however, several other considerations that are sometimes mentioned in the context of revealed preference that do suggest a systematic and predictable bias in the divergence between actions and words (and by extrapolation between market and electoral preference), and these considerations are of more interest in the current setting. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision

It's painfully obvious that the only way to immunize ourselves against future Hitlers is to create a system where people have no choice but to put their money where their mouths are.

Sure. Values are subjective, therefore we need to structure society to benefit from cooperation where values agree, and use competition to sort out where values compete.
P does not lead to pragmatarianism, you have yet to show that either rigorously or though an academic citation.

I asked you where exactly P leads to. If you have absolutely no idea where it leads to, then how can you be certain that it doesn't lead to pragmatarianism? Show me a more logical destination. Values are subjective therefore...therefore what?

[Xerographica]

Why the hell is this thread still going?

If we knew how freedom would be used, the case for it would largely disappear. - Friedrich A. Hayek

[Xerographica]

According to Xero, 'excess funding is impossible - it mean the department needs to provide more'. And that if you do somehow 'overpay', then you'll notice very quickly that you have overpaid (presumably through ostentatious displays of wealth by government officials) and not provide as much money next time.

lol.

Because values are subjective, terms like "adequate", "enough", "sufficient" can only be determined by each and every consumer.

For example, is it possible for this thread to have excess replies? Perhaps from some people's perspectives any replies are too many. But obviously that's not the case for everyone. Therefore, the only way to determine the "optimal" amount of replies that this thread should have...is to allow each and every member to decide for themselves whether or not they wish to contribute a reply.

But in some unknown amount of cases, just like with civic crowdfunding...Citizinvestor, Neighbor.ly, Spacehive...you might not have an option to continue to fund a project once its funding goal has been met.

I guess the more general the public good, the less likely they'll be to impose funding limits. I doubt congress would set a limit on how much money you could give them. But I have really no idea how granular it would eventually end up.

[Xerographica]

Oh that's why, the OP keeps spamming nonsense.

Do you ever buy anything nonsensical?

[Xerographica]

Because the goods are public, everyone receives all the goods.

Everyone does not receive all public goods...just like everyone does not receive all private goods. If you can understand why it would be stupid for everyone to pay for all private goods, then you can understand why it would be just as stupid for everyone to pay for all public goods.

We do not value all goods equally. Therefore, we give people the freedom to shop for themselves.

So what is adequate for one person will be not enough for another, but both will receive that amount of goods.

Is your logic applicable to the nonprofit sector?

Which means the entire idea of 'optimal provision' of public goods is therefore nonsense, because you can't satisfy everyone - only a compromise which leaves no-one happy.

I have 142 passages in my database that prove that what you're saying is nonsensical. How many do you need me to share with you before you revise your opinion?

[Xerographica]

Do you ever buy anything nonsensical?

I try not to. My cousin bought me a copy of 5000 Year Leap and mailed it to me.
Never picked that shit book up more then once I can tell you that.

Would you agree that most people try not to buy anything nonsensical? Or, do you want to argue that you're an exception to the rule?

[Xerographica]

The system where people are allowed to allocate public goods as they see fit does not bring about the socially optimal allocation of goods under the conditions of wealth inequality.

Now the premise of this model is that people with higher endowments of income will prioritise public goods from which they derive the most utility, and their prioritisation of public goods is partially determined by their income (that is, a rich person will not benefit from social insurance or poverty intervention programmes, and a poor person will not benefit from a repaved road in a gated community).

When wealth levels are unequal, this model demonstrates that "tax choice" will polarise - rather than redistribute - wealth.

Wealth inequality reflects the fact that some people are better than others at using society's limited resources. It therefore makes sense that some people should have more influence than others over how society's limited resources are used. This results in a greater abundance of the things that consumers want more of.

But it doesn't make any sense to argue that some people are better at using societies resources... but only in the private sector. If somebody is good at using resources to produce things that people want, then this has to be true no matter what the input is or where it comes from. Therefore, we can greatly increase abundance by allowing taxpayers to spend their money on public inputs just like they can spend their money on private inputs.

And this even though the same men know "in their hearts," subconsciously if not consciously, that they are the agents of the democracy and ultimately responsible to it for their trust. For it is clear that the "personal" interests which our rich and powerful business men work so hard to promote are not personal interests at all in the conventional economic sense of a desire to consume commodities. They consume in order to produce rather than produce in order to consume, in so far as they do either. The real motive is the desire to excel, to win at a game, the biggest and most fascinating game yet invented, not excepting even statecraft and war. - Frank Knight, Risk, Uncertainty, and Profit

If taxpayers could shop for themselves in the public sector, they would be motivated to "consume in order to produce". This means that they would have an incentive to spend their taxes on the public inputs that they need to produce their products/services.

[Xerographica]

The very definition of a public good : 'non-rivalrous, non-excludable' means that everyone receives it. You don't have to use it or value it, but everyone receives it.
If you CAN'T understand the way that markets acts for public goods is necessarily different to the way that the market acts for private goods, please go get yourself even a high school level education in economics and then come back.

Quoting 'passages' at people is never going to change their opinion - especially when about half the passages you've used previously in this thread disagree with you.

If you're not going to listen to me, and you're going to ignore the economists that I quote...then why should I even bother discussing economics with you?

You think I'm not familiar with the text book definition of a public good? Do you even know who came up with that definition? It's the same Nobel Prize winning liberal economist that I've been referring to throughout this entire thread.

Just a very simple thought experiment:
50% of the people in your country want a standing military of 10,000 people; and 50% of the people in your country don't want a military at all. What is the optimal amount of military to provide? How do the people who want no military ensure that they get no military? What does 'optimal' even mean in this situation?

What 'optimal' means in every situation is the allocation of resources which provides the maximum amount of benefit. So in this situation it would be the amount of money that taxpayers gave to the DoD.

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

When you brush your teeth, you try and put the optimal amount of toothpaste on your toothbrush. You also try and brush your teeth the optimal amount of times per day. So does everybody else...and this determines how much money is spent on toothpaste. If any more...or less...money was spent on toothpaste then this would decrease the total amount of benefit.

It isn't the same with defense. You don't determine how much money you give to the DoD...and neither do most people. Only 300 congresspeople get to decide. Therefore, it's impossible that the optimal amount of funding is given to the DoD. It's either going to be too much...or too little. In order to ensure that it's optimal, we simply need taxpayers to choose where their taxes go.

They will want many public goods, but have limited amounts of money. This will force them to prioritize...and it's through prioritizing that we determine optimal amounts.

First, economics is all about individuals. That is because economics is all about choice. We can’t have everything, so we have to choose which things are most important to us: would we prefer a new car, for example, or a summer holiday? To go out with friends, or to relax at home? Invariably, we have to give up one thing (an amount of money or time and effort, say) to get another (such as a new pair of shoes or a tidy garden). These are economic decisions – even when no money is involved. They are questions of how we juggle scarce resources (cars, holidays, company, leisure, money, time, effort) to best satisfy our many wants. They are what economics is all about. - Eamonn Butler, Austrian Economics

This is the opportunity cost concept. If taxpayers could shop in the public sector, they would consider the opportunity costs, and the result would be the optimal amount of funding for each and every public good. We wouldn't have too much defense and not enough public healthcare. We would have the "balance" of public goods which produced the maximum amount of benefit.

[Xerographica]

1) Wealth inequality reflects the fact that some people are better than others at using society's limited resources.
It really doesn't. People are dealt different hands. Get cancer and go bankrupt with medical bills? Have rich grandparents? Low income is a trap that is difficult to get out of. Most people perform wage labour and all their wealth is derived from their use of time (their own and others) rather than any kind of use of physical resources. The free market is about exploiting others out of your own selfishness and often really screws people over. And finally.. there are many uses of resources which are fantastically valuable to society but don't actually pay well because of free market competition.

The market is about consumer sovereignty.

2) It therefore makes sense that some people should have more influence than others over how society's limited resources are used.
Why? Why is my opinion worth more than yours just because I'm rich? Why does my ability to make cars mean I'm good at making bread?

Your ability to make cars means that you're able to select the correct inputs and you know how many of each you need to purchase. Can you possibly list all the inputs that go into making a car? You can't. So if somebody is good at getting the best balance of a gazillion inputs, then this can't only be true of private inputs. If somebody has mad juggling skills, then they are going to be able to handle the addition of public inputs.

3) This results in a greater abundance of the things that consumers want more of.
Again, this doesn't follow.

Then how do you explain abundance?

4) But it doesn't make any sense to argue that some people are better at using societies resources... but only in the private sector
It doesn't mean that people are good at using resources in the private sector either! It means they are good at using *those types* of resources in that particular private sector. A successful car salesman is no more qualified to direct military spending than he is to run a bakery. Most people make money only because they have skills which are in demand: the only 'resource' they are good at using is their time. Comparatively few people get rich by combining raw materials to make products.
Further, a public good by definition is not 'used' in the same way that a private good is.

Are you arguing that public inputs are not needed for any output? Are you calling the liberal congresswoman Elizabeth Warren a liar? Because she thinks that it's impossible to get rich without using public inputs...

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

5)If somebody is good at using resources to produce things that people want, then this has to be true no matter what the input is or where it comes from.
Go find an artist, and ask them to bake you some bread. Find a lawyer and ask them to perform surgery. Find a builder and ask him to run a software company. Surely if they are good at using any resource (their own labour) they should be equally good at using any other resource in the world.

Therefore, the artist can't purchase bread? Therefore, the lawyer can't purchase surgery? The builder can't purchase software?

6)Therefore, we can greatly increase abundance by allowing taxpayers to spend their money on public inputs just like they can spend their money on private inputs.
When your premises are rubbish, your conclusion is equally rubbish.

Seriously guy? You think the division of labor concept means that people can only purchase things that they know how to make. It's more sad than funny.

[Xerographica]

What? Even if we accept the astoundingly flawed premise that sufficiently many people are wealthy because - and only because - of their effectiveness at managing their resources to base a social system around, that in no way implies that they are capable of or interested in allocating resources in a way that benefits society. It's completely counter-intuitive. If, according to you, wealthy people are wealthy because they've managed their resources such that they've accumulated over time, why wouldn't they continue that process when managing public goods? Why would their incentives somehow change?

The wealthy manage their resources in such a way that it creates benefit for so many other people, which is why so many other people give them positive feedback (money). Even Micheal Moore understands this concept...

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

He's not a multi-millionaire because he's a multi-millionaire...he's a multi-millionaire because so many people value how he is using society's limited resources. They don't just like him on facebook, they make sacrifices to him...they give him a portion of their hard-earned money. Therefore, his wealth is a reflection of how much benefit he's created for others.

I don't understand your logic. In personal life, people are trying to maximise their own utility subject to their own constraints. In public life, we want to maximise society's utility subject to everyone's collective constraints. Reaching optimal utility in both those instances is a completely different process, as I demonstrated with the mathematical model. Fragmenting the public spending decision process into many individual units, rather than one collective unit (or at least many units that can effectively communicate and collaborate), misunderstands what the ultimate goal is.

In the private sector we know how many people's utility is maximized by an organization. We can't know perfectly, but we can have a decent idea of how "collective" a benefit truly is. The same can not be said about organizations in the public sector. And even Obama kinda understands this...

For too long, the U.S. Government has funded programs based upon metrics that tell us how many people we are serving, but little about how we are improving their lives. As part of this Administration’s commitment to using taxpayer dollars effectively, we are employing innovative new strategies to help ensure that the essential services of government produce their intended outcomes. Now more than ever, federal programs must be measurably effective and designed to do more with fewer resources. Adapting strategies currently being implemented as far away as the United Kingdom and Australia and as close as the State of Maryland, Pay for Success is an innovative way of partnering with philanthropic and private sector investors to create incentives for service providers to deliver better outcomes at lower cost—producing the highest return on taxpayer investments.The concept is simple: pay providers after they have demonstrated success, not based on the promise of success, as is done now. - Barak Obama, Paying for Success

Simply counting how many people are served by a government organization does not at all tell us how much benefit that it is truly providing. The only way to know how beneficial a government organization truly is, would be allow people to shop for themselves. They would have to prioritize how they spent their limited funds...and then, and only then, would we be able to accurately discern just how much benefit a government organization provides. Then, and only then, would we truly know just how "collective" the benefit is.

Michael Moore's worshipers give him a mandate to take their money and use it for their benefit. If he does so, then they'll continue to make sacrifices to him. Clearly they incentivize him to benefit them. This is exactly how/why markets work. So if we created a market in the public sector, would that incentive disappear for Moore the second he stepped foot in the public sector? Of course not. It's a given that he would still have an incentive to take his worshiper's money and spend it on the public goods that he needs to benefit them.

There are certain private goods that are essential to Moore's operation...and there are certain public goods that are essential to his operation. What goods are they? It's not my job to know that. It's his job to know. It's his job to figure it out. And clearly quite a few people think he's doing a good job of figuring it out. If he's doing a good job of figuring out what private inputs he needs, then he's capable of doing a good job of figuring out what public inputs he needs.

Therefore, by preventing Michael Moore from shopping in the public sector, you're hamstringing him. You're randomly limiting his ability to provide benefit for his worshipers. As a result, it's a given that they aren't receiving as much benefit as they could receive. By arbitrarily limiting Moore you're destroying benefit.

Now zoom out to the big picture...imagine every director...imagine every author...imagine every musician...imagine every architect...imagine every scientist...imagine every doctor...imagine every engineer...imagine every business owner. You're destroying an infinite amount of benefit by needlessly restricting their ability to use society's resources for the benefit of others. You're blocking their access to half our country's resources. Why? Simply because you haven't thought things through.

You hire somebody to remodel your kitchen, but you tell him that he can't shop in half of home depot. You hire somebody to landscape your garden, but you tell her that she can't purchase any plants whose names start with L through Z. You hire somebody to give you a massage, but you tell her she can't use her left hand. You would have to be insane to randomly and severely restrict the people you're paying to benefit you. But that's exactly what you're doing by preventing taxpayers from participating in half the economy. Stop the insanity.

[Xerographica]

Deciding which organizations were to receive all of those taxes at each point of sale would be not only destructive and counterproductive for the government, as previously shown, but administratively cumbersome to a level that No Child Left Behind could only dream of and masturbate to.

That's a stupid amount of different taxes. All it does is merely obfuscate the cost of public goods...making it entirely impossible for people to figure out whether or not they are getting their money's worth.

The linking of marginal benefits and costs is essential for a sound fiscal regime. Under the existing congressional budget process, however, the two sides of the federal budget largely are divorced. Together with strong political incentives to hide the cost of government (either by deficit financing or moving items "off-budget") and to concentrate benefits, the separation of spending and taxing decisions invariably lead toward excessive federal spending and, hence, eventually to excessive taxation. - James A. Dorn, The Principles and Politics of Tax Reform

For political decision makers, however, there is a strong incentive to design policies or systems (for example, tax systems) such that their own electorate is in the role of beneficiaries but does not have to pay for the costs involved, thereby causing inefficient allocations and over-provision of public goods. - Tilman Slembeck, Ideologies, beliefs, and economic advice

Fiscal illusion exists when individuals are not fully informed about "tax prices" and the benefits of government programs. - Philip Jones, Taking Self Interest Into Account

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

There's a continuum between fiscal illusion and fiscal equivalence. In order to maximize fiscal equivalence, the solution is simply to consolidate all taxes into the income tax. The more money you earn, the more influence consumers want you to have over how society's limited resources are used.

If consumers don't want Bob to have more influence than Sally, then they shouldn't give more money to Bob. If they do give more money to Bob, then clearly they want him to have more influence. Given that consumers benefit from Bob's influence, they will increase their benefit by giving Bob the freedom to shop in the public sector.

Let's say you ask random people at Home Depot why they are there. Most of them are going to give you a valid reason. They are there to find inputs that they need. You're not going to find a lot of people who are just there for no good reason.

If we opened the public sector up to shoppers...and you went to the public sector and asked random people why they were there...most of them would give you a good reason. They would tell you that they were there to find inputs that they need for the outputs that consumers want them to supply. If they don't need any public inputs, then why would they bother to make the effort to shop in the public sector? They wouldn't. They would simply give their taxes to congress.

You only go shopping when you need more of something. If we implemented pragmatarianism, and many taxpayers decided to shop in the public sector...then it would be because they needed more of certain public inputs. And the amount of money they had to purchase more of certain public inputs would be determined by consumers.

So go to Home Depot and ask people why they are there. And then imagine doing the same thing in a public sector market. What would people's answers be? "I'm here because I need more..."

[Xerographica]

Although I'm not very fond of market economies, I'd like point out that prices and intraniche competition, which pragmatarianism lacks, are crucial to the invisible hand's proper functioning. Without it, all the invisible hand does is wildly bitch slap (as opposed to what it currently does, bitch slap the poor).

More often than not, our options in life do not have price tags attached to them. But every choice does have an opportunity cost. Every choice requires that you sacrifice something.

I had the choice to do a or reply to you. What's a? You don't know what it is. You have no idea how valuable it is to me. But, given that here I am, replying to you rather than doing a, you can guess that I value this use of my time more than I value a.

replying to you = b
most valuable alternative = a

Here I am replying to you...therefore...

b >= a

I value b more than I value a. Not always, maybe not ever again, but in this specific moment in time, with these specific circumstances...this is my valuation.

Therefore, the invisible hand does not depend on prices. It just depends on people having the freedom to weigh the alternative uses of their limited resources. When people have this freedom, then resources will be put to their most valuable uses. In other words, the allocation of resources will be efficient.

So if you could shop for yourself in the public sector, you would evaluate your options...you would obviously understand that your tax dollars were limited...and you would sacrifice the less valuable options in order to fund the more valuable options. It would be second nature to you...just like allocating your time is second nature. Right now you're wondering whether it's worth it to reply. If you can't make that decision for yourself, then resources will not be put to their most valuable uses and we will all be worse off as a result.

[Xerographica]

Actually... no. The targeted taxes (IE, aviation fuel tax, heavy vehicle tax, etc) are the most similar to free enterprise in the whole taxation system. I will explain below.

You don't need to explain it. All you need to do is figure out the actual economic term, visit the Wikipedia page, check the edit history and you'll see me there.

Quite frankly, when you buy a tank of gas, you have absolutely no idea who Bob is or what his preferences are, so you don't knowingly give more power to Bob. Thus, asserting that buying the tank of gas makes you want Bob to have more social/public power is beyond absurd. Sally has never heard of Bob. How could she know if he supports her preferences?

So giving money to somebody does not increase their influence over how society's limited resources are used?

You still have failed to explain why, if I am a shareholder of Wal-Mart Worldwide, I can't designate that my $142 per share of earnings to to the division I want.

Explain to me why, as a shopper at Wal-Mart, you should be allowed to choose which items you put in your shopping cart.

The problem is your option doesn't link inputs and outputs. In fact, in this post, you explicitly (now) want disconnect them by eliminating targeted taxes. Unless you are also in favor of a gift economy, your latest idea is internally inconsistent with your previous ideas regarding making the public sector more like the private sector.

Why aren't you at Home Depot right now?

I suspect you cannot prove that the various federal government agencies are actually similar to independent competing corporations as you keep claiming. Instead, they are various divisions of a single organization under a single board of directors and headed by a single chief executive officer.

Since this blows your comparison clear to the moon, its being ignored.

You can see them however you want. If you want to see half our economy as one giant corporation, then I'll compare it to you shopping at Wal-Mart and having the freedom to choose which items you put in your shopping cart. If you want to see half our economy as independent organizations, then I'll compare it to you shopping in the nonprofit sector and having the freedom to choose which nonprofits you donate to.

If it's not economically logical for consumers to be able to shop for themselves in one half of the economy...then it's not economically logical for the other half either.

We're not talking about alternate dimensions where the laws of economics don't apply to half the economy. Maybe gravity doesn't apply there either? You have to put on gravity boots when you walk into the DMV?

The DMV, like all the organizations in the private sector, uses society's limited resources. It's the most basic economic law/rule, that if consumers can't decide how much money they give to the DMV...if the DMV has guaranteed funding...then they won't have any incentive to strive to improve how they are using society's limited resources.

You, the consumer have a carrot (money) dangling from a stick. If you can't dangle that carrot in front of the DMV, then it's not going to do what you want it to do. It's going to do what government planners want it to do. If you think that you and government planners both want the DMV to do the same thing with society's limited resources, then you should have absolutely no problem with allowing consumers to dangle their carrots in front of the DMV. But, if you believe that government planners are incentivizing the DMV to do better things with society's limited resources...then this can't only be true of government organizations. Therefore, we should give all our carrots to government planners.

[Xerographica]

SE here's a simple test: I want you, in your own words, to answer this question: What is a public good?

What should the government do? Whatever enough people are willing to pay it to do.

Can you step outside yourself? Can you set aside your own personal biases regarding the proper scope of government? Give it a try...and we'll have my good friend Herbert Spencer take us on a trip...

To the assertion that the boundary line of State-duty as above drawn is at the wrong place, the obvious rejoinder is— show us where it should be drawn. This appeal the expediency-philosophers have never yet been able to answer. Their alleged definitions are no definitions at all. As was proved at the outset, to say that government ought to do that which is "expedient," or to do that which will tend to produce the "greatest happiness," or to do that which will subserve the "general good," is to say just nothing; for there are countless disagreements respecting the natures of these desiderata. A definition of which the terms are indefinite is an absurdity. Whilst the practical interpretation of "expediency" remains a. matter of opinion, to say that a government should do that which is "expedient," is to say that it should do, what we think it should do!

Still then our demand is—a definition. Between the two extremes of its possible action, where lies the proper limitation? Shall it extend its interference to the fixing of creeds, as in the old times; or to overlooking modes of manufacture, farming operations, and domestic affairs, as it once did; or to commerce, as of late—to popular education, as now—to public health, as already—to dress, as in China—to literature, as in Austria—to charity, to manners, to amusements? If not to all of them, to which of them? Should the perplexed inquirer seek refuge in authority, he will find precedents not only for these but for many more such interferences. If, like those who disapprove of master-tailors having their work done off the premises, or like those who want to prevent the produce of industrial prisons displacing that of the artizans, or like those who would restrain charity-school children from competing with seamstresses, he thinks it desirable to meddle with trade-arrangements, there are plenty of exemplars for him. There is the law of Henry VII., which directed people at what fairs they should sell their goods; and that of Edward VI., which enacted a fine of £100 for a usurious bargain; and that of James I., which prescribed the quantity of ale to be sold for a penny; and that of Henry VIII., which made it penal to sell any pins but such as are "double headed, and their head soldered fast to the shank, and well smoothed; the shank well shaven; the point well and round-filed and sharpened." He has the countenance, too, of those enactments which fixed the wages of labour; and of those which dictated to farmers, as in 1533, when the sowing of hemp and flax was made compulsory; and of those which forbade the use of certain materials, as that now largely-consumed article, logwood, was forbidden in 1597. If he approves of so extended a superintendence, perhaps he would adopt M. Louis Blanc's idea that "government should be considered as the supreme regulator of production;" and having adopted it, push State-control as far as it was once carried in France, when manufacturers were pilloried for defects in the materials they employed, and in the textures of their fabrics; when some were fined for weaving of worsted a kind of cloth which the law said should be made of mohair, and others because their camlets were not of the specified width; and when a man was not at liberty to choose the place for his establishment, nor to work at all seasons, nor to work for everybody. Is this considered too detailed an interference? Then, perhaps, greater favour will be shown to those German regulations by which a shoemaker is prevented from following his craft until an inspecting jury has certified his competence; which disable a man who has chosen one calling from ever adopting another; and which forbid any foreign tradesman from settling in a German town without a licence. And if work is to be regulated, is it not proper that work should be provided, and the idle compelled to perform a due amount of it? In which case how shall we deal with our vagrant population? Shall we take a hint from Fletcher of Saltoun, who warmly advocated the establishment of slavery in Scotland as a boon to "so many thousands of our people who are at this day dying for want of bread"? or shall we adopt the analogous suggestion of Mr. Carlyle, who would remedy the distresses of Ireland by organizing its people into drilled regiments of diggers? The hours of labour too—what must be done about these? Having acceded to the petition of the factory-workers, ought we not to entertain that of the journeyman-bakers? and if that of the journeyman bakers, why not, as Mr. Oobden asks, consider the cases of the glass-blowers, the nightmen, the iron-founders, the Sheffield knife-grinders, and indeed all other classes, including the hardworked M.P.'s themselves? And when employment has been provided, and the hours of labour fixed, and trade-regulations settled, we must decide how far the State ought to look after people's minds, and morals, and health. There is this education question: having satisfied the prevalent wish for "government schools with tax-paid teachers, and adopted Mr. Ewart's plan for town-libraries and museums, should we not canvass the supplementary proposal to have national lecturers? and if this proposal is assented to, would it not be well to carry out the scheme of Sir David Brewster, who desired to have "men ordained by the State to the undivided functions of science"—"an intellectual priesthood," " to develop the glorious truths which time and space embosom*"? Then having established "an intellectual priesthood" to keep company with our religious one, a priesthood of physic, such as is advocated by certain feeless medical men, and of which we have already the germ in our union doctors, would nicely complete the trio. And when it had been agreed to put the sick under the care of public officials, consistency would of course demand the adoption of Mr. G. A. Walker's system of government funerals, under which "those in authority" are "to take especial care" that "the poorest of our brethren" shall have "an appropriate and solemn transmission" to the grave, and are to grant in certain cases "gratuitous means of interment." Having carried out thus far the communist plan of doing everything for everybody, should we not consider the peoples' amusements, and, taking example from the opera-subsidy in France, establish public ball-rooms, and gratis concerts, and cheap theatres, with State-paid actors, musicians, and masters of the ceremonies: using care at the same time duly to regulate the popular taste, as indeed, in the case of the Art-Union subscribers, our present Government proposed to do? Speaking of taste naturally reminds us of dress, in which sundry improvements might be enforced; for instance—the abolition of hats: we should have good precedents either in Edward IV., who find those wearing "any gown or mantell" not according to specification, and who limited the superfluity of peoples' boot-toes, or in Charles II., who prescribed the material for his subjects' grave-clothes. The matter of health, too, would need attending to; and, in dealing with this, might we not profitably reconsider those ancient statutes which protected peoples' stomachs by restricting the expenses of their tables; or, remembering how injurious are our fashionable late hours, might we not advantageously take a hint from the old Norman practice, and (otherwise prompted) fix the time at which people should put out their fires and go to bed; or might we not with benefit act upon the opinion of M. Beausobre, a statesman who said it was "proper to watch during the fruit season, lest the people eat that which is not ripe"? And then, by way of making the superintendence complete, would it not be well to follow the example of the Danish king who gave directions to his subjects how they should scour their floors, and polish their furniture?

Did you enjoy your journey? Now, would you agree that the government has done some absurd things in the past? If so, do you think it's at all possible that the government is currently doing some absurd things?

I take it as a fact that right now the government is doing some things that people in the not too distant future will think is absolutely absurd. Right now, in the future, they are laughing at us. Well...fine.

So we take it as fact that the government has done crazy shit...and we take it as fact that it is currently doing crazy shit...and we simply allow taxpayers to decide for themselves what the government is currently doing that's nonsensical.

You've made it clear that you think that what I'm saying is crazy. Maybe you're right. So I relish your freedom to boycott the fuck out of me. Please don't give me your money. But if not giving me your money makes sense to you, then I fail to see how it doesn't make sense for you to choose who you give your money to in the public sector. I think we've already established that right now the government is doing some bat shit crazy things with society's limited resources. So you should relish your freedom to boycott government insanity just as much as you relish your freedom to boycott private insanity. Why do you trust your judgement in the private sector but not in the public sector?

[Xerographica]

I can't believe I have to explain this to a market worshiper.

I worship the market? The local mall is my church? It's my temple where I go to pray? It's my cathedral? My place of worship?

Here's how prices work: If something is in short supply, whether it be a product or decent version of a product, people become more desperate. If people are more desperate, vendors are in a better position to price gouge. The resultant high prices encourage producers to produce more of the product so they can get in on the market and encourages consumers to consume less to save money. Eventually, the prices reach equilibrium. A good example of this is how the Seventies oil crisis turned into the Eighties oil glut.

What do you know about the bible? You know the part about the Garden of Eden? It was the epitome of abundance. But Adam and Eve got kicked out and were introduced to scarcity. As a result, they had to pay for abundance. Their payment was sacrifice. Cain and Abel both made sacrifices to god to try and ensure future abundance. The problem was that they didn't pay the same amount to god. Cain just sacrificed some fruits and veggies...while Abel sacrificed a lamb. Obviously a lamb is far more valuable than some fruits and veggies...so god far preferred Abel's sacrifice.

Sacrifice is one of the most common themes throughout the bible. You sacrifice to overcome scarcity. You sacrifice for abundance.

What's the difference between sacrificing a lamb to god and paying $2,000 to some guy at Best Buy? The Best Buy guy immediately answers your prayer for abundance.

What's the difference between sacrificing a lamb to god and donating $2,000 to the Democratic Party? LOL There's no difference. The entire country debates which party produces more abundance like people in the bible debated whether god produced more abundance than Baal. It's the funniest/saddest thing in the world.

The only way to ensure abundance is to give people the freedom to choose who they make their sacrifices to. And neither party understands this given that neither party wants you to have the freedom to choose which government organizations you make your sacrifices to.

Do you want more abundance from me? Look...read about human sacrifice...and/or read about whether prices are necessary.

Also, you haven't solved the intraniche competition problem.

That's what opportunity cost is all about...

In buying the resources needed to produce any one good, an entrepreneur has succeeded in competing away these resources from other possible uses. When a producer, not enjoying protection against competitive entry, finds himself as sole producer he still has to worry about
the activities of competing entrepreneurs. They are channeling their energies and their alertness into producing other products, which are competing for consumers' attention also. Inter-product competition will not guarantee horizontal demand curves facing each producer. But it offers assurance that errors made in the identification of the most urgently needed consumer products (and/or of the most easily accessible resources) will tend rapidly to be noticed and exploited by alert, competing entrepreneurs. - Israel M. Kirzner, How Markets Work

[Xerographica]

Of course not. However, that sentence directly contradicts the claim that the following is proven:

opportunity cost ensures the efficient allocation of resources

You're lumping two extremely different types of earmarking...

The standard normative "theory" of earmarking adopts the reference system of the budget-maker, the budgetary authority, who is, by presumption, divorced from the citizenry in the political community. An alternative working hypothesis of political order is the individualistic
one in which the reference system becomes that of the individual citizen. - James M. Buchanan, The Economics of Earmarked Taxes

The standard idea of earmarking is individual congresspeople allocating funds to specific programs. Buchanan discussed earmarking in terms of individual taxpayers allocating funds to specific programs. What do you think the difference is between the two types of earmarking in terms of opportunity cost?

Since economists do not agree, then we conclude that opportunity cost is not proven to ensure efficient allocation of resources (regardless of market). This logic only applies as of 1963, of course. It is possible that that statement was proven since then.

So find a paper that substantiates your specific claim that opportunity costs do not ensure the efficient allocation of resources.

I'll admit, I had only read the first page since I dislike making more internet accounts. The paper was, however, disappointing in it's narrow applicability.

His argument, in The Economics of Earmarked Taxes (1963), was, essentially, that if you make enough assumptions, then earmarking is optimal. To do prove earmarking is optimal, he explicitly rejects strategic allocation by assuming that the good provided by a public service is directly proportional to the amount of funding that service receives (p.460). He himself admits (as I would expect most any self respecting economist to do) that these are just assumptions and the real world may behave far differently from his idealization. He especially focuses on the political nature of the actor as far from his ideal actor and the "decision making cost." See section V for his cautions on the applicability of the results. Note especially where he says that the violation of these assumptions might mean that a traditional allocation system could be better. I will note that all 3 of these things have been brought up in one way or another in this thread by me or others.

You missed the point regarding bundles and preference revelation...

Institutionally, earmarking provides a means of compartmentalizing fiscal decisions. The individual citizen, as voter-taxpayer-beneficiary, is enabled to participate, separately, either directly or through his legislative representative, in the several public expenditure decisions that may arise. He may, through this device, "vote" independently on the funds to be devoted to schools, to sanitation, and so on, given the specified revenue sources. Only in this manner can he make "private" choices on the basis of some reasonably accurate comparison of the costs and the benefits of the specific public services, one at the time. By contrast, general-fund budgeting, or non-earmarking, allows the citizen to "vote" only on the aggregate outlay for the predetermined "bundles" of public services, as this choice is presented to him by the budgetary authorities. - James M. Buchanan, The Economics of Earmarked Taxes

Remember what I wrote in my original post? Our current system is based on the assumption that congresspeople are omniscient (True/False)...

The basic argument assumes a full range of possible baskets of public goods available at the start. But how is this spectrum of opportunities established? Two possibilities come to mind: some central authority or auctioneer could set up different local communities and clubs with different baskets of public goods and inform all potential citizens of the characteristics of each community club. There are two obvious difficulties to this resolution of the problem, however. First, assuming a central authority knows what baskets of public goods must be supplied disposes of a large portion of the preference revelation problem, which the model is supposed to solve. If the central authority knew which people had which preferences, it could simply assign individuals to the appropriate club or local polity. Second, even if it is to some extent feasible, this solution to the preference-revelation problem violates the decentralized spirit of the Buchanan and Tiebout models. - Dennis C. Mueller, Public Choice III

Scholars have examined a number of factors that are taken to be structural components of governmental systems and that are presumed to induce utility losses. Among them is the "bundling" of goods and services, that is, the provision in a single package of a number of goods and services. Yoram Barzel (1969) has shown that bundling can impose utility loses on citizens. - Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance

Every year, 100 million homes pay for a bundle of cable channels. Like any bundle, it's hard to see exactly what they are paying for. That is somewhat the point of bundling -- to disguise the true cost of the constituent items. - Derek Thompson, The End of TV and the Death of the Cable Bundle

Bundling...

1. assumes omniscience on the part of congresspeople
2. decreases utility for citizens
3. prevents citizens from being aware of the (opportunity) costs

Your argument is largely centered around the idea that taxpayers will have an incentive to conceal their true preferences if they could choose where their taxes go. Buchanan argued against this in his paper...

Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his "true" preferences for public goods. - James M. Buchanan, The Economics of Earmarked Taxes

This substantiates my claim that taxpayers would allocate their taxes according to their preferences. If you claim otherwise, then the responsibility is on you to find any papers that substantiate your claim. Just like if you claim that opportunity costs do not ensure the efficient allocation of resources, then the responsibility is on you to find any papers that substantiate your claim.

Opportunity cost is the difference in value derived from one choice versus the best of the choices not picked.

You derive x amount of value from replying to this thread (1st best option) and y amount of value from reading your book (2nd best option). The opportunity cost of replying to this thread is not x - y...it's simply y. It's the value that you would have derived from reading your book.

In theory, if everyone is rational (i.e. makes no "mistakes"), then they will pick the option with the least opportunity cost.

People pick the most valuable option, which requires the sacrifice of the second most valuable option. The value that you would have derived from the second best option is the opportunity cost.

I honestly cannot find a discussion of this concept with relation to multiplayer games, but that is quite important, as the opportunity cost of defecting in the prisoner's dilemma is dependent on the other player's action. This prevents the analysis from extending to collectively funded public goods IMO. My claim, however isn't that strong.

[...]

1) "If you're not willing to cooperate with your coconspirator, then clearly you'd prefer to sit in jail for 3 years instead of 1." Is that a true statement in your opinion? Can you see this as a valid analogy?

[...]

Opportunity cost is not well defined in (some) multiplayer games. That was the point of the second sentence. You can't tell me my opportunity cost for defecting in the prisoner's dilemma/Chicken/etc without information on another actor. This means that, even if I were a homo economicus, I would have insufficient information to determine the magnitude of my opportunity cost. How do you expect poor little normal me to do so? If I cannot determine the magnitude of my opportunity cost, I cannot determine how much I am sacrificing. If I cannot determine how much I am sacrificing, then I cannot compare the value of different options. If I cannot compare the value of different options, I cannot choose the one I prefer. Do you disagree with anything in that logic chain?

Imagine a river right next to a soup kitchen. When you arrive at the soup kitchen to volunteer you notice that there's a group of people picking up trash along the river. How is the prisoner's dilemma relevant/applicable?

My original guess was that you were going to claim that the private sector was more complex, and therefore people ought to have an easier time deciding what was of value to them in the public sector. After tracing the thread of conversation back a bit, it seems more likely that you intend to show that (government provided?) public goods tend to compete with each other far less, so it is much more important to choose one over the other. Was I even close?

Not really. My point was for you to explain why there's such a greater diversity/variety of goods in the private sector. What do you attribute this to?

I'll admit, I hadn't considered "voting" as asking people how much things are worth to them with the understanding that that will be how much they pay. When we vote we have the opportunity to make other people pay for things we value. I know this is a problem you have with the system, but it means that our method of voting is not exactly a contingent valuation system.

[...]

No, it's not. The reason people like Hitler become powerful is that they are able to change others' preferences. Hitler could easily have risen to head of government. If he could get any small fraction of the people to give their taxes to his military, he could seize power.

Clearly you believe that voting adequately allows people to communicate their true preferences/values. So please substantiate your claim.

No, but Congress does have access to experts and (in theory) studies the issue constantly. Now you are pretty much requiring that everyone do some fraction of this if they want to allocate to the best of their ability. I believe this is what Buchanan referred to as "Decision cost." Perhaps their will be a new industry of allocation advisers spawned, if so that would cut down, but not remove this decision cost. It also wouldn't get rid of the incentive to "defect"

Keep climbing the mountain by reading up on rational ignorance...

This greater complexity of political choice is compounded by an inability to gain from any investment in knowledge. In a market setting, a person can gain by storing food during the boom periods; it is a simple task to profit directly from knowledge. In a political setting, however, even if a person has acquired knowledge about the more complex question of "why," there is no way that he can profit from his knowledge because a change in policy will take place only after a majority of people have come to the same conclusion. Consequently, it is rational to be considerably more ignorant about general policy matters than about matters of market choice. - James M. Buchanan, The Theory of Public Choice: II

We all gain as a society when we incentivize people to be at the right place at the right time. Being at the right place at the right time requires doing homework. But there's no point in doing homework if there's absolutely no benefit from being at the right place at the right time.

Consider this recent blog entry over at the Bleeding Heart Libertarian blog...

Here’s the problem. Many moral philosophers (including me) think a purely instrumental agreement is seriously deficient from a moral point of view. For one thing, instrumentally rational agreements might be subject to gross inequalities of wealth, and worse, inequalities of bargaining power. It might be instrumentally rational, for instance, for a drowning man to give up all of his money to the only person in a position to rescue him. But we think such an agreement would be unjust because the rescuer is exploiting the man who needs rescuing. The result is that instrumentalist contracts are not properly normative. They don’t give us the right reasons to comply with social and political rules. - Kevin Vallier, The Essential Relationships Between Duty and Coordination – For Boettke and Leeson

Clearly Vallier needs to read Bastiat...

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil. - Frédéric Bastiat, What Is Seen and What Is Not Seen

It might seem morally wrong for Dave to exploit (take advantage of) Bob, who's drowning. But the fact of the matter is, nobody else was around. If we limit/restrict Dave's ability to benefit from his effort/research/luck/insight/foresight, then we decentivize people to be where we need them most. It's the equivalent of removing sirens and flashing lights from emergency vehicles. If we don't know how valuable all the different uses of society's limited resources are...then it's impossible for resources to flow to where they create the most value. Without this essential information, it's a given that resources will flow the wrong directions and we will all be worse off.

So you feel secure placing our future in the hands of 300 congresspeople and their entourage of experts. But I would feel infinitely more secure if everybody could receive the benefit of their accurate estimates of future value.

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

given enough eyeballs, all bugs are shallow - Linus's Law

Right now in this thread there are numerous people looking for the bugs in pragmatarianism. Clearly they are finding bugs. Maybe the bugs are imagined rather than real, but they should be allowed to allocate their resources accordingly. This is exactly how the public sector should work as well. Let many people look for the bugs in public programs and allocate their taxes accordingly.

Earlier you said that how much I sacrifice is the same as how much I valued something. If this is true, then no value is created in trades, as I am sacrificing something to receive something of equal value (and so is "Trusty"). Do you believe value is created in trades?

People only sacrifice something if they suspect that what they receive in return will be more valuable than what they have to give up. Otherwise they'll simply suffer a loss. Given that nobody intentionally wants to suffer a loss, the more that somebody is willing to sacrifice, the more they value what they are trading for.

The exsistence of a costless exit is not even obvious. "Cost," can only be defined relative to other things (as you assert when talking about oppurtunity cost). Therefore, the existence and placement of a zero (i.e. "costless") is at best arbitrary.

There's a difference between internal "barriers" and external barriers. Costless exit just means that I'm not preventing you in any way shape or form from leaving this discussion. With our current system, it's very costly for a pacifist not to fund the DoD. They can either avoid making enough money to pay taxes or risk going to jail or try to move to a country where they aren't forced to fund war.

I tend to think abundance has to do with how well society uses societies limited resources. There is so much aping and riffing on eachothers' ideas in industry that it is basically impossible to define who is responsible for a given business practice. And make no mistake, it is technological innovations and business practices that are responsible for the abundance, as they are what allow us to multiply our labor.

And you haven't answered my question. If, say, the poorest third of the people on SNAP (5% - 15 Million people) starved to death after implementing tax choice, would you say the market valued them more dead than alive?

You agree that abundance depends on how well society's limited resources are being used. Yet, you want me to address an unrealistic scenario with millions starved to death because we implemented tax choice. It reminds me of these anarcho-capitalists who critiqued pragmatarianism using a pragmatarian system with a 100% tax rate as their example. If you want me to address your unrealistic scenario, then please provide a detailed and credible explanation of how we arrive at your scenario.

Step 1: Implement pragmatarianism
Step 2: ?
Step 3: Millions starve to death

I can't be certain that P doesn't lead to pragmatarianism. In principle, I could if I could show some kind of contradiction, but I would prefer things be better defined before attempting that again. It may not lead to anywhere interesting or useful on it's own. That's just the nature of logic. You still have to rigorously show it leads to pragmatarianism; logic isn't a Bayesian analysis.

You're defending the current system, and you agree that values are subjective (P). Please give me an example rigorously showing that P leads to our current system. Or acknowledge that you hold my arguments to a far higher standard than you hold your own.

[Xerographica]

He also states:

Earmarking is defined as the practice of designating or dedicating specific public revenues to the financing of specific public services

This would strictly include tax choice, though his clarification seems to indicate it doesn't. Given that he analyzes a simplified tax choice system, that further confuses things. It's at least ambiguous, so I suppose I'll drop the point.

It really shouldn't be that ambiguous...

We may discuss this situation under two distinct models for budgetary decision-making. In the first, which we can call the planning model, we assume that decisions on the size of the budget, and hence on total tax revenues, are made by an external chooser who is able omnisciently to read individual preference functions. In the second, or public choice model, we assume that budgetary outcomes emerge from the interactions of citizens themselves, operating under some designated decision rules. - James M. Buchanan, Taxation in Fiscal Exchange

In terms of opportunity cost, what's the difference between the two models?

You do want me to prove a negative.... My claim is not that opportunity costs* do not ensure efficient allocation in all cases (though I do believe this). My claim is that it is not proven that opportunity costs ensure efficient allocation in all cases. The latter is not something on which anyone is going to write a paper, anymore than I could present you with an astronomy paper showing that it is not proven that there is a teacup in the Oort cloud (indeed, I could not present you with an astronomy paper proving there is not a teacup in the Oort cloud either). It is hard or impossible to prove negatives without exhausting (often infinite) possibilities. The only way to do so is by way of counterexample, which are not always easy to construct. The burden of proof is on the positive claim for this reason.

So, since I am skeptical of your claim, give me proof.

I've extensively studied the opportunity cost concept. As far as I know, not a single economist has limited the concept to private goods. If you claim that it is limited to private goods, then the burden is on you to substantiate your claim. Feel free to look over a very small sample of my evidence...opportunity cost passages.

*Note, this terminology bothers me - you claim is that systems which take advantage of maximizing peoples' ability to compare opportunity cost maximizes efficiency, not the opportunity costs themselves, correct?

What maximizes efficiency (value) is that individuals can select the most valuable option. If individuals can't determine the option they value most (individual valuation) then resources cannot be put to their most valuable uses. When I say "opportunity costs ensures the efficient allocation of resources"...I'm actually referring to the valuation rather than the opportunity cost. But I often just say "opportunity costs..." because individual valuation is inherent in the concept.

Edit: Ahh well, I did find something:Tax-earmarking and separate school financingJournal of Public Economics. Volume 54, Issue 1, May 1994, Pages 51–63

Edit2: quote redacted in deference to permissions. It was, indeed, provided by my library. It claims that in some large fraction of cases, tax choice results in poor overall public utility.

That's from the abstract. I hope you can access that; I am on a university campus, and it is not always obvious which papers are public. The beginning of section 3 is the where he discusses his results on the equilibria.

Did you not read the paper before you mentioned it? As far as I can tell, his criticism boils down to the prisoner's dilemma. Either the prisoner's dilemma is relevant and I'm just not seeing it...or the author just hasn't thought things through. But I did add a few passages from his paper to my database. Why did you remove the passage that you initially shared? I initially added to this reply all the passages that I had pulled from his paper...but then I removed them when I noticed that you had removed yours.

His conclusion would have been credible if, and only if, he had provided a reasonable defense/explanation of our current system's allocative efficiency. As in, "the current allocation is more efficient because congresspeople are omniscient". Or, "the current allocation is more efficient because the political process as it stands allows citizens to adequately communicate their preferences". But like yourself, he did not substantiate his claim concerning the current system's allocative efficiency.

Tax choice allocation can only be considered less efficient when compared to a system that's more efficient. But our current system is solely based on the assumption of efficiency. Congresspeople are assumed to be omniscient. It's assumed that they can reach inside our heads and pull out our preference rankings. Not all economists accept this absurd assumption which is why there's been considerable work done in the area of preference revelation.

I'm not certain I see a way, do you? I could shoehorn it in if I made wild enough assumptions. There's a reason I put "(some)" in front of multiplayer.

I don't see a way either, which is why I maintain that game theory is largely irrelevant to allowing millions of citizens to shop for themselves in both halves of the economy.

Partially, I attribute it to the fact that public goods serve many more people than private goods (usually), so they are, by their nature, less dividable. I suspect competition and innovation are what drives the private sector, while it is hard to change the services offered by the government (though not all of these are "public goods" by the real definition).

There's far less diversity of goods in the public sector because public goods are less dividable? Then how do you explain a lack of diversity of private goods in planned/command economies?

The lack of diversity of goods in the public sector has absolutely nothing to do with public goods being less dividable. Instead, it has everything to do with a lack of easy exit. For example, if taxpayers could choose where their taxes go...then it's reasonable to assume that a good portion of liberals would withdraw their taxes from the DoD if they perceive that a war is being fought largely for the financial benefit of Halliburton et all. Yet, not sure if you noticed this, but oftentimes liberals are vocal proponents of military intervention when it comes to preventing/stopping genocide / ethnic cleansing (ie Darfur). In other words, they'd be willing to pay for some types of intervention but not other types. As a result, if the unmet demand is substantial enough, a humanitarian branch of the DoD could be split off into a new government organization. In other words, defense is easily dividable. It can be divided to reflect people's diverse perspectives on when military intervention is worth the opportunity cost. Of course I'm not saying that the DoD should be divided, I'm just saying that costless exit is the reason why there's far more goods in the private sector.

In 1978 when Deng Xiaoping started helping China transition from a planned/command economy to a mixed economy...they only had the tiniest fraction of private goods available that they do today. If we implemented pragmatarianism tomorrow, then in 30 years we'd have a far greater diversity/variety of public goods available than we do today. This means that the demand for public goods will be far more adequately met than it is today. Just like the demand for private goods in China is more adequately met today than it was 30 years ago.

I would disagree with that. I believe that the system of voting we have now would likely produce a more utilitarian society than implementing your system.

So substantiate any claim you have regarding the allocative efficiency of our current system. Why wouldn't you want to determine whether or not your beliefs are based on anything of substance?

I might as well, if I agreed that tax choice resulted in accurate estimates of future value.

Markets incentivize people to accurately estimate future value. Pragmatarianism would create a market in the public sector. As a result, taxpayers would be incentivized to accurately estimate future value. More incentive/motivation/effort/interest...would result in far more accurate estimates of future value. If you prevent taxpayers from shopping in the public sector, then the logical result is rational ignorance. Take away the carrot...and the mule won't have a good reason to budge.

So you think people would allocate congress an emergency discretionary fund of some sort? Maybe that would help. It still suffers from being a very public good among many less public goods.

People wouldn't have to shop for themselves in the public sector if they didn't want to. Congress would still be there and taxpayers would be welcome to give them as much (or as little) money as they wanted. Just like with every organization, the amount of money that people gave to congress would reflect what congress was doing with the money. If taxpayers perceived that congress was wasting their money (inaccurate estimates of future value), then this would decrease the amount of money that congress received.

Think it about it like this. Right now Elizabeth Warren has far more of a say how taxes are allocated than I do. Is it fair? Sure, she received more votes than I did. If we implemented pragmatarianism, would it be fair for Michael Moore to have far more of a say how taxes are allocated than I would? Sure, he receives far more dollar votes than I do. Clearly more people value his estimate of future value. But do they value his estimate of future value more than they value Elizabeth Warren's estimate of future value? It would behoove us to find out.

Congress, in terms of personal shopping, is easily dividable. Taxpayers should have the freedom to give their taxes to whichever congressperson most closely matches their preferences.

So people value the thing they sacrifice for more than the thing they sacrifice? That contradicts your definition of value as willingness to sacrifice.

If you value x more than you value y, then you don't sacrifice x for y. If you value reading your book more than replying to this thread, then you won't sacrifice your opportunity to read your book.

Ahh, you mean "low cost," or "negligible cost" exit. Leaving the thread may save me time, but it may also leave me with a bad taste in my mouth. That isn't costless to my mind, but it is negligible cost. I'm more concerned with Bob above - he lacks a costless exit (drowning and going bankrupt are both high costs).

But if you do decide that it's worth it to leave this thread, then nobody will prevent you from doing so. That's costless/easy exit. If liberals decide that it isn't worth it to sacrifice our nation's future for Halliburton's financial gain, then nobody should prevent them from allocating their taxes to other government organizations.

1) Note that people on SNAP*, as a rule, do not make enough money before taxes to feed themselves**. They receive more money from the government than they pay in.

2) So we implement pragmatarianism. The people eligible for SNAP will allocate most or all of their tax burden (if any) to the SNAP program for obvious reasons. After this, the program is less well funded, relative to the tax burden, than it is now (from (1)).

3) The SNAP program provides no obvious good to anyone not on it, so we hope the rest of the tax base sees the benefit of preventing people from getting desperately hungry enough to begin committing crime. If an insufficient amount of the tax base realizes this, or enough of the tax base lives far away from where any such crime would be committed (and thus have no interest in preventing it, except at maybe another level of abstraction), then the program's only hope of staying funded is altruism.

4) If none of the conditions in (3) are met, then the program will stay underfunded, which means some fraction of the people it funds will be unable to buy food. Therefore, they will starve/die of exposure/possibly turn to crime and be jailed.

I'm not sure how likely this scenario is, but I don't think it's that crazy. It certainly is not impossible. If it happened, would you say the market valued those people more dead than alive?

It's a crazy scenario. There's a demand for eliminating poverty/hunger. If we create a market in the public sector, then this demand will be far better met than it currently is. This is because markets incentivize entrepreneurs to come up with better solutions. So implementing pragmatarianism would reduce poverty at a far greater rate than our current system does.

In the real world, demand revelation meets with the same problem that has long confounded students of democracy. As Anthony Downs and others have shown, rational voters have little or no incentive to spend their time or effort gathering or providing information about their preferences. And even if the information were available, what is the incentive for a bureaucratic (monopolistic) supplier of a public good to give voters the greatest amount of value at the minimum of cost? - Edward H. Clarke

Even if the real demand for the elimination of poverty is significantly less than the pseudo-demand...the taxpayers who are willing to pay for the elimination of poverty are going to be motivated to do their homework in order to give their money to whichever organization is feeding/clothing/sheltering the most people at the minimum cost. This will incentivize producers to come up with more innovative/resourceful/economical/better ways of eliminating poverty.

You are claiming proof, I am not. I do see benefits to our current system that would not exist in pragmatarianism. I tried to show these to you and you have rejected them. I am not certain that the loss these benefits out way anythings gained from switching to pragmatarianism, but I think it likely. If you wish to call that a defense, go ahead, but it is nowhere near the level of certainty you claim.

If you were just suggesting that some sector of government provided services be transitioned to a tax choice model, I may or may not agree with you, but it would at least be reasonable. You instead are suggesting that pragmatarianism is better than every other conceivable system due to opportunity cost being the only valuable perspective for maximizing total value. Can you not see how this differs in strength from my claim?

You're claiming that I'm on the wrong path and you're on the right path. So substantiate your claim. Find papers that argue that the opportunity cost concept is limited in scope. Find papers that argue that our current political mechanisms adequately allow citizens to communicate their preferences. Or find papers that argue that our preferences are not needed to determine the optimal provision of public goods. Why wouldn't you want to do these things anyways? If half of your money is going to be spent in the public sector...then isn't your life too short not to discern the efficacy of the current system?

If you're going to throw half of your possessions into a volcano, then wouldn't it be reasonable to make the effort to try and understand the logic of doing so? If you're going to sacrifice your children to the gods of war, then wouldn't it behoove you to take a closer look at the rationale?

You're at a university for goodness sake. How hard is it to walk to the economics department and ask if anybody there is familiar with public finance?

Personally, I've sacrificed the alternative uses of my limited time in order to track down and understand the best of the best arguments that defend our current system. As a result, I'm pretty certain that the people in the not-too-distant future will laugh at the absurdity of allowing 300 people to allocate half our nation's resources. Just like we laugh at the absurdity of allowing a king to control the power of the purse.

Right now too many economists love their models, all politicians love their power and too many voters think they are getting a free lunch. We need more people to take a critical look at the assumptions that our current system is based on. After we drop the ridiculous assumptions, pragmatarianism will become imperative.

[Xerographica]

I trust a specialist who's job is to know how to spend it more than I would Joe Blow who does not even know what NIST or the NSF is yes.
I trust the head of the CDC to know how best to spend the CDC's money then a guy off the street that thinks memory water can cure disease.

I agree.

I'm asking the OP why they appear to think Congress can't be trusted to allocate funds (due to lack of omniscience), but departments/organisations/agencies one tier down apparently can:

Right, you can't dictate to the Red Cross how they spend your donation...just like how in a pragmatarian system you wouldn't be able to dictate to FEMA how they spend your tax dollars. Shopping for yourself means that you choose which organizations you give your money to...it does not mean that you can dictate how they spend your money once you give it to them.

Subway isn't omniscient, which is why consumers have to have the freedom to communicate their preferences to Subway. Consumers communicate their preferences by deciding whether or not it's worth it to spend $5 for a Subway sandwich.

FEMA, just like congress, just like Subway, is not omniscient. This is why taxpayers have to have the freedom to communicate their preferences to FEMA. Taxpayers must have the freedom to decide how many of their tax dollars they are willing to give to FEMA. The amount of money that FEMA receives will reflect 1. the demand for disaster relief and 2. how adequately FEMA is meeting the demand. Just because a demand exists in no way shape or form automatically means that FEMA is doing a good job supplying disaster relief.

[Xerographica]

So when you say that China had only the tiniest fraction of private goods available that they have today, you're saying that they had almost not food, clothing, fuel, electricity, bicycles, brooms, housing, etc. That is literally what you are claiming here.

So prove it. Using the CORRECT definition of private goods, not your own bullshit definition, which is absolutely worthless.

Even though it's true, In my post I didn't say a single thing about the quantity of private products available in China when Deng Xiaoping took over in 1978. My argument was that today there's an infinitely greater/wider diversity/variety of private products available in China than there was in 1978.

In terms of variety of available products...the difference between China today and China 1978 is far greater than the difference between America today and America 1978.

China 2013 - China 1978 > America 2013 - America 1978.

We had a decent variety of products available in 1978...and now we have an even greater variety of products available. China had barely any variety in their products in 1978...and now they have an infinitely wider variety of products available. They still don't have as much variety as we do though.

When I lived in China several years ago there were actually quite a few fat people. This is in stark contrast to the 30 million people who died of starvation because of Mao Zedong's collectivist efforts. So yeah, not only is there a wider variety of food now available in China...but there's also a greater quantity of food available. That being said, the variety/quantity of gyms there is nothing compared to over here. So they still haven't caught up to us in terms of variety/quantity of private products, but they are pretty darn close. They are infinitely closer than they were in 1978.

The point is, if we created a market in the public sector, then it's a given that in 30 years from now, not only would the quantity of public goods increase, but so would the variety. This is because markets incentivize producers to identify and satisfy any unmet demands.

Right now there's far more room for improvement in the public sector than there is in the private sector. If China is smart then they'll beat us at our own game by creating a market in their public sector. Given that the public sector is half the economy, not only would China catch up to us, they'd leave us in their dust.

[Xerographica]

Xero, you are still desperately trying to avoid admitting that you don't understand the difference between public goods and private goods, because you don't accept or understand the standard economic definitions of these things.

You can't use concepts from economics in total ignorance of the field and expect us to accept your arguments. There are too many of us here who do understand economics (having been schooled in it) for that kind of bull shit to fly on NSG.

And you still don't understand the irrelevance of the definitions. It doesn't matter how you define public goods or private goods...the question is how we end up with a greater variety/quantity/quality of the goods that we want more of.

If you think the definitions matter to the process by which we overcome scarcity then please, by all means, present your argument.

But the fact of the matter is, you're simply not seeing the forest for the trees. You're trying to "gotcha" me so bad with trifling details that you're blinding yourself to the very objective and point of economics.

[Xerographica]

TRANSLATION: "I don't understand anything at all about economics. My lack of understanding uniquely enables me to transcend the petty limitations of the field to come up with economic ideas that are truly breathtaking in their scope and importance, because I can make economics be and say anything I want it to be and say."

You know, there are a score of nutjobs every year who claim to have invented perpetual motion because they're not bound by the limitations of conventional physics and its theories or definitions either.

<dusts hands off>

I believe my work here is done.

Your work here is not done. It's entirely possible that I'm a nut job. But I'm not the only person reading what you write. This isn't private correspondence...it's public correspondence. So yeah, go ahead and write me off...but why screw the innocent bystanders? Why needlessly deprive them of your excellent knowledge/understanding of economics?

Do the audience a huge solid and enlighten them by sharing your definition of public goods. And then explain to them why your definition of public goods prevents them from being produced in greater abundance.

If you fail to do this, then by "bravely" running away you're implicitly acknowledging your vast economic ignorance.

[Xerographica]

Wait, you were still trying to teach him?

Wow. Talk about trying to make the horse drink.....

Eh? He was trying to teach me? I thought he was trying to teach you. Maybe he doesn't need to teach you because you already know about economics? Let's find out if that's true. What is the definition of a public good and how does the definition prevent public goods from being produced in greater abundance?

[Xerographica]

Because the non-excludable nature of public goods means that no self-respecting private firm will seek to provide public goods to the public as a whole: they cannot demand payment, and as such will fall under the weight of hordes of free riders.

True, but irrelevant, given that I'm not an anarcho-capitalist.

Further, the same free-rider problem (as well as externalities) applies to any attempt to spend public money only where the taxpayers choose in advance: why should I, as a (hypothetical - you wouldn't catch me dead there) Arkansas resident vote to spend money upgrading the Port of New York, instead of on a local roadworks improvement project?

So even though you're sacrificing 50% of your income for the public good, you're still a free-rider simply because you fail to see the benefit of upgrading the port of New York? Do you think it's at all possible that public projects are not all equally valuable/beneficial? Is it hard for you to consider that values are subjective? Does it strain your brain to imagine that one person's trash is another person's treasure?

And now that I've given a brief insight into one week's content from Microeconomics 100, will you please go and do your research before trying to apply your own personal definitions to every economic problem out there? Or is that too much to ask of a right-wing ideologue like you?

Evidently you don't seem to realize that you failed to explain why the definition of public goods prevents them from being produced in greater abundance. Yes, public goods are non-excludable and non-rivalrous...therefore we have government organizations supply them and force people to pay taxes. What does this have to do with whether or not public goods can be produced in greater abundance? That was my question which you completely failed to answer.

If you had done your research, then you would know that I'm not a right-wing ideologue. My goal isn't to kick even one public good over to the private sector. My goal is not to reduce the tax rate by even 1%. So please stop spewing your pre-recorded and entirely irrelevant arguments at me. Save them for actual right-wing ideologues.

[Xerographica]

Food is an essential for survival, but Subway isn't. I can go to a different food outlet, buy raw ingredients from a market, or even grow my own.
Subway has competition, and that's what allows my "dollar vote" meaning - if I don't like Subway, I can simply choose not to spend money there.

FEMA has no such competition, and there is simply no way a person in need of disaster relief has any means to "shop around".

Why are there multiple outlets for food...but only one outlet for disaster relief? In 1978 when Deng Xiaoping started to help China transition from a command/planned economy to a mixed economy...how many food outlets were there in China? Now how many food outlets are there? Why is it, that when a market is created, that the number of outlets increases? Why is it that planned/command economies all have had far fewer food outlets?

The comparison is demonstrably false.
If I'm choosing between government departments, I'm comparing different services and making a value judgement over which I consider a higher priority. That's not even remotely the same as choosing which of several similar food vendors I buy lunch from.

Eh? If value isn't a priority for consumers, then why does Subway advertise that you get a foot long sandwich for $5? If we created a market in the public sector, then are taxpayers suddenly going to lose all interest in value?

The amount FEMA would receive would not reflect either 1. the demand for disaster relief or 2. how adequately FEMA is meeting the demand.
1. The demand cannot be known ahead of time - in terms of supply and demand, disaster relief is one of the worst examples you could have chosen.

Demand, in no circumstances, can be known ahead of time. Nobody has a crystal ball. Producers make guesses regarding future demand. The producers who make the best guesses gain influence over how society's limited resources are used.

2. If the public perceives that FEMA is doing a bad job and vote them less money, that'll only lead to them doing a worse job due to lack of funds - which is a downward spiral and not an accurate reflection of the reality. And unlike Subway, if FEMA goes under there isn't a fledgling disaster relief agency waiting to pop up and fill the gap.

So the threat of losing their jobs wouldn't incentivize FEMA employees to give taxpayers more value? If FEMA did go under, and no fledgling agency took its place, then how do you know that there's any demand for disaster relief? If you're going to say that voting accurately conveys people's true preferences, then please be able to substantiate your claim with at least one peer reviewed paper.

[Xerographica]

Actually, the conditions for the invisible hand to produce an efficient allocation are quite stringent, and quite obviously unrealistic in some sectors of the economy.

What about the conditions for the visible hand to produce an efficient allocation? Here's a thread (and illustration) I created just for you... Government Success vs Market Success.