Are Congresspeople Omniscient?

[Xerographica]

You'll note in section 3 that he admits that this is too oversimplified to apply to the real world and may only be applicable in a small range of areas. That is, he knows this is a false dichotomy.

There's nothing less applicable to the real world than assuming people's preferences...

The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process

A. Our current system is based on the assumption that congresspeople are omniscient. But clearly they are not omniscient...

With the help of equations and diagrams, Samuelson showed how the planner would derive for each individual his demand function and the collective consumption goods that would contribute to his utility maximization. In this system, the planner is expected to have an omniscient presence and be able to ascertain individual preferences even when they are not voluntarily revealed. Samuelson attempted to show the combination of public and private goods and their distribution that would maximize social welfare. His concern was with the total community's welfare and with all goods; it did not have much to do with the central reality of the budget in the ordinary world. - A. Premchand, Government Budgeting and Expenditure Controls: Theory and Practice

"Market failure" has always been defined as being present when conditions for Pareto-optimality are not satisfied in ways in which an omniscient, selfless, social guardian government could costlessly correct. One of the lessons of experience with development is that governments are not omniscient, selfless, social guardians and corrections are not costless. - Anne O. Krueger, Government Failures in Development

The Founding Fathers of public choice, in some cases by design and in other cases by accident, effectively leveled the playing field in the debate over the relative merits of governments and private markets. This playing field, by the mid-1950s, had become undeniably prejudiced in favor of an allegedly omniscient and impartial government. - Charles K. Rowley, Public Choice from the Perspective of the History of Thought

Samuelson, laying particular emphasis on the problem of preference revelation, takes as a premise the existence of an omniscient planner. - Christian Bastin, Theories of Voluntary Exchange in the Theory of Public Goods

The new welfare economists view private markets as failing extensively because of perceived weaknesses in property rights, pervasive externalities and public goods and widespread asymmetries in information. In contrast, they view democratic government as benevolent, omniscient and impartial in its role as the White Knight riding to rescue individuals from unavoidable private market failures (Baumol and Oates, 1988). The public choice revolution redressed this bias by analysing government as it is and not as a figment of some excessively cloistered imagination. - Donald Wittman, Efficiency of Democracy?

To accurately choose which vector of policies is wealth-maximizing, the government would need to know how every person would act under these new policies—something which would require omniscience on the part of government agents. - Edward Stringham, Kaldor-Hicks Efficiency and the Problem of Central Planning

In what follows we shall assume an omniscient planner who seeks to maximize social welfare subject to the scarcity constraints of the economy. This is standard practice in normative economics. - Elisha A. Pazner, Merit Wants and the Theory of Taxation

A social efficiency objective implies a single mind to which all resource supply conditions and all consumer attitudes are simultaneously given. Otherwise, there can be no coherent notion of a relevant optimum. The entire notion of a 'social choice' presumes, in principle, the relevance of imagined omniscience. - Israel M. Kirzner, How Markets Work

The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process

The possible advantages are, however, greatly increased when the unrealistic assumption of omniscient planning is relaxed and the preference-revelation problems in a world of diverse preferences are explicitly recognized. - John G. Head, Public Goods and Multi-Level Government

The traditional approach describes the allocation and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution which improves on the market outcome and achieves an efficient allocation of resources. Traditional theory employs the device of a 'social welfare function' which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, 'the government' is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge. - Margaret Wilkinson, Paying for Public Spending - Is There a Role for Earmarked Taxes

The well-known Samuelson (1954, 1955) public goods articles offer a good example. Samuelson titles his first article “The Pure Theory of Public Expenditure,” indicating that his analysis of a possible market failure in the production of public goods is, in fact, not a theory, but the theory, of public expenditure even though the article contains no analysis of how government would succeed in producing public goods where the market would fail. The only way Samuelson's public good theory can be a theory of government expenditure is if the government is an omniscient benevolent dictator. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator

Though an old theme, Samuelson’s rigorous analysis of public goods in a general equilibrium setting (Samuelson 1954) captured the attention of a wide range of theorists, and soon became the center of fiscal theory. Wicksell’s concern with how to secure preference revelation was noted but set aside as unmanageable by economic analysis. Implementation of budget choice was again left to an omniscient referee. - Richard A. Musgrave, Public finance and three branch model

The problem would disappear if government were omniscient, as implicitly assumed by Hotelling, but government is not omniscient and throughout his career Coase has insisted very sensibly that in evaluating the case for public intervention one must compare real markets with real government, rather than real markets with ideal government assumed to work not only flawlessly but costlessly. - Richard A. Posner, Nobel Laureate: Ronald Coase and Methodology

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

B. The political process does not come close to allowing citizens to adequately communicate their preferences...Democracy, the Market, and the Logic of Social Choice


C. ???

What is your C? If I can't read your mind, and you can't communicate your true preferences to me, then how can I possibly know your true preferences? How can resources be efficiently allocated when people's preferences are not entered into the equation?

You're hanging out with two of your friends trying to decide what to watch on netflix. If you don't allow your friends to give their input on which movie to watch, then how can the allocation be efficient? Well...you can simply assume their preferences. You can simply assume that they are irrational. You can simply assume that they would have tricked you into defecting.

If it's considerate to allow your friends to share their input, then it's considerate to allow everybody to share their input on what the government does. And as the paper I shared above logically argues, when it comes to sharing input, the political process doesn't hold a candle to the market process.

To use your language (which you have repeatedly shown to be distinct from professional economic language), the omniscient external chooser is able to better consider the effects of different choices by virtue of being omniscient. However, I realize that you would rather I note that people can consider opportunity cost better when they have more choices.

Are you now seriously arguing that congresspeople are omniscient? How can you consider the opportunity cost better when you have more choices?

This is why I dislike the use of the term by itself. Everything has an opportunity cost. That is undeniable. What is deniable is that maximizing peoples' apparent opportunity to compare opportunity costs will maximize value in all cases.

If people's freedom maximized value in all cases then people would be infallible. Obviously people make mistakes, but values are subjective, which is why we need other people to determine whether or not our use of society's limited resources is a mistake.

I just want a paper that shows that maximizing ability to compare opportunity cost maximizes total value. You claim to have many. Any such demonstration will rest on some assumptions. I would like to examine those assumptions for things you may have missed. Please, just one link that you believe shows this.

Side note - I sincerely hope that sample is not representative of your sources. We have, in order:

Professor's blog - No link to put the original quote in context with what assumptions were made. Looks like he's explaining a basic point (& => is making many simplifying assumptions)
Austrian Economics - A field that explicitly rejects empirical critique (http://en.wikipedia.org/wiki/Austrian_School).
Buchanan again - Without context or assumptions, but I'm willing to bet the assumptions he's made in the other papers hold.
Eva Mueller - No context. Refers to private goods. Seems to doubt existence of certain preference functions when referring to public policy.
Robert Higgs - Literally a political blog post. Is a professor, but is not his professional work.
Bastiat - From 1850. Not exactly a formal economics paper despite it's apparent foundational worth according to wiki.
Lazear - General review of economics is being quoted.
Derrida - Philospher. Not an economist.
The rest include more Derrida, a "Christian perspective," two bible quotes, a greek myth, Thoreau, Eisenhower, what are hopefully 3 jokes, and Neitzche.

You've got a pretty bad ratio of trained economists to random people saying things that sound good. You have an even worse ratio of formal economics work to watered down (and therefore oversimplified) prose.

I will also note that none of these sources seem meant to show that maximizing ability to compare opportunity cost will maximize value in all cases.

First off, kudos for actually looking through the passages. But I think you're barking up the wrong tree if you're looking for perfection. What you simply need to look for is any economist who argues that the opportunity cost concept is only applicable to the private sector. Here are some more passages for you to read and discern why, exactly, these economists are concerned with the alternative uses of society's limited resources...

In determining the marginal costs of producing a publicly provided
good or service, it is important to emphasize that these are not simply
financial or accounting costs, but economic or opportunity costs – that is, the economic value of the benefits that could have been obtained had the resources used to produce the good or service been used for their most highly valued purpose. - David Duff, Benefit Taxes and User Fees in Theory and Practice

The economic approach stresses the fact that any expenditure always has an opportunity cost, i.e. a benefit that is sacrificed because money is used in a particular way. For example, since biodiversity is threatened by many factors, but chiefly by changes in land use, measures of value denominated in monetary terms can be used to demonstrate the importance of biodiversity conservation relative to alternative uses of land. In this way, a better balance between 'developmental' needs and conservation can be illustrated. To date, that balance has tended to favour the conversion of land to industrial, residential and infrastructure use because biodiversity is not seen as having a significant market value. Economic approaches to valuation can help to identify that potential market value, whilst a further stage in the process of conservation is to 'create markets' where currently none exist. Market creation is the subject of a separate OECD initiative (OECD, forthcoming). - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

The notion of opportunity cost refers to the fact that the allocation of resources to biodiversity conservation necessarily means those resources cannot be allocated to something else. From an economic perspective, the money value of the resources allocated to conservation approximates the benefit that is sacrificed for conservation. Hence, for the instrumental value rule to be obeyed, it must be the case that the benefits (positive changes in human well-being) from conservation must exceed the costs of conservation (the well-being foregone). In essence, this is the resource allocation rule that would be used in economics. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

While the philosophical debate is extensive, complex and largely confined to academic publications, it does have direct relationships to the practical problem of how to make decisions in a world where resources are limited. The relationships are sometimes weak, however, as with discussions that ignore the finitude of resources and hence the central place that has to be occupied by the concept of opportunity cost. Any practical decision-making criterion has to account for the benefits that are sacrificed by biodiversity conservation. This involves either a formal procedure, such as cost-benefit analysis, or some political process. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

The economic approach is clearly not restricted to material goods and wants, nor even to the market sector. Prices, be they the money prices of the market sector or the "shadow" imputed prices of the nonmarket sector, measure the opportunity cost of using scarce resources, and the economic approach predicts the same kind of response to shadow prices as to market prices. Consider, for example, a person whose only scarce resource is his limited amount of time. This time is used to produce various commodities that enter his preference function, the aim being to maximize utility. Even without a market sector, either directly or indirectly, each commodity has a relevant marginal "shadow" price, namely, the time required to produce a unit change in that commodity; in equilibrium, the ratio of these prices must equal the ratio of the marginal utilities. Most importantly, an increase in the relative price of any commodity - i.e., an increase in the time required to produce a unit of that commodity - would tend to reduce the consumption of that commodity. - Gary S. Becker, The Economic Approach to Human Behavior

War costs a nation more than its actual expense; it costs, besides all that would have been gained, but for its occurrence. - J.B. Say, A Treatise on Political Economy

Once the option has been made for a public-sector project, still another choice must be confronted, and this also involves a choice-influencing cost, an obstacle to decision. Once currency has been issued, and the decision has been made to expand public-sector spending, the choice among separate public employments of the funds must be faced. The choice-influencing cost of the new post office building is the subjective value that the decision-maker places on the new school building that might be constructed instead. - James M. Buchanan, Cost and Choice: An Inquiry in Economic Theory

Even at the cost of lining up with Friedman, I’d be pleased if the idea that war is a mostly futile waste of lives and money became conventional wisdom. Switching to utopian mode, wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)? - John Quiggin, War and waste

Even where the explicit goals of the organization are to help non-donors, this rule—that the consumers guiding production decisions are the donors—still applies. Suppose, for example, the organization is a charity giving alms to the poor. In a sense, the purpose is to benefit the poor, but the actual consumers here, the guides to production decisions, are the donors, not the recipients of charity. The charity serves the purposes of the donors, and these purposes are in turn to help the poor. But it is the donors who are consuming, the donors who are demonstrating their preference for sacrificing a lesser benefit (the use of their money elsewhere) for a greater (giving money to the charity to help the poor). It is the donors whose production decisions guide the actions of the charity. - Murray Rothbard, The Myth of Neutral Taxation

Nevertheless, the classic solution to the problem of underprovision of public goods has been government funding - through compulsory taxation - and government production of the good or service in question. Although this may substantially alleviate the problem of numerous free-riders that refuse to pay for the benefits they receive, it should be noted that the policy process does not provide any very plausible method for determining what the optimal or best level of provision of a public good actually is. When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money? There is a whole economic literature dealing with the willingness-to-pay methods and contingent valuation techniques to try and divine such preference in the absence of a market price doing so, but even the most optimistic proponents of such devices tend to concede that public goods will still most likely be underprovided or overprovided under government stewardship. - Patricia Kennett, Governance, globalization and public policy

In determining the application of the revenue sum derived, a second choice must be made between the satisfaction of alternative wants by public economy. If more is spent for armaments, less can be spent for education. - Richard A. Musgrave

But economic costs, as envisaged in the marginal-cost-pricing approach, are not simply accounting costs. The fundamental economic concept of cost is opportunity cost, or the value of the benefits that could have been obtained had the inputs been used for some other purpose. From this perspective, the cost of, say, a park does not consist simply of the tangible construction and operation costs recorded in financial accounts. Instead, the relevant cost is the (highest) value that the land would realize if it were used for some other purpose, such as logging or residential development. - Richard M. Bird and Thomas Tsiopoulos, User Charges for Public Services:
Potentials and Problems

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

Yes, it boils down to the prisoner's dilemma (a continuous version of it). The prisoner's dilemma is relevant because people can "lie" about their preferences, and, as he puts it, demand an "inefficient bundle of public goods" - that is not an exact quote, but I'm paraphrasing the bottom of page 52. I would be very careful before concluding a trained economist published in a peer reviewed journal has "not thought things through."

Again, here's that scenario that perfectly models the public sector...

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.

Where's the prisoner's dilemma? How is it relevant/applicable? In this scenario you simply consider the circumstances, evaluate where the need/value/benefit is greatest, and allocate your time accordingly. It would be exactly the same thing if taxpayers could shop in the public sector.

Sure it does. Why don't we see as many types of parks as we do novelty keychains otherwise? I don't disagree that the "costless" exit helps diversify the private sector, but it is not the only driving force. Things are almost never that simple.

Are you arguing that allowing taxpayers to shop in the public sector wouldn't greatly increase the quality/quantity/variety of public goods? People want abundance/value...which is why they reward the producers who provide them with abundance/value. The fact that consumers can withhold their reward incentivizes producers to be more economical, resourceful and innovative.

Wait. Let's say I accept your narrative. You want me to accept that we can extrapolate from a Chinese transition of private goods to an American transition of public goods 35 years later? Do you know why this is a terrible idea?

It's a terrible idea because...the laws of economics don't apply to China or America?

Right here and now there are an infinite amount of different things that I could do with words (a resource). I could arrange them in countless ways. It's a given that some ways are going to make more sense to you than other ways. It's a given that some allocations are going to provide you with more utility than other allocations. Which is exactly why I need your feedback. I wouldn't need your feedback if values were objective. But they aren't. They are subjective. There isn't an efficient allocation of words if your preferences are assumed/disregarded/ignored. This concept is applicable and relevant to any and all resources.

Right now, in this thread, that's not my claim. I am claiming your policy recommendations can be and (if I can) often are wrong, not that mine are always right. I am interested to see if my beliefs are based on substance. This is not explicitly the thread for it, but you are forcing me too think through the situations where centralization is probably optimal (and where it might not be).

There is no "optimal" without you. If there was, then there would be absolutely nothing wrong with allowing one person to allocate all the resources. But in the real world, as long as you exist, then without your input, without your valuations of the opportunity costs, the output can never be optimal.

1) The paper I just posted claimed that they also incentivized to not have this estimate reflected in their allocation (in many cases).
2) As a result, this does not follow.

Again, and again, what's your standard for efficiency? If you want to claim perfect knowledge of everybody's preference functions, then why don't you work at Subway and guess exactly how people are going to want their sandwiches? Let me know how that goes for you.

But they would want to. That's the problem. "The prisoner's wouldn't defect if they didn't want to, they could just both keep silent" doesn't work in the dilemma and doesn't work here.

What? The way you allocated your words doesn't make any sense to me.

Excellent, so you agree that people value the things they sacrifice for more than the things they sacrifice? If the answer is yes, then your definition of value as willingness to sacrifice is contradictory. A consistent (non contradictory) stance is important if you want your conclusions to be meaningful.

If somebody puts bros before hoes, then they value their bros more than their hoes. Where's the difficulty? Where's the contradiction?

Are you sure this will be enough to cover the difference in demand versus "pseudo-demand"? 99+% sure? It is perfectly possible that the market values some people (or whole groups of people) more dead than alive. The market is amoral, and, as you say, hard or impossible to predict.

Nobody truly benefits when society's limited resources are misallocated. You don't gain opportunities when you waste your mind...or any other resource.

If you haven't seen it already, check out the illustration that I shared in this thread...Government Success vs Market Success.

[Xerographica]

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.
Is it Non-Sequitur Day today and no-one told me?
If you can't even understand the bolded, there's no point continuing.

What? Before you could decide which food vendors to buy from, you first had to decide whether you wanted to eat, sleep, work or play. Before you can understand economics, you have to understand the opportunity cost concept...

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

Your resources are limited/scarce, so you have to prioritize how you spend them. This is true whether we're talking about the private sector or the public sector.

[Xerographica]

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

The only difference that I can see is that you think people should be able to individually and personally allocate their taxes, while an-caps don't think there should be taxes at all. What's more, I never claimed you were an an-cap. So take your strawman and shove it.

You never claimed that I'm an an-cap? So why critique a system where taxes are voluntary?

No, I think that most people are - in economics - woefully short-sighted. They'll fail to see the greater benefits of an upgrade to the Port of New York - which won't directly affect them much - compared with the benefits of, say, upgrading their local road network, which will put dollars in their pockets directly.

Please explain how the public sector ended up with a monopoly on foresight.

Do you think it's at all possible that public projects are not all equally valuable/beneficial?

And this has what to do with your "point" again?

My point is that people should be able to shop for themselves in the public sector. They'll spend their taxes on the public goods that they value most and this will result in far greater value/benefit than our current system. Do you not agree that values are subjective?

Public goods cannot be produced by the private sector because they are public goods - there is no way for a private-sector provider to get their money back.

Not once have I argued that public goods should be produced by the private sector. I am not a libertarian nor an anarcho-capitalist so please stop arguing that public goods cannot be produced by the private sector.

Public-sector provision of public goods is limited by the resources the government has. Unless you're trying to argue that people are generally willing to pay a higher rate of tax - in which case you're even more ignorant than I thought - then the only way to give more funding to one project is to give less to another.

Are really seriously arguing that the only way to get greater abundance from a government organization is to give them more money? Abundance depends on better uses of society's limited resources. It doesn't matter how much money you give to the Dept of Education, if they are simply flushing the money down the toilet then you'll never get an abundance of quality education.

There are an infinite number of different ways that the Dept of Education can use the resources that they currently have. And some ways are more valuable than other ways. In order to incentivize them to determine the best, most economical, most resourceful, most innovative, most effective ways to use the resources that they do have, taxpayers have to be directly responsible for determining how much value they are deriving from how the Dept of Education is using its limited resources. The more value that the Dept of Ed. produces with its limited resources, the more positive feedback (money) they'll receive from taxpayers. The desire for more revenue will incentivize the Dept of Ed. to come up with better ways of using its resources. Without this direct feedback mechanism, there won't be a fail safe device to prevent massive amounts of society's limited resources from being wasted.

Markets produce abundance because consumers incentivize producers to do better things with society's limited resources. If we create a market in the public sector, then it's a given that the quality/quantity/variety of public goods will be infinitely greater than it is now.

And frankly, I'd prefer a deliberative system of allocating such resources, however flawed it may be, to subjecting appropriations to glitzy media campaigns and snap popularity contests. I don't know why, but placing the decision in the hands of the media - which is what would happen under your proposal whether you wanted it to or not - doesn't inspire me with confidence.

Why would the effort to persuade others only be placed in the hands of the media? How does that make any sense? You wouldn't be able to try and persuade your friends to give more of their taxes to the EPA? A pastor wouldn't be able to try and persuade his congregation to withhold their taxes from immoral uses?

[Xerographica]

So you agree that there is more than one kind of choice being made here?

Yes, there are primary choices and secondary choices. There are different levels of choice. There's a hierarchy of choice. Choices are granular. Not sure what is the best way to describe it.

Choice 1 is: which service do I want? Lunch, a movie, a haircut… I'm choosing between different services. If I decide I want to see a movie, Subway can't help me and neither can my barber, only a cinema can.

Having chosen a service (I'm hungry, so lunch it is), I now make Choice 2: which provider do I want to patronise for the service I've already chosen? Subway, Nandos, a local market, my own garden… I'm choosing between vendors of a particular service.

Choice 3 would then be: which menu item(s) do I want? Now I'm choosing a specific product, from my vendor of choice, in my service of choice.

In your analogy, "tax choice" would be broadly equivalent to Choice 1 - a choice between services. But as government is a monopoly, there is no Choice 2.
Choice 3 would presumably be: having a say in how a department prioritises its funds, but you specifically excluded that option.

So once again, the comparison is false because you're not comparing like with like.
"Tax choice" is Choice 1 - between services.
Subway is Choice 2 - within a service.

You're absolutely correct that I compared primary choices with secondary choices. But for the intents and purposes of pragmatarianism, there's no real economic difference.

If I choose eating over sleeping, then it's because eating will provide me with more value than sleeping. If I choose Subway over Nandos, then it's because Subway will provide me with more value than Nandos. If I choose the EPA over the DoD, then it's because protecting the environment will provide me with more value than enriching Halliburton.

Therefore, even if we don't have secondary choices in the public sector, allowing taxpayers to choose where their taxes go will create far more value than the current system creates.

Here's how one liberal put it...

I’d love to be able to allocate my taxes. Seriously, I would. It’d be difficult to organize this on a high granularity level, though; I imagine everything would get of whack, as I probably have no information on how other people allocated theirs. So, to start with, I would suggest just a couple of categories, like, say, ‘the military’ and ‘everything else’. - Henri Vieuxtemps

Obviously I don't agree that everything would get out of whack if there were as many secondary options in the public sector as there are in the private sector, but even if our only options were "military" and "not military"...then this would be an improvement over the current system.

But it's important to understand why there aren't secondary options in the public sector. Imagine being a kid in a candy store. You'd be extremely happy...right? It would be heaven on earth for you. Why? Because there are so many options that very closely matched your preferences. Obviously you couldn't afford to buy all the candies...and they wouldn't all match your preferences equally...so your goal would be to spend your limited money on the candy combination that maximized your happiness. Because you could spend your money on the candies which most closely matched your preferences, candy producers would have an incentive to develop new candies that were even closer matches. Step back and imagine billions of kids over time incentivizing producers to develop better candies. As a logical consequence of this process, the variety/quality/quantity of candies greatly improves over time.

If we want the variety/quality/quantity of public goods to greatly improve over time, then we need to introduce the same process to the public sector. We need to allow taxpayers to spend their limited taxes on the public goods combinations that maximize their benefit.

Now, obviously it might not seem fair that some taxpayers would have more influence than other taxpayers. But is it fair that Elizabeth Warren has more influence over how taxes are currently spent than I do? Well...yeah...she received more votes than I did. Which is exactly why, in a pragmatarian system, it would be fair for Michael Moore to have more influence than I would. He's received more dollar votes than I have...

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

More people value how he is using society's limited resources. Therefore, he should have more influence over how society's limited resources are used than I should. Attempting to equalize influence would only destroy value.

So everybody should be able to give their input on what the government does, but their input should be weighted according to the amount of benefit that they provide for others.

[Xerographica]

First, you seem to make the mistake - again - of missing the middle ground. There are more that the two options: "congress knows nothings about preferences" and "congress is omniscient." Buchanan knows this.

Knowing something about preferences isn't good enough. I know you're a human male...therefore, I'll spend your money for you...on the same things that I spend my money on? Really? Your middle ground is resource allocation by hasty generalization. Seriously go shopping with somebody. When you do so, take note of the disparities between your preferences. Please report back the contents of your respective shopping carts.

Guessing the general shape is not impossible. To use your example, I'm pretty sure that most of the people who come to Subway want a sandwich.

Great, so allow taxpayers to make primary choices...and then have government organizations make the secondary and tertiary choices. Look over my latest exchanges with Yaltabaoth.

Private sector...

Primary choices - eating, sleeping, reading, working, playing
Secondary choices - if eating then...Taco Bell, Subway, McDonalds
Tertiary choices - if Subway then...Black Forest Ham, B.L.T., Cold Cut Combo

Public sector...

Primary choices - defense, environment, education, healthcare, transportation (taxpayer)
Secondary choices - if environment then...EPA (government)
Tertiary choices - if EPA then...habitat conservation, pollution reduction, (government)

How do you define the word "mistake?"

How many different ways can you allocate the resources that you now have? Each possible allocation is going to provide you and others with a different amount of value. Because values are subjective, an allocation that might create value for you...might destroy value for others. So we're dealing with an x y graph...your value is on the x axis and other people's values are on the y axis. Can you figure out where mistakes would be on this graph?

You don't get to assume you're right and insist I prove you wrong or agree with you. If I believed everything I couldn't disprove, I'd be Christian, Muslim, Pagan, Buddhist, and basically every other religion with vague enough teachings. That's why we put the burden of proof on the positive claim.

If you weren't making claims then I would agree that I should bear the sole burden of substantiating claims. But you're constantly claiming stuff. Whenever you claim something you should be prepared to substantiate it. If you claim there's some middle ground...then please substantiate it. If you claim that close enough counts for horseshoes, hand grenades...and how resources are used...then please substantiate it.

I've claimed that, when it comes to facilitating input, the market process is far superior to the political process. Therefore, it's my responsibility to substantiate my claim...

Democracy, the Market, and the Logic of Social Choice

See section 2 of This paper by Amartya Sen. It discusses a brief overview of when the market is shown to work for private goods and what assumptions go into that. It includes citations of the important works if you want to google scholar them. One of the major assumptions is lack of "externalities." Public goods are (partially) defined by the fact that they contain positive externalities. Ergo, the canonical proof that shows markets maximize value (Or, to use your words "the opportunity cost concept") does not apply to public goods.

Except, if you had bothered to even read only the first opportunity cost passages that I shared, then you would know that your conclusion is categorically untrue...

In determining the marginal costs of producing a publicly provided good or service, it is important to emphasize that these are not simply financial or accounting costs, but economic or opportunity costs – that is, the economic value of the benefits that could have been obtained had the resources used to produce the good or service been used for their most highly valued purpose. - David Duff, Benefit Taxes and User Fees in Theory and Practice

The economic approach stresses the fact that any expenditure always has an opportunity cost, i.e. a benefit that is sacrificed because money is used in a particular way. For example, since biodiversity is threatened by many factors, but chiefly by changes in land use, measures of value denominated in monetary terms can be used to demonstrate the importance of biodiversity conservation relative to alternative uses of land. In this way, a better balance between 'developmental' needs and conservation can be illustrated. To date, that balance has tended to favour the conversion of land to industrial, residential and infrastructure use because biodiversity is not seen as having a significant market value. Economic approaches to valuation can help to identify that potential market value, whilst a further stage in the process of conservation is to 'create markets' where currently none exist. Market creation is the subject of a separate OECD initiative (OECD, forthcoming). - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

The notion of opportunity cost refers to the fact that the allocation of resources to biodiversity conservation necessarily means those resources cannot be allocated to something else. From an economic perspective, the money value of the resources allocated to conservation approximates the benefit that is sacrificed for conservation. Hence, for the instrumental value rule to be obeyed, it must be the case that the benefits (positive changes in human well-being) from conservation must exceed the costs of conservation (the well-being foregone). In essence, this is the resource allocation rule that would be used in economics. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

While the philosophical debate is extensive, complex and largely confined to academic publications, it does have direct relationships to the practical problem of how to make decisions in a world where resources are limited. The relationships are sometimes weak, however, as with discussions that ignore the finitude of resources and hence the central place that has to be occupied by the concept of opportunity cost. Any practical decision-making criterion has to account for the benefits that are sacrificed by biodiversity conservation. This involves either a formal procedure, such as cost-benefit analysis, or some political process. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

The economic approach is clearly not restricted to material goods and wants, nor even to the market sector. Prices, be they the money prices of the market sector or the "shadow" imputed prices of the nonmarket sector, measure the opportunity cost of using scarce resources, and the economic approach predicts the same kind of response to shadow prices as to market prices. Consider, for example, a person whose only scarce resource is his limited amount of time. This time is used to produce various commodities that enter his preference function, the aim being to maximize utility. Even without a market sector, either directly or indirectly, each commodity has a relevant marginal "shadow" price, namely, the time required to produce a unit change in that commodity; in equilibrium, the ratio of these prices must equal the ratio of the marginal utilities. Most importantly, an increase in the relative price of any commodity - i.e., an increase in the time required to produce a unit of that commodity - would tend to reduce the consumption of that commodity. - Gary S. Becker, The Economic Approach to Human Behavior

War costs a nation more than its actual expense; it costs, besides all that would have been gained, but for its occurrence. - J.B. Say, A Treatise on Political Economy

Once the option has been made for a public-sector project, still another choice must be confronted, and this also involves a choice-influencing cost, an obstacle to decision. Once currency has been issued, and the decision has been made to expand public-sector spending, the choice among separate public employments of the funds must be faced. The choice-influencing cost of the new post office building is the subjective value that the decision-maker places on the new school building that might be constructed instead. - James M. Buchanan, Cost and Choice: An Inquiry in Economic Theory

Even at the cost of lining up with Friedman, I’d be pleased if the idea that war is a mostly futile waste of lives and money became conventional wisdom. Switching to utopian mode, wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)? - John Quiggin, War and waste

Even where the explicit goals of the organization are to help non-donors, this rule—that the consumers guiding production decisions are the donors—still applies. Suppose, for example, the organization is a charity giving alms to the poor. In a sense, the purpose is to benefit the poor, but the actual consumers here, the guides to production decisions, are the donors, not the recipients of charity. The charity serves the purposes of the donors, and these purposes are in turn to help the poor. But it is the donors who are consuming, the donors who are demonstrating their preference for sacrificing a lesser benefit (the use of their money elsewhere) for a greater (giving money to the charity to help the poor). It is the donors whose production decisions guide the actions of the charity. - Murray Rothbard, The Myth of Neutral Taxation

Nevertheless, the classic solution to the problem of underprovision of public goods has been government funding - through compulsory taxation - and government production of the good or service in question. Although this may substantially alleviate the problem of numerous free-riders that refuse to pay for the benefits they receive, it should be noted that the policy process does not provide any very plausible method for determining what the optimal or best level of provision of a public good actually is. When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money? There is a whole economic literature dealing with the willingness-to-pay methods and contingent valuation techniques to try and divine such preference in the absence of a market price doing so, but even the most optimistic proponents of such devices tend to concede that public goods will still most likely be underprovided or overprovided under government stewardship. - Patricia Kennett, Governance, globalization and public policy

In determining the application of the revenue sum derived, a second choice must be made between the satisfaction of alternative wants by public economy. If more is spent for armaments, less can be spent for education. - Richard A. Musgrave

But economic costs, as envisaged in the marginal-cost-pricing approach, are not simply accounting costs. The fundamental economic concept of cost is opportunity cost, or the value of the benefits that could have been obtained had the inputs been used for some other purpose. From this perspective, the cost of, say, a park does not consist simply of the tangible construction and operation costs recorded in financial accounts. Instead, the relevant cost is the (highest) value that the land would realize if it were used for some other purpose, such as logging or residential development. - Richard M. Bird and Thomas Tsiopoulos, User Charges for Public Services:
Potentials and Problems

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

You've already sent me off on two wild source goose chase source trawls that have left me little better informed than when I started. You'll forgive me If I am suspicious of the efficacy of the third. If you think one of these demonstrates your point, please point me to it.

I just read 20 pages of a paper you suggested and you can't be bothered to read a dozen passages?

Do you know why paragraphs by themselves are all but useless as actual information?

Because you don't read them? Given that the very first paragraph I shared directly counters your argument, it should be abundantly clear that I categorically disagree with your assessment of their use value.

1) Trivially false. Setting aside the impossibility of perfect model, you only include 2 goods, when nontrivial game theory results require 3+. The real public sector has more than 2 goods as well.

Do you really need me to add a third good for you? Ok, here you go...

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. You also notice that there's a group removing graffiti from a wall.

You fail note that the real game you're setting up is how these things are funded, which makes it misleading at best.

What are you talking about? Your game theory falls apart when time, rather than money, is donated?

Also, none of those goods have direct benefit to the volunteers, again excluding most nontrivial game theory.

A river free of garbage and trash doesn't have numerous direct benefits? If not, then throw in a volunteer opportunity that does have direct benefits in order to demonstrate your game theory in action.

1) Of course not. Again, you confuse "some" and "all." Some of the lack of variety of public goods comes (probably) from the nature of public goods. Some of the variety of public goods might come from market forces. Those two statements are not contradictory.

Therefore, you agree that allowing taxpayers to shop in the public sector would greatly increase the quality/quantity/variety of public goods?

No, because you are attempting to derive the laws of economics from 1 data point and extrapolating. Consider the following two arguments:

Gravity makes things fall. Earth is a planet with gravity. Things on earth fall at 9.81 m/s2. We determine our law of physics is that planets with gravity have things fall towards them at 9.81 m/s^2. Mars is a planet with gravity. Therefore things on Mars fall at 9.81 m/s2.

Markets change the variety of goods. China has private goods. China's transition to a private market increased the variety of private goods. We determine our law of economics is that transitioning to a market increases the variety of goods. The USA has public goods. Therefore transitioning to a public market will increase the variety of public goods.

What is wrong with the first argument that isn't wrong with the second?

Beats me, what the F do I know about gravity? My ignorance when it comes to gravity is VAST. You know why? Because I spend all my free time studying economics. This is why I know that creating a market in the public sector will greatly increase the variety/quality/quantity of public goods. Consumers would incentivize the producers of public goods to do better and more innovative things with the resources they have. In other words, consumers drive abundance.

You said "People wouldn't have to shop for themselves in the public sector if they didn't want to." Giving your money to congress is equivalent to choosing the cooperative option (indeed it is choosing the best knowable cooperative option for an honest congress). Therefore this statement is equivalent to "The prisoners wouldn't defect if they didn't want to, they could just both keep silent." Where "keeping silent" is cooperating with each other.

The idea that any of these candidates represent my interests is absurd. - Daniel Tosh

I don't know why Tosh gets it but you don't. What was your major again? Physics? Have you ever watched C-Span for more than 10 minutes?

The contradiction comes when you say that you value something based on what your willing to sacrifice for it. You seem to agree that you value it more MORE, meaning that the value is disconnected from what you are willing to sacrifice. You seem to assume they're directly connected when you ask questions like "If you value the highway so much, why didn't you spend money on it?"

This definition has other problems as it makes your argument circular:

This, as I understand it, is your argument.
1) People's value of something is based on how much they sacrificed.
2) We can let people sacrifice to see how much they value things.
3) We know that they sacrificed for the things they value most because (1).

You're saying that there's a contradiction and a disconnect...but somehow you fail to understand that there's frequently a contradiction and a disconnect between people's words and their actions. You can't fill up your shopping cart and pay with words...you have to pay with actions...your sacrifice. Without knowledge of your sacrifice, we can't determine which uses of society's limited resources are the most valuable. This is true whether you fill your shopping cart up with private goods or public goods.

But do all people benefit when the market is allocated "properly"? That is the question. The answer is not obviously yes.

It's not all or none. It's a matter of degrees. Far more people benefit when you put your mind to its more productive use. The market works because others can give you feedback on how productively you're using your mind. Take away this direct feedback mechanism, and you're left with the epitome of absurdity.

We can only predict the breadth and depth of market failure based on models and empirical studies. Knowing it is hard. This doesn't mean we should go ahead and do it however. We don't have a study that says cigarettes cause lung cancer in humans, so we don't "know" that. We don't have this study because it was determined that it was too likely to be true and would therefore the study would mean giving many people lung cancer.

Totally false. We could easily know the depth of market failure and the height of government success simply by allowing taxpayers to choose where their taxes go.

It is, of course, not desirable that anything should be done by funds derived from compulsory taxation, which is already sufficiently well done by individual liberality. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

If education is sufficiently well done by individual liberty, then taxpayers won't spend any of their taxes on public education. The more money that taxpayers do spend on public education, the greater the depth of market failure and the greater the height of government success in terms of education.

[Xerographica]

'Infinitely'!?!

Pretty much

In order for a free market to exist, you need multiple competitors for the same product.

In a public sector market, there would be numerous government organizations competing for your tax dollars.

Wealth =/= intelligence.

Wealth is a reflection of the kind of intelligence that consumers value.

You first.

Democracy, the Market, and the Logic of Social Choice - Samuel DeCanio

I want you to tell me, clearly and honestly, without any semi-trollish bullshit, how an alternative agencies would get formed, and, furthermore, I want to know how this method would not easily be constricted.

What do you mean by alternative agencies? As in EPA1, EPA2, EPA3...EPAn?

Also, stop quoting others. It's hella gay, dude.

I'd rather be hella gay than hella ignorant.

[Xerographica]

Your analogies continue to worsen.

Eating vs sleeping now?
Since when was sleep a marketplace? What is the secondary choice for sleep - "who do I want to buy sleep from"?

LOL...how about..."who do I want to sleep with?" Do you need me to tell you what the tertiary choices would be as well? Typical liberal...failing to think things through.

Eating and sleeping are both necessary for my survival, it's not an either/or choice.

Seriously? You can't think of a single instance when you sacrificed much needed sleep in order to take care of a more urgent priority? You've never stayed up all night cramming for an exam? You've never skipped dinner and gone to bed because you were so f'ing tired?

This is not analogous to choosing Subway over Nandos.

It doesn't matter what you allocate your limited resources to...it's still economics if you're allocating your resources.

The decision between eating or sleeping is a choice between needs.
The decision between Subway or Nandos is a choice between preferences.

It's always a matter of choosing whichever option will provide you with the most value/benefit/utility.

It's a simple distinction, but you keep trying to make reality fit your model instead of modelling from reality.

Your behavior right this second fits my model. Right now you're allocating your time (a limited resource) to trying to disprove my model. Why? Because obviously doing so provides you with utility. But allocating your time to this specific use obviously means sacrificing the alternative uses of your time. This is the opportunity cost concept. This is how resources are put to their most valuable uses.

This is going in circles, and I can't be bothered anymore.

You can't be bothered anymore? Therefore, I can't prevent you from leaving? Therefore I can't force you to continue trading with me? Therefore, your exit from this thread should be costless? Why do you think you should be able to choose how you allocate your time (a limited resource) but you shouldn't be able to choose how you allocate your tax dollars (a limited resource)? Why do you think you should be able to boycott me (a waste of your limited time) but you shouldn't be able to boycott the war on drugs (a waste of your limited money)?

In summary:
Congress-critters are not omniscient, neither are they expected to be.

Blatantly, totally, and utterly false...

With the help of equations and diagrams, Samuelson showed how the planner would derive for each individual his demand function and the collective consumption goods that would contribute to his utility maximization. In this system, the planner is expected to have an omniscient presence and be able to ascertain individual preferences even when they are not voluntarily revealed. Samuelson attempted to show the combination of public and private goods and their distribution that would maximize social welfare. His concern was with the total community's welfare and with all goods; it did not have much to do with the central reality of the budget in the ordinary world. - A. Premchand, Government Budgeting and Expenditure Controls: Theory and Practice

"Market failure" has always been defined as being present when conditions for Pareto-optimality are not satisfied in ways in which an omniscient, selfless, social guardian government could costlessly correct. One of the lessons of experience with development is that governments are not omniscient, selfless, social guardians and corrections are not costless. - Anne O. Krueger, Government Failures in Development

The Founding Fathers of public choice, in some cases by design and in other cases by accident, effectively leveled the playing field in the debate over the relative merits of governments and private markets. This playing field, by the mid-1950s, had become undeniably prejudiced in favor of an allegedly omniscient and impartial government. - Charles K. Rowley, Public Choice from the Perspective of the History of Thought

Samuelson, laying particular emphasis on the problem of preference revelation, takes as a premise the existence of an omniscient planner. - Christian Bastin, Theories of Voluntary Exchange in the Theory of Public Goods

The new welfare economists view private markets as failing extensively because of perceived weaknesses in property rights, pervasive externalities and public goods and widespread asymmetries in information. In contrast, they view democratic government as benevolent, omniscient and impartial in its role as the White Knight riding to rescue individuals from unavoidable private market failures (Baumol and Oates, 1988). The public choice revolution redressed this bias by analysing government as it is and not as a figment of some excessively cloistered imagination. - Donald Wittman, Efficiency of Democracy?

To accurately choose which vector of policies is wealth-maximizing, the government would need to know how every person would act under these new policies—something which would require omniscience on the part of government agents. - Edward Stringham, Kaldor-Hicks Efficiency and the Problem of Central Planning

In what follows we shall assume an omniscient planner who seeks to maximize social welfare subject to the scarcity constraints of the economy. This is standard practice in normative economics. - Elisha A. Pazner, Merit Wants and the Theory of Taxation

A social efficiency objective implies a single mind to which all resource supply conditions and all consumer attitudes are simultaneously given. Otherwise, there can be no coherent notion of a relevant optimum. The entire notion of a 'social choice' presumes, in principle, the relevance of imagined omniscience. - Israel M. Kirzner, How Markets Work

The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process

The possible advantages are, however, greatly increased when the unrealistic assumption of omniscient planning is relaxed and the preference-revelation problems in a world of diverse preferences are explicitly recognized. - John G. Head, Public Goods and Multi-Level Government

The traditional approach describes the allocation and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution which improves on the market outcome and achieves an efficient allocation of resources. Traditional theory employs the device of a 'social welfare function' which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, 'the government' is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge. - Margaret Wilkinson, Paying for Public Spending - Is There a Role for Earmarked Taxes

The well-known Samuelson (1954, 1955) public goods articles offer a good example. Samuelson titles his first article “The Pure Theory of Public Expenditure,” indicating that his analysis of a possible market failure in the production of public goods is, in fact, not a theory, but the theory, of public expenditure even though the article contains no analysis of how government would succeed in producing public goods where the market would fail. The only way Samuelson's public good theory can be a theory of government expenditure is if the government is an omniscient benevolent dictator. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator

Though an old theme, Samuelson’s rigorous analysis of public goods in a general equilibrium setting (Samuelson 1954) captured the attention of a wide range of theorists, and soon became the center of fiscal theory. Wicksell’s concern with how to secure preference revelation was noted but set aside as unmanageable by economic analysis. Implementation of budget choice was again left to an omniscient referee. - Richard A. Musgrave, Public finance and three branch model

The problem would disappear if government were omniscient, as implicitly assumed by Hotelling, but government is not omniscient and throughout his career Coase has insisted very sensibly that in evaluating the case for public intervention one must compare real markets with real government, rather than real markets with ideal government assumed to work not only flawlessly but costlessly. - Richard A. Posner, Nobel Laureate: Ronald Coase and Methodology

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

The collective knowledge of Treasury, backed by the cumulative data from all departments and agencies in regards to their own specific financial needs, is undeniably superior to the personal whims of you, me or any other significantly-less-well-informed member of the general public.

Again, blatantly, totally, and utterly false...

Democracy, the Market, and the Logic of Social Choice

Possessing wealth is not equivalent to providing value, see: Paris Hilton.

We've already seen Paris Hilton earlier in this thread...

This is pretty great. LOL. I love it. Paris Hilton versus Paul Krugman? That's a really tough one. Is Paris Hilton an idiot? Is Paul Krugman all that? How would Paris Hilton allocate her taxes? How would Paul Krugman allocate his taxes? How much taxes do they each pay? I think you really have to come up with some credible theories regarding their allocation decisions.

What would you consider to be a huge allocation mistake on the part of Paris Hilton? What public goods are so bad that we'd all be worse off if she spent her tax dollars on them? Maybe the war on drugs? Doesn't she do drugs? Does Paul Krugman do drugs? Maybe they both wouldn't spend their tax dollars on the war on drugs?

Who has more loyal followers...Paris Hilton or Paul Krugman? If Paul Krugman tweets that the EPA is underfunded...how much money would would the EPA receive as a direct result? If Paris Hilton tweets that a wall need to be built between us and Mexico...how much money would the INS receive as a direct result?

Paul Krugman has a 1,072,031 followers on twitter while Paris Hilton has 11,939,304 followers. But I'm sure that Krugman's followers pay far more taxes than Hilton's followers. Right? So I think he would have far far far more influence than she would.

Personally, I've shared this article by Krugman...In Praise of Cheap Labor...far more times than I've ever shared anything written by Hilton. Well...I haven't shared anything written by Hilton...so maybe it doesn't say much. But that article by Krugman is pretty excellent. Especially the part where he argues that liberals fail to think things through.

And thus your entire case is palpable nonsense.

My entire case is built on the idea of you having the freedom to say "no thanks". Clearly you don't truly believe that it is palpable nonsense...

*Drops mic, walks away*

You think there's value in being able to divest from me, but not from unnecessary wars? Even some liberals understand the value of ethical consumerism...
Velazquez: Funding war should be taxpayers’ choice.

[Xerographica]

You keep talking about Samuelson's Pure Theory of Public Expenditure. I'm not an economist, so could someone explain in more simple terms what it actually means?

EPA: How much do you value environmental protection?
You: It's worth around $500/yr to me.
EPA: Please pay us $500/yr
You: Ohhhh, in that case, it's only worth $100/yr

Samuelson was critiquing voluntary taxation. If taxes were voluntary, then clearly people would have an incentive to understate exactly how much benefit they derive from public goods. Doing so would reduce their tax obligation. Therefore, compulsory taxation is necessary. This is now commonly referred to as the free-rider problem.

I don't think it's unreasonable to conclude that compulsory taxation is necessary...my concern is that Samuelson assumes that congresspeople are omniscient in order to justify having them allocate everybody's taxes. Clearly congresspeople are not omniscient, which is why taxpayers should be able to choose where their taxes go.

Check this thread out for supporting evidence... Government Success vs Market Success...and the pragmatarianism FAQ.

[Xerographica]

He understood that the factors often ignored by individual preferences, such as externalities, longer-term strategies, valuation of indirect benefits, etc. - can be better captured by something more over-arching.

Better captured by omniscience? That's true...unless congresspeople aren't really omniscient. If you assume the world's biggest net, then sure, nothing's going to capture more. But if you drop that assumption then it should be clear that it should be absurdly easy for consumers to share what they know.

What do people know? They know external things (surroundings, circumstances, situations, environments) and internal things (values). They know how many potholes they run over (external) and how much cancer research they'd sacrifice to fix them (internal). They know how many times they've been mugged (external) and how much education they'd sacrifice for more police (internal). They know how many nights they've lost sleep because of the threat of terror (external) and how much space exploration they'd sacrifice for more peace of mind (internal).

The only way to capture all that decentralized/dispersed information is to create a market in the public sector. That would create the biggest net realistically possible.

Buchanan insisted on the same conclusion in an article published a few months after the conference in October 1959 in the Journal of Law and Economics. “Positive Economics, Welfare Economics, and Political Economy” opposed the positive political economy approach of welfare economics -- in which the role of the economist consists in discovering “what people want” (1959, p. 137) and “what is the structure of individual values” (1959, p. 130) -- to the normative new welfare economics -- in which the economist, seeing himself as an external and omniscient observer, is capable of “reading” the individual preferences of the individuals and accordingly of determining the best possible outcome for the collectivity - Alain Marciano, Why markets do not fail

At this point, a question naturally arises: how can we justify the fact that the central government is less capable (because of less information) of satisfying citizens' preferences (Oates 2005)? - Brian Dollery, Lorenzo Robotti, The Theory and Practice of Local Government Reform

Jay Lund's chapter explores the informational problems implied in finding the best way to allocate water resources. In this respect, the main advantage of water trading is that its effectiveness does not require having in advance detailed information on the value of water on any place and for any alternative use. Engaging in trade is a voluntary decision, thus the market is itself a preference revelation mechanism. No particular prior information on people's preferences is then required in advance for trading to find mutually beneficial deals. By definition, when a transaction takes place, the maximum willingess to pay of those buying water is higher than the minimum compensation required by the sellers of water property rights and the deal improves the welfare of those engaged in it. Allowing for water trading thus reduces the information burden of water authorities as they do not need detailed information beyond that required to reach a decision on the overall constraints on the water use in the entire economy. - Carlos Mario Gomez, Incentives and prices in water trading

Our discontent with the original Samuelson rule stems from its failure to account for tax payers’ response to public expenditure and taxation. The rule was derived for an omnipotent, omniscient and benevolent government, a government which, by definition, need not consider people’s responses to its actions. Drop that assumption, restrict government to the choice of tax rates and public expenditures, and the response to its actions must be taken into account. - Dan Usher, Should the Samuelson Rule Be Modified to Account for the Marginal Cost of Public Funds?

The instruments of intervention became the tools with which to apply government knowledge. Resources were directed and allocated by the state, by political and bureaucratic decision making, rather than by the elemental forces of supply and demand - forces shaped by the knowledge of those in the marketplace. - Daniel Yergin, Joseph Stanislaw, The Commanding Heights

One of the strongest arguments in favor of letting people interact freely in a market under property rights institutions is that it is the best known way to utilize the decentralized knowledge of the society— including the knowledge that each individual has about his own values. - David Friedman, The Machinery of Freedom

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

Individuals’ actions necessarily rest on imperfect knowledge, and people often appear to act without sufficient information. However, intractable problems of knowledge and incentives impede government officials’ attempts to improve on market-generated knowledge. Knowledge, consisting of information plus judgment, is highly subjective. Therefore, the optimal amount of information varies from person to person, depending on the expected costs and benefits. It should not be surprising that government attempts to improve consumer knowledge frequently are disappointing. Hayek labels as the fatal conceit the idea that human beings can determine what is best for society and use the political process to shape the world according to their wishes. - E.C. Pasour, Consumer Information and the Calculation Debate

Hayek stressed that the knowledge needed to achieve a rational economic order consists of dispersed bits of knowledge held by individuals. This knowledge is highly specialized: only individuals involved in deciding resource use know the relative importance of the various ends or purposes for which resources might be used. Thus, the crucial problem confronting society is how to use the specialized knowledge of different people in the production of goods and services to satisfy consumers. - E.C. Pasour, Consumer Information and the Calculation Debate

Economic planning in a socialist system must necessarily founder on the rocks of ignorance. First, the data necessary to find out the pattern of production that best fits consumer preferences are never given, as often assumed by planning proponents. Second, and even more important, the central planner cannot obtain the necessary data. Much of the data on available resources, production alternatives, and consumer demand constantly changes as economic conditions change. Thus, decentralization is the only means of coordinating economic activity through which the specialized knowledge of individuals can be taken into account and used promptly. - E.C. Pasour, Consumer Information and the Calculation Debate

Governments, like private firms, do not necessarily have ‘the necessary information’ about people’s demand functions to provide public goods at efficient levels. Without non-exclusion there does not seem to be a compelling role for government provision, that is, there is no 'public' in 'public goods'. The general consensus seems to be that it is better to restrict public goods, and hence the a priori case for government intervention, to goods that are both non-rival and non-excludable. - Frances Woolley, Why public goods are a pedagogical bad

It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life, or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The essence of the situation is action according to opinion, of greater or less foundation and value, neither entire ignorance nor complete and perfect information, but partial knowledge. - Frank H Knight, Risk, Uncertainty, and Profit

To the naïve mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions, and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account. This is the main reason for rejecting the requirements of constructivist rationalism. - Friedrich A. Hayek, The Fatal Conceit

It may be admitted that, so far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available...[Yet] scientific knowledge is not the sum of all knowledge...[A] little reflection will show that there is . . . the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others in that he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation. - Friedrich A. Hayek

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich A. Hayek, The Use of Knowledge in Society

It is the extensive cooperation among highly specialized workers that enables advanced economies to utilize a vast amount of knowledge. This is why Hayek's emphasis on the role of prices and markets in combining efficiently the specialized knowledge of different workers is so important in appreciating the performance of rich and complex economies. - Gary S. Becker

A free society is one in which individuals are free to discover for themselves the available range of alternatives. In his masterly critiques of the theory of central planning, Hayek directed attention to the circumstance that the information available in an economy is always scattered among countless individuals, never concentrated in the mind of a single central planner. Hayek pointed to the need for a social institutional structure capable of organizing the scattered scraps of available information so they can be used for the efficient allocation of society’s resources. The competitive market, Hayek showed us, is a discovery process, one in which society discovers what options are feasible and how important they are. - Israel Kirzner, Perception, Opportunity, and Profit

An individual is fully sensible of the value of the article he is consuming; it has probably cost him a world of labour, perseverance, and economy; he can easily balance the satisfaction he derives from its consumption against the loss it will involve. But a government is not so immediately interested in regularity and economy, nor does it so soon feel the ill consequences of the opposite qualities. Besides, private persons have a further motive than even self-interest; their feelings are concerned; their economy may be a benefit to the objects of their affection; whereas, the economy of a ruler accrues to the benefit of those he knows very little of; and perhaps he is but husbanding for an extravagant and rival successor. - J.B. Say, A Treatise on Political Economy

It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

The fact that such a tax institution always exists conceptually does not, of course, imply that it can be determined independently of the revealed choices of individuals themselves. If an omniscient observer should be present, and if he were asked to "read" all individual preference maps, he could then describe the "optimal" structure of tax prices. Failing this, there is no means of ascertaining with any degree of accuracy the "efficient" tax structure or institution. - James M. Buchanan, Public Finance in Democratic Process

Individuals are not, of course, omniscient, even those who think themselves to be. The securing of information about the predicted effects of alternatives is a costly process, even in a world with reasonable certainty. Recognizing this, individual utility-maximizing behavior remains “rational” when choices are made on the basis of less-than-perfect information. There is some “optimal” investment in fact-finding and analysis for the deciding individual at each stage of his deliberation. - James M. Buchanan

Markets, for instance, are usually prima facie diverse because they are made up of people with different attitudes toward risk, different time horizons, different investing styles, and different information. On teams or in organizations, by contrast, cognitive diversity needs to be actively selected, and it's important to do so because in small groups it's easy for a few biased individuals to exert undue influence and skew the group's collective decision. - James Surowiecki

Pareto-optimal provision clearly also requires full knowledge of individual preference functions by the central planning agency. The preference-revelation problems involved in practice are a familiar theme in the modern public goods literature. - John G. Head, Public Goods and Multi-Level Government

If the knowledge problem identified by Mises and Hayek make rational central planning impossible for something as simple as a quart of milk, what chance do central planners have to make rational, effective plans for something as complex and difficult as educating the children of a diverse nation of more than 300 million? - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

As we've seen, socialism cannot serve citizens' interests because central planners have no way of knowing what those interests are. In the absence of the information conveyed through marketplace activity - particularly through prices - economic planners are left with highly defective sources of information: opinion polling, surveys, stated preferences (which normally differ dramatically from real or revealed preferences), and the like. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

This process of redistribution of wealth is not prompted by a concatenation of hazards. Those who participate in it are not playing a game of chance, but a game of skill. This process, like all real dynamic processes, reflects the transmission of knowledge from mind to mind. It is possible only because some people have knowledge that others have not yet acquired, because knowledge of change and its implications spread gradually and unevenly throughout society. - Ludwig M. Lachmann, The Market Economy and the Distribution of Wealth

If well-meaning policymakers possess all the relevant information about individuals' true preferences, their cognitive biases, and the choice contexts in which they manifest themselves, then policymakers could potentially implement paternalist policies that improve the welfare of individuals by their own standards. But lacking such information, we cannot conclude that actual paternalism will make their decisions better; under a wide range of circumstances, it will even make them worse. New paternalists have not taken the knowledge problems that are evident from the underlying behavioral and economic research seriously enough. - Mario J. Rizzo, Douglas Glen Whitman, The Knowledge Problem of New Paternalism

Deprived of this guidance, and without the incentive of personal interest, accounts and statistics, however complete, would be of very little use, and unless they were the mundane representatives of an omniscient providence, the directors of production would be quite unable to avoid occasional excess or deficiency of supply, which would cause terrible disorder and confusion, with effects infinitely more serious than mistakes made by private enterprise, which, as a whole, is never actuated by precisely similar motives; thus its errors correct each other, and being uninfluenced by prejudice, or amour proper, it shows a marvellous quickness of adoption; mistakes committed by the state would be not only far more serious, but far more difficult to remedy. - Paul Leroy Beaulieu, Collectivism

Each individual is unique, not fully duplicated anywhere else. Therefore, each individual possesses considerable knowledge that is not and cannot be fully known by anyone else - by government or by any group of people. Each individual has preferences - needs and wants - of which only he can be cognizant at any point in time; he also has a unique capacity to envision new wants when old ones have been partially or fully satisfied. The individual knows, within limits, what gives him gain and causes him pain; and he knows this before any of his actions are revealed to others. He can understand the subjective basis for his actions before he acts; others can only observe his actions after the fact and guess at his motivation by reflecting on their own, different preferences. - Richard B. McKenzie, Bound to Be Free

True, consumers do demand a given product, say, a certain model automobile. But how, outside the market process, can the government know what consumers want? Can the government simply ask consumers what they want? - Richard B. McKenzie, Bound to Be Free

The very division of knowledge increases the necessary ignorance of the individual of this knowledge. The division of knowledge increases the need for a decentralized decision-making system - the market. - Richard B. McKenzie, Bound to Be Free

Expositions of welfare economics typically assume that the analyst possesses knowledge that is in no one’s capacity to possess. A well-intentioned administrator of a corrective state would face a vexing problem because the knowledge he would need to act responsibly and effectively does not exist in any one place, but rather is divided and dispersed among market participants. Such an administrator would seek to achieve patterns of resource utilization that would reflect trades that people would have made had they been able to do so, but by assumption were prevented from making because transaction costs were too high in various ways. A corrective state that would be guided by the principles and formulations of welfare economics would be a state whose duties would exceed its cognitive capacities. - Richard E. Wagner

We can never possess tomorrow’s knowledge today. We can never know what innovations, creative ideas, and useful improvements will be generated in the minds of free men in the years to come. That is why we must leave men and their minds free. The man of system, the social engineer, who sees only the apparent problems from these global changes, wants to plan America’s place in the new, emerging global economy. But to do so, he must confine and straitjacket all of us to what his mind sees as the possible, profitable, and desirable from his own narrow perspective with the knowledge he possesses in the present. - Richard M. Ebeling, Free Markets, the Rule of Law, and Classical Liberalism

There is no need to prove that each individual is the only competent judge of this most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He alone has an experience which is all the more reliable since it is limited to a single object. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want. - Turgot

We know that the essence of markets is that individual cost and value information is private and dispersed, and that command and control economies inevitable must fail to deliver the goods because the appropriate information is not, and cannot be, given to any one mind. - Vernon L. Smith, Commonwealth North Forum

Nevertheless, even without perfect knowledge, the government must decide whether or not to provide the public good. It also must decide how much of the public good it should provide. Finally, the government must decide, all without guaranteed information, on a tax schema. Under such circumstances, it is not possible for the government to reach an optimal solution and a Pareto distribution of taxes for the public good. - Wilfried Eecke, Ethical Dimensions of the Economy

Development happens thanks to problem-solving systems. To vastly oversimplify for illustrative purposes, the market is a decentralized (private) problem solving system with rich feedback and accountability. Democracy, civil liberties, free speech, protection of rights of dissidents and activists is a decentralized (public) problem solving system with (imperfect) feedback and accountability. Individual liberty in general fosters systems that allow many different individuals to use their particular local knowledge and expertise to attempt many different independent trials at solutions. When you have a large number of independent trials, the probability of solutions goes way up. - William Easterly, The Answer Is 42!

[Xerographica]

The point isn't that congresspeople are omniscient. It's that individual people aren't.

Of course nobody is omniscient. That's why we need a system that allows people to share what they know about how other people are using society's limited resources. The market is the epitome of such a system. Everybody goes around giving everybody else feedback on how well they are using society's limited resources.

They know how they perceive the world, but for the types of services that the government provides, they don't have a thorough or well-formed understanding of how it will benefit them over time.

Of course they don't, it's called rational ignorance. It's the unintended consequence of preventing taxpayers from shopping in the public sector. Let me know if you need a dozen or more passages on the concept.

Aggregating that lack of understanding through market mechanisms will just lead to an even bigger lack of understanding.

Persuasion facilitates the flow of information. If I have to persuade you to give me your money, then it will behoove me to share with you whatever information leads me to believe that you will benefit from doing so.

[Xerographica]

So Samuelson just assumed that congresspeople are omniscient in the real world? That sounds really stupid, and I don't think anyone is that stupid. Why did he assume this?

This is a pretty "accessible" answer...

Economists, like artists, are often in love with their models. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator

Assuming omniscience on the part of congresspeople makes for a beautiful economic model. Without that assumption, Samuelson would have had to change the model to determine/integrate the actual demand for public goods...which would have made it ugly.

Plus, Samuelson honestly believed that there was nothing wrong with government planners assuming the preferences of their citizens...

the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive. - Paul A. Samuelson

Whether we're talking about private goods or public goods...there are extremely negative consequences that result from assuming away the problem of how to determine people's true preferences.

My solution is to allow taxpayers to shop in the public sector. This would reveal the true demand for public goods. But the viability/necessity of this solution depends on knowing the extent of the current preference revelation problem.

Here are some passages that prove that our current system is based on the absurd assumption of omniscience. Most of them weren't written for non-economists to read...but try to read them anyways. Just copy and paste any sentences that you'd like me (or others) to try and translate for you. Probably the most helpful thing to keep in mind when you read them is that "preference" and "demand" are the same thing. So people's preferences for public goods is the same thing as the demand for public goods. "Preference functions" (people's unique priorities) are the same thing as "demand functions".

With the help of equations and diagrams, Samuelson showed how the planner would derive for each individual his demand function and the collective consumption goods that would contribute to his utility maximization. In this system, the planner is expected to have an omniscient presence and be able to ascertain individual preferences even when they are not voluntarily revealed. Samuelson attempted to show the combination of public and private goods and their distribution that would maximize social welfare. His concern was with the total community's welfare and with all goods; it did not have much to do with the central reality of the budget in the ordinary world. - A. Premchand, Government Budgeting and Expenditure Controls: Theory and Practice

"Market failure" has always been defined as being present when conditions for Pareto-optimality are not satisfied in ways in which an omniscient, selfless, social guardian government could costlessly correct. One of the lessons of experience with development is that governments are not omniscient, selfless, social guardians and corrections are not costless. - Anne O. Krueger, Government Failures in Development

The Founding Fathers of public choice, in some cases by design and in other cases by accident, effectively leveled the playing field in the debate over the relative merits of governments and private markets. This playing field, by the mid-1950s, had become undeniably prejudiced in favor of an allegedly omniscient and impartial government. - Charles K. Rowley, Public Choice from the Perspective of the History of Thought

Samuelson, laying particular emphasis on the problem of preference revelation, takes as a premise the existence of an omniscient planner. - Christian Bastin, Theories of Voluntary Exchange in the Theory of Public Goods

The new welfare economists view private markets as failing extensively because of perceived weaknesses in property rights, pervasive externalities and public goods and widespread asymmetries in information. In contrast, they view democratic government as benevolent, omniscient and impartial in its role as the White Knight riding to rescue individuals from unavoidable private market failures (Baumol and Oates, 1988). The public choice revolution redressed this bias by analysing government as it is and not as a figment of some excessively cloistered imagination. - Donald Wittman, Efficiency of Democracy?

To accurately choose which vector of policies is wealth-maximizing, the government would need to know how every person would act under these new policies—something which would require omniscience on the part of government agents. - Edward Stringham, Kaldor-Hicks Efficiency and the Problem of Central Planning

In what follows we shall assume an omniscient planner who seeks to maximize social welfare subject to the scarcity constraints of the economy. This is standard practice in normative economics. - Elisha A. Pazner, Merit Wants and the Theory of Taxation

A social efficiency objective implies a single mind to which all resource supply conditions and all consumer attitudes are simultaneously given. Otherwise, there can be no coherent notion of a relevant optimum. The entire notion of a 'social choice' presumes, in principle, the relevance of imagined omniscience. - Israel M. Kirzner, How Markets Work

The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process

The possible advantages are, however, greatly increased when the unrealistic assumption of omniscient planning is relaxed and the preference-revelation problems in a world of diverse preferences are explicitly recognized. - John G. Head, Public Goods and Multi-Level Government

The traditional approach describes the allocation and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution which improves on the market outcome and achieves an efficient allocation of resources. Traditional theory employs the device of a 'social welfare function' which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, 'the government' is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge. - Margaret Wilkinson, Paying for Public Spending - Is There a Role for Earmarked Taxes

The well-known Samuelson (1954, 1955) public goods articles offer a good example. Samuelson titles his first article “The Pure Theory of Public Expenditure,” indicating that his analysis of a possible market failure in the production of public goods is, in fact, not a theory, but the theory, of public expenditure even though the article contains no analysis of how government would succeed in producing public goods where the market would fail. The only way Samuelson's public good theory can be a theory of government expenditure is if the government is an omniscient benevolent dictator. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator

Though an old theme, Samuelson’s rigorous analysis of public goods in a general equilibrium setting (Samuelson 1954) captured the attention of a wide range of theorists, and soon became the center of fiscal theory. Wicksell’s concern with how to secure preference revelation was noted but set aside as unmanageable by economic analysis. Implementation of budget choice was again left to an omniscient referee. - Richard A. Musgrave, Public finance and three branch model

The problem would disappear if government were omniscient, as implicitly assumed by Hotelling, but government is not omniscient and throughout his career Coase has insisted very sensibly that in evaluating the case for public intervention one must compare real markets with real government, rather than real markets with ideal government assumed to work not only flawlessly but costlessly. - Richard A. Posner, Nobel Laureate: Ronald Coase and Methodology

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

[Xerographica]

In a public sector market, there would be numerous government organizations competing for your tax dollars.

Which would necessarily decrease effective government efficiency by reducing the number of dollars actually going toward essential services.

This would be a problem...if you're starting from the assumption that you already know just how essential each and every service is to each and every person. If you drop that assumption, then the objective becomes to determine just how essential each and every service is to each and every person. In order to achieve this objective, we should simply allow taxpayers to shop in the public sector. Taxpayers will be incentivized to pull the information they need to maximize their value...and producers will be incentivized to push the information they need to maximize their revenue.

Will opening up half the economy to consumers result in people being subjected to twice as much information? I don't think advertisements on TV are going to be twice as long. I don't think there are going to be twice as many billboards. I don't think radio commercials are going to be twice as long. It will be more of a matter of combining a list of public priorities and a list of private priorities into one list of priorities. If for-profit companies and non-profits have to compete with government organizations for advertising, then prices will go up and the lower priorities will have to reallocate their advertising budgets to less expensive means of promoting their product/service.

[Xerographica]

Economics does use the example of the all-knowing "social planner" who, according to most common models, would come up with the same optimal allocation of goods as if we just allowed the "magic of the market" to allocate them. That doesn't extend to the goods that the government is usually tasked with providing, though. Xero doesn't understand that distinction. Thus this stupid thread.

If you're going to claim something, then please substantiate it. Or, feel free to admit that what you're sharing has simply been pulled from your ass.

[Xerographica]

The problem is that there are services that may not be directly essential to the population, resulting in underfunding for said services.

NASA and Government Scientific Institutions come to mind.

That's how life works sometimes. Sometimes the indirectly essential gets sacrificed for the sake of the directly essential. If you didn't want this to happen, then the responsibility would be on you to persuade others to make indirectly essential services a higher priority.

But the public sector is HALF the economy. Which means that the private sector is half the economy as well. It should seem self evident that there's a ridiculous amount of indirectly essential private services/goods that get substantial funding. One person's indirectly essential service is another person's directly essential service. One person's trash is another person's treasure.

[Xerographica]

But the public sector is HALF the economy.

You know, when you keep insisting 2/5 = 1/2, it makes us question if you understand enough mathematics to have even an elementary level understanding of economics.

Total tax percentage potentially paid by the above average US citizen, 2013 est. - 59.7% http://www.nowandfutures.com/taxes.html

[Xerographica]

Have you ever taken an economics course? Or picked up a book on the subject? What I'm describing are the fundamental theorems of welfare economics. This is absolutely fundamental stuff (ho ho ho).

I don't want it in your own words. Find a credible paper on the topic and share the relevant passage. If you were actually knowledgeable about the subject, then you shouldn't even have to search for a relevant paper. You should already have plenty on hand to choose from.

[Xerographica]

I don't want it in your own words. Find a credible paper on the topic and share the relevant passage. If you were actually knowledgeable about the subject, then you shouldn't even have to search for a relevant paper. You should already have plenty on hand to choose from.

I put it in my own words because I'm knowledgeable about it, but there you go. And here are some extensions of the simple theorems in situations where some of the assumptions do not hold if you're interested.

I learned about this in intermediate microeconomics. It's in every textbook. I don't need to have tonnes of papers on hand to substantiate because it's indisputably fundamental to the subject.

Why should I read your sources when you don't even bother to read them yourself?

Suppose our social planner tried to choose an efficient allocation of resources on his own, instead of relying on market forces. To do so, he would need to know the value of a particular good to every potential consumer in the market and the cost of every potential producer. And he would need this information not only for this market but for every one of the many thousands of markets in the economy. The task is practically impossible, which explains why centrally planned economies never work very well. - Gregory Mankiw, Principles of Macroeconomics

In case you missed it, our public sector is a centrally planned economy.

[Xerographica]

This statistic was supposedly so critically important to validating your initial claim that the public sector in the US accounts for 50% of economic activity that you restated it outside your link. Explain that decision, because it doesn't make any sense at all to me. It's like trying to determine your height by counting the number of cashews in a bowl of mixed nuts.

What difference does the tax rate mean to you? Does it matter to you if the government spends 75% of your money? If so, why? In case you missed it, the main argument of my opponents has been that congresspeople are pretty good at guessing your preferences. If this is the case, then should you really care if the government spends most of your money?

[Xerographica]

You said that the public sector composes half the US economy, and when challenged with the argument that government activity actually only composes 2/5 (40%) of the US economy, you proceeded to parade out the claim that the estimated proportion of total tax receipts paid by wealthy US citizens in 2013 is about 59%. Hence my question about the relevance of that statistic for your point.

It's only 1/10 difference between 4/10 and and 5/10. It's just more convenient to say "half" than "two fifths". It's not like my argument is suddenly only going to be relevant to Western Europe but not to the USA...

I suggest that this type of mechanism is an important explanation as to why public sector spending in Western Europe as a whole has increased from 35 to over 50 procent of GDP from 1970. - Assar Lindbeck, Overshooting, Reform and Retreat of the Welfare State

Now answer my question. If you're confident that congresspeople know your preferences well enough to spend half your money...then what argument would you have against them spending most of your money?

[Yaltabaoth]

Please name me one private corporation that allows shareholder choice where I can take my money.

I'll wait.

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.

So you'll trust the head of a Government department or agency to omnisciently know how to use tax money, just not Congress?

[Yaltabaoth]

So you'll trust the head of a Government department or agency to omnisciently know how to use tax money, just not Congress?

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.

[Yaltabaoth]

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:

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.

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".

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.

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.
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.

[Yaltabaoth]

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.

Is it Non-Sequitur Day today and no-one told me?
If you can't even understand the bolded, there's no point continuing.

[Yaltabaoth]

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.
Is it Non-Sequitur Day today and no-one told me?
If you can't even understand the bolded, there's no point continuing.

What? Before you could decide which food vendors to buy from, you first had to decide whether you wanted to eat, sleep, work or play. Before you can understand economics, you have to understand the opportunity cost concept...

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

Your resources are limited/scarce, so you have to prioritize how you spend them. This is true whether we're talking about the private sector or the public sector.

So you agree that there is more than one kind of choice being made here?

Choice 1 is: which service do I want? Lunch, a movie, a haircut… I'm choosing between different services. If I decide I want to see a movie, Subway can't help me and neither can my barber, only a cinema can.

Having chosen a service (I'm hungry, so lunch it is), I now make Choice 2: which provider do I want to patronise for the service I've already chosen? Subway, Nandos, a local market, my own garden… I'm choosing between vendors of a particular service.

Choice 3 would then be: which menu item(s) do I want? Now I'm choosing a specific product, from my vendor of choice, in my service of choice.

In your analogy, "tax choice" would be broadly equivalent to Choice 1 - a choice between services. But as government is a monopoly, there is no Choice 2.
Choice 3 would presumably be: having a say in how a department prioritises its funds, but you specifically excluded that option.

So once again, the comparison is false because you're not comparing like with like.
"Tax choice" is Choice 1 - between services.
Subway is Choice 2 - within a service.

[Yaltabaoth]

So you agree that there is more than one kind of choice being made here?

Yes, there are primary choices and secondary choices. There are different levels of choice. There's a hierarchy of choice. Choices are granular. Not sure what is the best way to describe it.

Choice 1 is: which service do I want? Lunch, a movie, a haircut… I'm choosing between different services. If I decide I want to see a movie, Subway can't help me and neither can my barber, only a cinema can.

Having chosen a service (I'm hungry, so lunch it is), I now make Choice 2: which provider do I want to patronise for the service I've already chosen? Subway, Nandos, a local market, my own garden… I'm choosing between vendors of a particular service.

Choice 3 would then be: which menu item(s) do I want? Now I'm choosing a specific product, from my vendor of choice, in my service of choice.

In your analogy, "tax choice" would be broadly equivalent to Choice 1 - a choice between services. But as government is a monopoly, there is no Choice 2.
Choice 3 would presumably be: having a say in how a department prioritises its funds, but you specifically excluded that option.

So once again, the comparison is false because you're not comparing like with like.
"Tax choice" is Choice 1 - between services.
Subway is Choice 2 - within a service.

You're absolutely correct that I compared primary choices with secondary choices. But for the intents and purposes of pragmatarianism, there's no real economic difference.

If I choose eating over sleeping, then it's because eating will provide me with more value than sleeping. If I choose Subway over Nandos, then it's because Subway will provide me with more value than Nandos. If I choose the EPA over the DoD, then it's because protecting the environment will provide me with more value than enriching Halliburton.

Therefore, even if we don't have secondary choices in the public sector, allowing taxpayers to choose where their taxes go will create far more value than the current system creates.

Here's how one liberal put it...

I’d love to be able to allocate my taxes. Seriously, I would. It’d be difficult to organize this on a high granularity level, though; I imagine everything would get of whack, as I probably have no information on how other people allocated theirs. So, to start with, I would suggest just a couple of categories, like, say, ‘the military’ and ‘everything else’. - Henri Vieuxtemps

Obviously I don't agree that everything would get out of whack if there were as many secondary options in the public sector as there are in the private sector, but even if our only options were "military" and "not military"...then this would be an improvement over the current system.

But it's important to understand why there aren't secondary options in the public sector. Imagine being a kid in a candy store. You'd be extremely happy...right? It would be heaven on earth for you. Why? Because there are so many options that very closely matched your preferences. Obviously you couldn't afford to buy all the candies...and they wouldn't all match your preferences equally...so your goal would be to spend your limited money on the candy combination that maximized your happiness. Because you could spend your money on the candies which most closely matched your preferences, candy producers would have an incentive to develop new candies that were even closer matches. Step back and imagine billions of kids over time incentivizing producers to develop better candies. As a logical consequence of this process, the variety/quality/quantity of candies greatly improves over time.

If we want the variety/quality/quantity of public goods to greatly improve over time, then we need to introduce the same process to the public sector. We need to allow taxpayers to spend their limited taxes on the public goods combinations that maximize their benefit.

Now, obviously it might not seem fair that some taxpayers would have more influence than other taxpayers. But is it fair that Elizabeth Warren has more influence over how taxes are currently spent than I do? Well...yeah...she received more votes than I did. Which is exactly why, in a pragmatarian system, it would be fair for Michael Moore to have more influence than I would. He's received more dollar votes than I have...

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

More people value how he is using society's limited resources. Therefore, he should have more influence over how society's limited resources are used than I should. Attempting to equalize influence would only destroy value.

So everybody should be able to give their input on what the government does, but their input should be weighted according to the amount of benefit that they provide for others.

Your analogies continue to worsen.

Eating vs sleeping now?
Since when was sleep a marketplace? What is the secondary choice for sleep - "who do I want to buy sleep from"?

Eating and sleeping are both necessary for my survival, it's not an either/or choice.

This is not analogous to choosing Subway over Nandos.

The decision between eating or sleeping is a choice between needs.
The decision between Subway or Nandos is a choice between preferences.

It's a simple distinction, but you keep trying to make reality fit your model instead of modelling from reality.

This is going in circles, and I can't be bothered anymore.

In summary:

Congress-critters are not omniscient, neither are they expected to be.

They do not act as if in a vacuum, they are advised by massive bureaucracies such as departments and agencies.

Departments and agencies act both autonomously in regards to matters that fall entirely within their purview, and collectively on matters that overlap more than one jurisdiction or magisteria.

Departments and agencies primarily provide not-for-profit services, and for-profit competition comparisons are invalid in evaluating their services or performance.

One of these departments is called Treasury, and their specific purview is gathering and analysing current financial data, and using that data to model and project future needs based on trends over time (amongst many other modelling techniques).

The collective knowledge of Treasury, backed by the cumulative data from all departments and agencies in regards to their own specific financial needs, is undeniably superior to the personal whims of you, me or any other significantly-less-well-informed member of the general public.

Possessing wealth is not equivalent to providing value, see: Paris Hilton.

And thus your entire case is palpable nonsense.

*Drops mic, walks away*