Any fan of the classic 90's sitcom Seinfeld knows the unfortunate conclusion by which the series ends. Jerry Seinfeld, with his friends and the show's three mainstays Elaine Benes, George Costanza, and Cosmo Kramer, are on their way to Paris in NBC's company jet which was loaned to Seinfeld in return for the network keeping the pilot of his sitcom "Jerry" on the shelf for five years. Upon Kramer's erratic jumping and clumsily stumbling into the plane's cockpit (not all that strange of an occurrence in comparison to Kramer's normal behavior), an emergency landing ensues in the fictional town of Latham, Massachusetts. While awaiting takeoff, the foursome witnesses an overweight man being robbed. The following ensues:
The key takeaway from the incident is when the Latham police officer tells the group, "the law requires you to help or assist anyone in danger as long as it's reasonable to do so." This is the essence of what is known as Good Samaritan laws which require the public to act on the behalf of a victim when witnessing a crime taking place.
The coercion of such laws should immediately strike a nerve for austro libertarians. As Walter Block noted:
"Good Samaritan laws mandating that people come to the aid of those in trouble (say, an unconscious person) are incompatible with libertarianism."If the state is capable of mandating that one act in lieu of non-action, there then exists only a very fine line between the liberty, by which some believe the state should protect, and slavery. One could argue that no difference at all exists between Good Samaritan laws and laboring under bondage. The rational behind such laws comes down to the belief that members of the public are obligated to help their fellow citizens. The fact that such obligation comes from the barrel of a government gun goes unacknowledged. Collectivist arguments rarely consider methodological individualism for it would stick a wrench into the social engineering of the few over the masses. After all, it's always individuals who act, not groups.
From the libertarian perspective, the imprisonment of Jerry & friends is unjustified based on the principle of property rights alone. Jerry, nor George, Elaine, or Kramer should not be forced by any state, no matter how small in jurisdiction, to act on the behalf of others. Salvation through coercion is still coercion none the less. The guilty ruling concurred by Judge Art Vandelay (perhaps motivated by George false use of the name in picking up women and lying to potential employers) in spite of the spirited defense by the bombastic lawyer Jackie Chiles demonstrates the inherent contraction with Good Samaritan laws:
"callous indifference and utter disregard for everything that is good and decent rocked the foundation on which society is built."Society is composed of individuals, not the other way around. Equivocating "good and decent" with compulsion through the threat of imprisonment is no better than fruitlessly making a moral case for military conscription. As Chiles, who parodies the late Johnnie Conchran, ironically stated:
"You don't have to help anybody..that's what this country is all about."Chiles' claim, no matter how appealing to libertarians or even objectivists, has been refuted by decades of government mandates including FICA taxes, welfare funding, perpetual warfare under the guise of humanitarianism, and endless private sector bailouts through government loans or central bank liquidity injections.
None of this is to say that acting on the behalf of others shouldn't be done in certain circumstances. If a robbery occurs directly in front of you, an argument can be made for your intervention if you are capable of doing so. That isn't to say you should barrel into a quarrel of armed men without any defensive items of your own. The vagueness of the word "reasonable" shows the true fallacy of Good Samaritan laws imposed by the state. By what criteria is "reasonable" determined? Is it even possible for such a concrete decision to be made? Since individuals are different in thoughts as well as physical ability, how a state official determines such instances shows the true pretense of knowledge.
While Jerry and the Seinfeld crew ended a beloved television series of 9 seasons in jail, the disastrous effects of government enforced Good Samaritan laws presented in the last episode are obvious. Laws based on the subjective values of fallible bureaucrats end up creating more complications rather than strictly enforcing property rights. Thus is the nature of the state: unintended consequences brought about by short term and damaging policies through those who think they know how society operates best.
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I gotta work on it a bit but I think that makes a good first draft. I will end by mentioning I have article on the American Thinker today entitled "It's Not Aggregate Demand, Stupid." An excerpt:
Increased production financed through accumulated savings drives sustainable growth. This goes hand in hand with entrepreneurial seeking of unmet demand, not aggregate demand in general. Steve Jobs didn't create the iPod because consumers were spending at Walmart. He speculated that there was a demand for a portable device that could store a massive amount of music, designed the product, determined the marginally profitable price it could be sold at, and decided whether or not to risk his capital and make the whole thing happen. He could have been wrong, but thankfully for all of us, he wasn't.
Keynesian focus on aggregate demand misses the big picture. Taken to its extreme conclusion, overconsumption can ultimately lead to higher prices as supply diminishes and production can't keep up. Inflation only exacerbates the situation as wages and prices eventually adjust after distorting the structure of production.
Meanwhile, the real barriers holding back economic growth are unacknowledged by government apologists acting as economists. The prospect is what Robert Higgs deems "regime uncertainty," where the threat of increased taxes and regulatory enforcement is simply tossed away with academic hand-waving. Artificially low interest rates from the Fed have disincentivized savings and pushed investment toward riskier assets. Capital becomes difficult to accumulate, and the economic pie is prevented from expanding.
Aggregate demand is the last vestige of economists who believe that prosperity is but a simple math formula away. Those who hold it truly believe that government spending on anything creates wealth. As Paul Krugman admitted:
As far as creating aggregate demand is concerned, spending is spending - public spending is as good as but also no better than private spending, spending on bombs is as good as spending on public parks.Such a candid statement reveals the true nature of Keynesianism. Any merit it had as an economic theory has been replaced with providing cover for politicians to do what they do best: fund special interests. When digging ditches became a solution to joblessness, Keynesianism should have been relegated to the dustbin of history. Instead, it litters college textbooks to this day.
Not too bad if I do say so myself.With theories like this passing as conventional wisdom, is it any wonder why our economic affairs are in such disarray?
Just recently commented on a couple of threads on related topics. If you get a chance you should check them out...
ReplyDeleteRon Paul Forums...If You Were King
Arnold Kling...My Version of Race Against the Machine.
Wow, James! Methinks you may get some attention on this one; not just from friends. ;)
ReplyDeleteJoe- Thanks! I have to spruce it up a bit and add a wittier ending (something involving a Seinfeld inside joke) but I think people will enjoy this one.
ReplyDeleteXero- For the internship program I was in over the summer, I was asked during the initial interview what I would do if I were king for a day (it was a libertarian/think tank type of program, I am not gonna say the name on here since the organization frowns upon it and I would like to get a job sometime within the organization but it's relatively easy to find what it is by Googling), without thinking I replied that I would step down and wouldn't take the position. I was pressed further for what policies I would potentially implement and I vaguely replied something about granting more economic freedom and free trade but reasserted that I had no interest being a dictator.
I thought I had screwed the question up and gave the wrong answer but I learned months later at the close of the program that it was indeed the best answer. Apparently Mises made the same exact reply as well when asked if he were king. I do enjoy your answer though.
As for Kling, I read his post when it first came out and disagree a bit with his premise. He may be right that we are undergoing another structural shift (I don't know if anyone can actually prove for sure this is actually occurring as the economy is so dynamic and diverse) and the creative destruction overhang he sees as holding the economy back is more of a result of government interference, mainly through prohibitions for small start ups to gain capital and get off the ground. But the economy is always changing and adapting to new circumstances, I don't see this period as any different than any others.
I do like this passage in particular:
"My guess is that the more power is concentrated in governmental units, the less likely it is that our collective institutions will be geared toward achieving outcomes that are charitable and make efficient use of resources. Trying to get large sums of tax money past the grabbing hands of rent-seeking elites will be like trying to get a stagecoach full of gold past a horde of armed robbers."
It's great Kling answered your question and you know I agree with your "tax payer allocation of their own tax dollars" but I think such a policy brings up a key dilemma for libertarians. If taxpayers are allowed to allocate the money "stolen" from them, what is the point of government in the end? Legislators are elected, after all, to allocate public funds on behalf of their constituents. If people are forced to pay taxes but are ultimately allowed to decide where those funds will go, there isn't any particular need for government at all if libertarians truly believe the right to not be coerced is sacrosanct. In other words, it would be one step away from anarcho capitalism as agencies would be competing for funds, all that is left is getting rid of forced taxation.
If competition is so good, why not then have competing judges, police protection, etc. to maximize the benefits of this new competition then?
And that is why I would agree with such a policy as it essentially eliminated the middleman of politicians who, like Kling noted, feed public funds to their buddies. But libertarians who still think a state is necessary have to rectify how a policy still falls in line with their supposed beliefs.
Let's consider Hayek's well known concept of partial knowledge. We all have some information but nobody has all the information. What is the information disparity between 535 congresspeople and 150 million taxpayers?
ReplyDeleteCan this information disparity be represented by a flea and an elephant? Or perhaps by a flea and a blue whale?
Understanding the information disparity ties into understanding the tax allocation disparity between A) 535 congresspeople allocating other people's money and B) millions and millions of taxpayers allocating their own individual taxes.
Right now we know that taxes are inefficiently allocated. Based on the idea of partial knowledge it makes sense that taxes are very inefficiently allocated.
What would the value to society be if taxes were efficiently allocated?
Why has nobody else considered this? How many economists have read Hayek's essay on decentralized knowledge?
The problem is that libertarians have been too focused on their "rights" based arguments. It's caused them to miss the simple truth that's been right in front of their noses this entire time.
Libertarians have argued themselves blue in the face that the scope of government should be limited. But where's the progress?
What would happen if libertarians left the tax rate and the scope of government alone and argued instead for the efficient allocation of public funds?
How do you argue against the best use of public funds?
If you get a chance check out my post where I ask a Keynesian economist how planners can guarantee the best use of public funds...The Ostrich Response to Pragmatarianism.
Xeno said, "What would happen if libertarians left the tax rate and the scope of government alone and argued instead for the efficient allocation of public funds?"
ReplyDeleteYou are asking for the impossible and falling into the same fallacy that government can rationally allocate its services like that of a business (strangely, this is a common right-wing mistake). Instead of going into all of the details, I will instead direct you to Mises' 'Bureaucracy'. It is quite short and can be read in one sitting (depending upon your reading abilities).
Here's a free .pdf link...
http://mises.org/Books/bureaucracy.pdf
Sorry for the typo, I meant "Xero"
ReplyDeleteJoseph, thanks for sharing the link...but Mises never addressed the point that I made. He said that a "third solution" was impossible. Mises was too focused on getting rid of government to see the viable "third solution" that was right under his nose.
ReplyDeleteThe thing is... you really can't share any links to address my points because nobody has ever addressed my points. That sounds ridiculous but it's true.
My point is simply that taxpayers should be given the freedom to directly allocate their taxes among the various government organizations. This will result in allocative efficiency.
Allocative efficiency means that you give your kidney to somebody that needs it rather than to somebody that doesn't need it.
It's definitely true that anarcho-capitalism would also produce allocative efficiency...but for the past 100 years of effort we haven't managed to even attain "progressive libertarianism". The scope of government has steadily been broadening...not narrowing.
Asking for Anarcho-capitalism or even asking for progressive libertarianism is asking for the impossible. But nobody has asked for what I'm asking for so you really can't say that I'm asking for the impossible.
Well, I would ask that you at least give the book a read.
ReplyDeleteIn any case, I have to get closer to what it is that you ARE asking. It seems that you are leaning more toward direct democracy with regard to funds, is this correct? I will refrain from further commenting until you reply, because I would like to avoid putting words into your mouth.
Joe
P.S. Mises didn't say that a 3rd solution was necessarily impossible, he said that there simply is no third solution with regard to the market. It is either planned (to some/any degree) or it is not. His contention wasn't that it was impossible, his contention was that it simply does not exist.
Joe, I spent 9 years in the Army...including a year in Afghanistan. Needless to say I'm extremely well versed in the shortcomings of government organizations.
ReplyDeleteWhat I'm advocating is not quite direct democracy. When I think of direct democracy I think of everybody voting whether we should, for example, go to war. In a pragmatarian system our leaders would still decide whether we went to war...the only difference would be that it would be up to taxpayers to decide how much of their individual taxes they wanted to allocate to the war.
What I'm advocating is clearly a third solution...so Mises was wrong for saying that a third solution does not exist. Just because you fail to see something does not mean that it does not exist.
I guess all the Austrian economists believed Mises when he said that a third solution does not exist. Why would they doubt the principles of their leader?
First, I must state that I "served" in the Unites States Navy from 2002 to 2006. So, that is kind of a non-issue for me (i.e. veteran status and the experience thereof doesn't mean much to me based merely upon that criteria).
ReplyDeleteNext, while I admire guys like Hayek, Mises, Hoppe, Menger, Rothbard, B-B, etc, I do not agree with everything that they have said. Sure, I am an Austrian of the Rothbardian (ancap) flavor, but that does not mean that I will not question their judgements. I base my opinions on what is logically consistent, not on any pragmatic or "cult of personality" considerations.
My opinion based upon your last comment is that you feel that the expenditures of government would best be decided by those who actually give up a portion of their incomes for such aims. My question to you is by what mechanism will such a thing be realized? IOW, exactly how would such a system work? Does this system allow for voluntary choice with regard to taxation, or is taxation a given (and enforced by the state), with the only choice of the individual being the allocation of such funds?
Forgive me if I am not fully understanding your position, but from the information that you have presented, I am not necessarily seeing anything new here. Rather, it is my opinion that you are merely conflating two already known ideas into one, and then calling it new.
Oh, I must say that I did read your article, and I do agree with your point with regard to knowledge and time. However, I do not have the time at this point to keep clicking on reference-links to get to the bottom of what you are saying specifically. So, if you could, focus more attention on the 3rd paragraph in my last comment so that I can get a fuller picture of what such a system would entail (i.e. how it is executed in the practical sense).
ReplyDeletePlease not: I am not attempting to disparage you, I am rather attempting to more fully understand your view. Disparagement or agreement can only come when I know what it is exactly that you are proposing; at this point, I am not entirely certain.
I look forward to your reply, and I also would like to see what James' opinions are, as well.
My point was that as a veteran I am well versed in the failings of bureaucracy.
ReplyDeleteTaxpayers wouldn't have a choice whether they paid taxes but they would have a choice which government organizations received their taxes.
The logistics would be as follows...at anytime throughout the year a taxpayer could visit a government organization website and submit a payment. They would receive a receipt for the payment and the IRS would just ensure that taxpayers had paid the proper amount of taxes by April 15.
So a new combination of two known ideas isn't creating something new?
I have been thinking through pragmatarianism and it's tough to imagine what it could look like and whether it is corruptible.
ReplyDeleteYes, the system could function where people go to websites and submit payments accordingly. But a few issues/questions arise. Would agencies be allowed to fail if they run out of funding sometime throughout the year? How would new agencies arise? What if no one wanted to fund Congress? (a fantastic idea in my opinion) What measures would there be to ensure that money paid goes into the agency chose and not funneled off to another?
Correct me again if I am wrong Xero, but the premise seems to go like this:
Congress determines tax rates and people must then calculate their yearly payment (seems very difficult as the economy progresses and conventional 9-5s are replaced with more flexible hours and payment).
Say I make $60,000 a year and have to pay 20% in income taxes. So throughout the year I have to make $12,000 in payments to whatever government agencies I see fit. Seems simple enough but I imagine enforcement of such would be a problem come April 15 when many owe a lot in back taxes and can't afford to make a lump sum payment at once. Depending on the enforcement mechanism (garnished wages, imprisonment, etc.) this could be a good thing or bad thing. The less money going to the government the better but locking up and harassing a bunch of people for back taxes is a crappy policy as well even though it exists today.
It just seems like such a system makes the job of politicians irrelevant (again, this is a good thing) since people allocate their money themselves. If it wasn't for the compulsory nature of taxation, it would be anarcho capitalism, so maybe this is a potential step in that direction.
I think we can all agree that pragmatarianism is good in terms of recognizing knowledge decentralization is best in the end.
I am gonna think through this a little more but I enjoy the discussion.
Hmm! That is an interesting concept. It certainly does install a further constraint on government more so than the current constitution does, but I still have certain doubts.
ReplyDeleteI'll tell you what, let me think about such a system for a day or so and I will get back to you. Sorry, it has been a long day for me and I need a little rest of the 'ol noggin. But, just from a cursory analysis I still see problems with regard to the rational allocation of services within a bureaucratic institution as well as shortfalls with regard to popular rule (even if it is in dollars and cents), as well as certain concepts that are against voluntarism. However, I do like the installment of personal choice with regard to revenue streams (relative to current reality), even if it is still coercive in nature.
"So a new combination of two known ideas isn't creating something new?"
Yes and no, it depends upon the ideas that you are combining. Could I have worded that better? Sure. But, I still stand by the old phrase, "two (known) wrongs don't make a right". In this case you are combining two opposed ideas to make one (one that I support, the other I do not), which tells me that there is a flaw somewhere, I just haven't had the time to fully digest it. Certainly, you're proposing a dynamic that I have not seen before (at least not completely). For that, I commend you.
You will find that I am not at all the "Mr. Knowitall", and that I am often so self-critical as to downplay my own abilities. This does not mean that I turn-tail and run away from ideas and concepts of which I am not familiar, rather I seek to fully understand such ideas and concepts to see how it works before I give an opinion. IOW, I am confident in my knowledge, as well as admitting the lack thereof (I am a classic INTJ if you subscribe that sort of thinking).
I look forward to further correspondence with you in the future, and my hope is that we can ultimately come to a mutual agreement on the matter at hand. In any case, I think that this will be an interesting exchange.
Joe
James, pragmatarianism decentralizes power...so in theory it would be somewhat less susceptible to corruption.
ReplyDeleteYou ask a lot of great questions...and your guesses are as good as mine. Regarding funneling of funds...I'm not sure this happens with non-profit organizations...so I'd be kind of surprised if this happened in a pragmatarian system.
Taxpayers would have the option to divvy up their taxes among three different tiers. The top tier would be congress...then the cabinet departments and then the individual government organizations.
So I have no idea what percentage of taxpayers would choose to directly allocate their taxes themselves rather than just give their taxes to congress like they currently do.
Yes, taxes are the only difference between pragmatarianism and anarcho-capitalism. The trick is understanding that the invisible hand would determine the scope of government. Maybe the invisible hand would narrow the scope of government...or maybe it would broaden the scope of government.
Yeah, people would still be locked up for not paying their taxes...but at least in a pragmatarian system you would have a choice whether you allocated any of your taxes to the IRS.
The value in pragmatarianism is that it doesn't say a single thing about the tax rate...or whether a good should be public or private. All it argues for is the best possible use of public funds. How can people argue against the best possible use of public funds? Let's find out.
Joe, for all intents and purposes pragmatarianism is a compromise. Libertarians would concede taxes and liberals would concede choice.
ReplyDeleteWell...kinda. I'm just recommending a switch in tactics. Rather than focusing on "rights" we would focus on benefits. So rather than making the typical deontological arguments we would try a consequentialist argument that hasn't been made before.
Think it over...check out my blog and let me know what you think.
"Think it over...check out my blog and let me know what you think."
ReplyDeleteYes, I will do that. It is kind of funny, your idea on this topic (compromise) is somewhat analogous to my idea (middle ground competition) with regard to free banking.
As I said, I am a Rothbardian (ancap), but I do find some flaws in Rothbard's free banking analysis. My "middle of the road" suggestion is to offer two types of demand deposit accounts: one that is the standard fractional-reserve model proposed by Selgin (for those less risk-adverse), the other based upon the 100% reserve banking model proposed by Rothbard (for those more risk-adverse and willing to pay a fee for the warehousing of money). Obviously, this has little relevance to today's banking system, it is entirely hypothetical just as your system is. But, it allows for a certain amount of choice depending upon the "partial knowledge" of the participants. To be honest, I still have not fully elaborated upon it.
While I am not one to make "compromises" with my principles, I do feel that choice and alternatives are of the utmost importance. In the end, I am not at all adversary of different systems so long as the individual has a choice one way or the other. What I do have problems with is being coerced into a specific choice without an option of an alternative, and this probably comes from my own belief that free and voluntary choice in a world of competing alternatives yields the best solutions.
The idea of direct alternatives, while offered in some fashion in your hypothetical arrangement, is of utmost importance to me. But, I do have some reservations with regard to your proposal, and to be honest, most my reservations are associated with the actual structure of production itself, rather than any "alternative choice" ideas, as well as the shortfalls of bureaucratic management of the same.
If you have ever done an ERE analysis, then you know the difficulty involved. The problem that I am running into (other than bureaucratic inefficiency) is how to understand your proposal without concluding a reduction of production and utility. The wall that I am running into is that no matter how much choice you give to the individual taxpayer to allocate his funds to the bureaucratic institution of his choice, there is still an increased cost to the original factors of production that results in reduced production, therefor a reduction to net utility. And, this is not even taking into account the inefficiencies of bureaucracy.
I am just thinking out loud at this point, but I am trying to give you an idea of my thought process.
Oh, I almost forgot. What is the mechanism of taxation that you propose? Is it an income tax, a direct tax, or is it a capitation tax? This will help a great deal in any further analysis of such a taxation schema.
ReplyDelete(haha, I drank a Red Bull and suddenly my noggin grew wings....)
The difference between a non-profit and the government is that the non-profit gets its money from voluntary means, the incentive for corruption and funneling funds in the government is therefore higher.
ReplyDeleteI do like the idea of not funding the IRS, such an option would be akin to a downward slope to abolish government in general as the enforcement mechanism to collect taxes loses funding and resources. However, I have a hard time thinking Washington would let this happen in the end and money would end up being funneled to it.
Joe- I feel the same way about free banking vs. fractional reserve, if all transactions were done on a contractual basis, there is nothing fraudulent about fractional reserve banking per say. 100% reserve banking would probably be more prominent because of its safety and that's just an out come of rigorous competition.
Joe also asks a good question- on what basis would taxes be determined? The same as now?
The problem with suggesting that libertarians concede on the rights argument is that some of us see the rights argument as the best reason to support liberty. Utilitarianism is good and all and appeals to those who want to do the most good for mankind, but it can also be argued the other way around. Hitler could have made the case that getting rid of a few million Jews would increase Germany's productivity ten-fold (not sure how but he was able to convince an army to commit basic genocide). So it would all be a tough pill to swallow in the end.
Yeah, I almost let the form of taxation completely slip my mind. Obviously, when you are talking about direct allocation of government revenues being dictated by the taxpayer, you must know what type of taxation you are considering (even though all taxes ultimately reduce production by falling upon the original factors, they do not effect the stages of production in the same way intertemporally). I purposely left out consumption taxation due to the complexity of reporting (it isn't practicable). While I do like the choice element in his proposal, I am still not seeing anything that hasn't been discussed before; well, at least in terms of a separate theory.
ReplyDeleteOn banking, I figured that you would agree. To be honest, that is probably my biggest opposition to Rothbardian theory. I think that he assumes far too much in that particular analysis and that he crosses the line between free markets and his own opinion of how such a thing would exist. I understand the natural rights argument, as well as the argument with regard to ownership of property (grain elevators), but I still do not believe that this would be something that would necessarily naturally emerge on the market. However, what I often stress with regard to choice is that the parties to the contract are familiar with the mechanisms at work (two parties agree to a contract).
In free competition I do not feel that FRB would be completely non-existent, but that it would eventually be an investment choice (for an interest return), and thus has an element of risk. Whereas, the warehousing of money would not be an investment, but would rather be a safeguarding of money for a fee (a lesser risk). Both accounts would act just as any demand deposit account currently operates (i.e. you can draw checks on the account, use debit/credit cards on the account, use online bill-pay services, etc), but that one allows fractional reserves and the other doesn't.
Now, this is a completely hypothetical system. It simply would not make sense to warehouse money for a fee if a monopoly power-center can arbitrarily increase the supply of "money". Basically, under our current monetary system 100% reserve banking is untenable, thus my construction is untenable.
While many would say that this system could only work under a commodity system, I disagree. Sure, it probably will not have any relevance in a fiat money environment, but I think that it can most certainly work in a "competing monies" environment (where foreign fiat currencies are allowed to circulate as money). While I agree that the tendency of the market would probably favor Rothbard's position over that of Selgin, Rothbard's position would not be an absolute. Not only would there be choice in money, but further their would be choice in banking, even if the Rothbardian "choice" would be more favorable in the end; only the market can decide.
Like I said, I have not completely thought it through and it is something that I am working on. Shoot, I only just proposed it about a week ago on Murphy's blog, so it is still a work in progress. In fact, I am quite sure that I am not the only one who has ever thought of this (I feel the same about Xero's theory).
As I said to Xero, the conflating of two known ideas into one does not necessarily make a new theory, sometimes it is just two ideas that have already been covered from here to Sunday. The hard part is identifying the unseen consequences of such a combination.
Yes, it seems we agree on much of what a true free market in banking and currencies would look like. And yes, I have thought about this topic many times in the past, but it always comes down to not being able to predict what the market will bear like Leonard Reed said. I do enjoy this statement a lot:
ReplyDelete"It simply would not make sense to warehouse money for a fee if a monopoly power-center can arbitrarily increase the supply of "money". Basically, under our current monetary system 100% reserve banking is untenable, thus my construction is untenable."
I think many austro libertarians would agree to such a statement and the fact that it would only be plausible in a competing currencies environment. If a fiat banking with 100% reserve requirement were to exist, it wouldn't be hard to assume that a black market in alternative currencies would pop up.
The unseen consequences point applies to Xero's theory as well, if a government agency A doesn't get the funding needed to operate, is money taken from agency B to make up for it? Is agency A allowed to shut down? What about legislation mandating its existence?
Again, Xero's theory seems great at first glance but then again socialism has the same appeal to some people. Vetting out these possibilities is the only way to determine its soundness.
Oh, what I mean by a fiat environment is a "nationalistic" and/or "legal tender" fiat environment.
ReplyDeleteWith competing currencies, it is obvious that a great portion of such currencies will be foreign fiat. While I am certainly not a fan of fiat, I do think that my system can also work where multiple currencies can exist and be deposited into the necessary account (either FRB or 100% reserve) based upon their floating ppm.
Obviously, this is not ideal, as my system works most ideally with commodity money. But, given the current state of monetary affairs, my system could still work if the competition of currencies were available to the public.
Example:
Say the dollar is depreciating. It would most certainly make sense to put your dollar into an interest bearing account such as savings. However, if you instead choose an FRB account that accrues interest, then that is a risk-taking investment decision. But, at the same time, you can have swiss francs that are gaining on the dollar, thus you don't necessarily need to accrue interest in order to keep or gain PPM, therefor it might be more advisable to put them into a 100% reserve account and pay a fee. If you want to take further risk, then you can put your francs into a FRB account.
I would like to think that commodity money would ultimately win out, but one cannot tell with certainty the choice of the markets. I do feel that it is wrong to impose a commodity standard if the market does not choose it. Obviously, being an ancap, I do think that commodity money would ultimately win out. But, that is still entirely unrelated to whether or not such a system (as I have described) can work.
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ReplyDeleteYes, intergovernmental debts and transfers is only one of many problems that I have with Xero's proposal. But, as I said, I really have to ponder it more.
ReplyDeleteThough, I am happy that you noticed why I "illuminated" the parallels between his and my theories. The prime difference is that my system is entirely voluntary, the actor chooses the medium of exchange of which he will transact (or, multiple mediums), as well as who he will do business with. This, I think, through market calculations will lead to a "money", as well as favorable banking institutions and unfavorable banking institutions.
ReplyDeleteXero's system is a tax schema that does not take into account the money or medium of exchange. Further, it leaves the bureaucratic institution fully in charge of the managerial aspects of the money. It certainly has a market aspect with regard to choice of where the money goes, but when it gets there, what happens to it? Further, it is entirely "revenue neutral". I am sure that you hate that phrase just as much as I do, but it is what it is.
James, Bob finally posted your "guest article". Gotta love Murphy. He gave me my first shot at writing an article and it got posted to both the LRC and Tom Woods' blog with a day or so. You're definitely farther ahead than I with regard to published articles (Mises, American Thinker, Local papers, etc), but it is always nice to see Bob give a little love to the little guy (even if it was a bit late).
ReplyDeleteI saw Bob posted it but apparently there is an issue with comments on his blog again. I think it got fixed as I left a thank you comment so hopefully it is showing. I am not sure if it will get posted anywhere else, though that would certainly be great.
ReplyDeleteI agree with your system in that commodity money would ultimately win out as it would also provide protection against depreciation of fiat currencies. Like you implied, the whole concept of competing currencies would ensure that that which is perceived to have more purchasing power would be used as a kind of safe haven.
And yeah, revenue neutral is a bad term. Xero's system, as good as it sounds, still relies on bureaucrats to not be corrupt. I am not sure if protections could arise to ensure that pragmatarian government would ultimately be beholden to the way which people allocate their money.
Such is the case with any institution that receives large sums of money by force.
Honestly I only just skimmed over Rothbard's detailed explanation of a stateless society. That guy really hated the state. He said that if there was a button that would completely destroy the state then he would push that button until his thumb blistered.
ReplyDeleteIn terms of compromising your principles...conscientious objectors come to mind. It seems quite reasonable that people who object to violence on moral grounds can be assigned military duties that have nothing to do with killing...such as being a medic.
As far as I can tell...the courts have never upheld any conscientious objections to paying taxes. But as we speak your taxes pay for coercion. Just like the taxes of pacifists pay for war.
So it would seem the principled thing to do would be to advocate for a system that allows people to allocate their taxes according to their principles.
We would never want one person to have a button that would completely destroy something that they considered to be unprincipled...but it's desirable to give each and every taxpayer a button that they can push to redirect their individual taxes from unethical to ethical government functions.
Voters would determine the functions of government and taxpayers would determine which functions to fund.
Regarding corrupt bureaucrats...you have to consider the value of being able to direct exactly where your own individual taxes are going. The process would be completely transparent rather than totally opaque. Once you can direct and see exactly where your taxes are going then you will demand and expect accountability from the government organizations that receive your taxes.
People who directly allocate their taxes to the Environmental Protection Agency value environmental protection. They will expect and demand that every penny they "donate" will be accounted for and optimally used to protect the environment.
Right now there are non-profit organizations that evaluate the financial health of non-profit organizations. For example...on the Charity Navigator website it says..."Find a Charity That You Can Trust". In a pragmatarian system there will be a demand for non-profit organizations that evaluate the financial health of government organizations..."Find a Government Organization You Can Trust."
You guys are way over my head when it comes to monetary issues. But if you guys saw my scope of government diagrams you'll notice I did include control of money/banks. Well...I can't take any credit for their inclusion...I had to be reminded by this guy. He's the guy you want to bounce your money ideas off of.
The point is that in a pragmatarian system we would have a division of labor between taxpayers that would reveal the ideal division of labor between the private and public sectors.
You guys brought up a lot of good points...let me know if I missed any...
Oops...forget. I love this video where Milton Friedman says which of the cabinet departments should be abolished. We should all be able to say which of the cabinet departments receive our federal taxes. So when I think of pragmatarianism I tend to think of applying it to the federal government.
ReplyDeleteBut it is just as applicable to state and local levels as well. It would be easy enough to do with property taxes. The issue just seems more pressing on the federal level though because the only alternative is to move to another country.
Xeno,
ReplyDeleteDon't think that I have forgotten my promise to you. I have been thinking about your proposals, but the realities of life have taken precedence. I will give at the very least an opinion upon your proposition, even if incomplete.
BTW, I began my study of economics in the neo-classical tradition rather than the Austrian tradition, so I am quite knowledgeable of Friedman's works. I must say that I am no longer as big of a fan of his theoretical or philosophical works as I used to be, though I still enjoy his works in economic history.
Anyhow, I just wanted to say that I have not forgotten my promise to you. I just have a lot on my plate right now.
Take care.
Joseph, no worries no hurries. It's great that you're even just thinking about it. So many libertarians have tunnel vision when it comes to their "rights" based arguments. I think pragmatarianism is, if nothing else, a really fun intellectual exercise. Here are a few pragmatarian questions to consider.
ReplyDeleteApologies from me as well Xero, I haven't had too much free time lately.
ReplyDeleteYour military conscription example I think is off from the libertarian point of view as the draft was essentially slavery in the end. It's not so much that people were forced to fight or they had other options, but the fact that they were forced to give their service at all should strike many libertarians as wrong; even those who don't buy into natural rights. And I believe Peter Schiff's dad is imprisoned for refusing to pay taxes on moral grounds.
"Voters would determine the functions of government and taxpayers would determine which functions to fund."
This is a weird but interesting concept to grasp. Say voters wanted a department to give free cheese to old people (an example of a government service one of my college professors used to give a lot) but taxpayers didn't fund it (assuming there are more voters than taxpayers), the issue for me comes down to whether that department would shut down or whether it would be saved somehow through the mismanagement of funds.
Again, I understand the basis for your argument and agree with much of it but it seems to ultimately rest on politicians playing by the rules. I am not sure the check of consumer sovereignty would be enough in the end to bring about a great system. The same goes with the fact that tax money is not voluntary, but that plays into your argument as well as taxpayers will have more of an incentive to make sure their money is spent better.
In the end, pragmatarianism would most likely be better than what we have today but corruption stands a good chance of ruining it. I do like your question list however and will respond to it eventually.
James, if enough voters voted for a department of free cheese to make it happen...wouldn't a few of them donate a dollar or two to help fund the department? The problem is that we're trying to apply non-profit concepts to government organizations as we now know them.
ReplyDeleteAnybody who wants to work for the dept of free cheese is probably going to genuinely care about giving free cheese to people who need free cheese the most. Maybe these government employees will work longer hours with less benefits...maybe they will cut overhead costs as much as possible. Maybe they will hold regular fundraisers to remind the American public why free cheese is important. It's hard to think of government organizations behaving like non-profits isn't it?
What if they stumble on a cheese formula that is even tastier, healthier and more cost effective than cheese you can buy on the private market? Suddenly the demand for free cheese skyrockets and less and less people are buying private cheese and more and more people are allocating their taxes to the dept of free cheese.
Even the most brilliant economist alive wouldn't be able to predict what the impact would be of applying market forces to the public sector. But it would seem that our country would benefit as a whole from the process.
Yeah, you're right about politicians...but it's hard to consider how decentralizing the power of the purse could make the system more corrupt than it currently is. Taxpayers will be making donations directly to the government organizations...unless they choose just to give their taxes to congress for congress to allocate.
James and Joseph, if you guys get a chance you should check out my challenge to Stefan Molyneux.
ReplyDeleteMy challenge to Stefan is that the biggest obstacle to a stateless society is not immorality...it's simply that people do not understand how the invisible hand works. By focusing on moral arguments anarcho-capitalists are barking up the wrong tree.
Here's a bit of confirmation bias...a progressive Ph.D advocating adding choice to sacrifice...Your Choice, Your Money. It's really surprising to see this coming from the liberal camp.
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