Xero and Douglas: The Invisible Hand

[Xerographica]

In its simplest form, my logically positive assertion that an economy -- a free market -- does not, nor did it ever, require taxes from human individual Citizens to exist, is true on its face. There is nothing to disagree with on economic grounds (economics can entertain anything at all, giving answers that are strictly economic), so any exception you might take to that must be on moral grounds -- just as your proposal is.

Having lived in numerous developing countries...I don't think "existing"/"surviving" is really what people are aiming for. If a seed from a coniferous trees falls on a rocky ledge...it might survive as a bonsai for a 1000 years...but nobody would argue that it's really thriving.

For the most part, we generally do not debate what a tree needs to thrive. But we certainly do debate...vigorously...what humanity needs to thrive. We no longer debate what we need to survive and exist. We have that down pat...given that around 90% of human history consists of hunting and gathering.

When we transitioned from hunting and gathering to agriculture...we learned that some people have green thumbs. This lead to a division of labor which led to the development of cities. That's when we started to make progress. And ever since then there has always been some form of taxation. People have always given some form of tribute or offerings to their leaders.

If you argue that we don't need taxes to thrive...then there has to be some economic explanation for this. Same thing if you want to argue that we will thrive even more if we get rid of taxes. (honestly...I'm still a bit unclear on whether you're saying that we should get rid of the government...or whether you're saying that funding it should be completely voluntary.)

From my perspective...whether we survive or thrive has everything to do with giving people the freedom to apply their unique perspective to their limited resources. This was the point of Bastiat's Parable of the Broken Window. If I force you to give me your limited resources...then I prevent you from using your limited resources in new and innovative ways. On an individual level...the consequences are negligible. If I steal a $1 from you...then the chances that you would have used that $1 to cure cancer are extremely slim. But when 538 congresspeople take more than $3.5 trillion dollars from taxpayers...the consequences are not negligible...they are very very very significant.

Here's how Bastiat put it...

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good. - Bastiat

When I trade with you...the bargaining process incorporates both our limited, but unique, perspectives into how our scarce resources are allocated. But when I take from you...it's only my limited, but unique, perspective that determines how both our scarce resources are allocated. But the efficient allocation of scare resources depends on all our partial information, values, priorities, concerns, interests and so on. That's why trading leads to progress while taking hinders progress.

Taxes are a clear example of taking...rather than trading. My proposal is to combine both elements. People would still be required to pay taxes...but they would have the freedom to decide which public goods they traded their taxes for. Therefore...it wouldn't be 538 congresspeople spending 150 million taxpayer's money in the public sector...it would be 150 million taxpayers spending their own money in the public sector. This would incorporate the unique perspectives of 150 million of our most productive citizens into the distribution of public funds. What would the outcome be of allowing the invisible hand (150 million taxpayers) rather than the visible hand (538 congresspeople) to determine how more than $3.5 trillion dollars were distributed in the public sector?

Hardly. You are interested in illustrating how you believe the invisible hand would work if the policy proposal you are advocating (your primary objective) was enacted. The invisible hand is always at work, regardless of any policy proposal. Your proposal is not required to illustrate that, or to help people understand in any general way how the invisible hand works.

Well...I disagree with most of this...but I'd really like to focus on whether you believe that people need to understand how the invisible hand works in order for them to appreciate the value of whatever it is that you are proposing. In other words...if they don't need to understand economics then what you're proposing is simply based on morality. It's wrong to take people's money and that's that...end of story. On the other hand...if people do need to understand economics then what you're proposing is based on economics. In order for people to appreciate the value of your proposal they have to understand Hayek's partial knowledge and Bastiat's opportunity cost and Smith's invisible hand and Mises' human action...

We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care.

It's really obvious that many many people feel uneasiness regarding how congress spends their taxes. But the large majority have absolutely no problem with the fact that they have to pay taxes. They just take issue with what their taxes are being spent on.

In a pragmatarian system...taxpayers would still have the option to give their taxes to congress. What percentage of taxpayers would give their taxes to congress? According to Mises' human action...if a taxpayer chooses to give their taxes to congress...then this would indicate that they were satisfied with how congress was spending their money. They would feel more unease at the thought of directly allocating their own taxes. If a taxpayer chooses to directly allocate their taxes themselves...then this would indicate that they were not satisfied with how congress was spending their money. They would feel more unease at the thought of congress spending their taxes.

Freedom is all about options...I'm arguing that taxpayers be given the option to give their taxes to congress or directly allocate their taxes themselves. The choices they make in their attempt to decrease their uneasiness will have significant benefits because it will incorporate their unique perspectives into how scarce resources are distributed in the public sector.

Here's how simple it is...assuming you want to eliminate forcing people to pay taxes...

1. We implement a pragmatarian system
2. You give taxpayers a good reason to feel uneasy at the thought of congress spending their money
3. You give taxpayers a good reason to feel uneasy at the thought of giving their taxes to the IRS
Result: Taxes would be 100% voluntary