Hazlitt - Public works mean taxes

[mohassan]

I am currently reading Hazlitt's Economics in one lesson. I say reading but what I really mean to do is analyse his arguments. I want to do it chapter by chapter here on the forum.

The broken window fallacy chapter is pretty self evident so I would like to start with chapter three instead.

Fore note:
"A certain amount of public spending is necessary to perform essential government functions. [But] I am here concerned with public works considered as a means of “providing employment” or of "adding wealth" to the community that it would not otherwise have had." - Henry Hazlitt

The question: Do public work projects like a bridge, provide employment at the expense of employment in the private sector?

Hazlitt's Answer: It is true that a particular group of bridge workers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $1,000,000. They will have that much taken away from them which they would otherwise have spent on the things they needed most. Therefore for every public job created by the bridge project a private job has been destroyed somewhere else.All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers.

[mohassan]

The advocates of these public projects, seem to imply that the private sector is not capable of providing them. I must admit, I find it difficult to imagine a private built bridge, but then again, who knows what the private sector would do had they not been sacked.

Also Hazlitt points out a grave concept,

When providing employment becomes the end, need becomes a subordinate consideration. “Projects” have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built.

[georgiaboy]

The advocates of these public projects, seem to imply that the private sector is not capable of providing them. I must admit, I find it difficult to imagine a private built bridge, but then again, who knows what the private sector would do had they not been sacked.

The recent television miniseries "The Men Who Built America" was very interesting on this point. As I understood it, Andrew Carnegie built the first steel bridge across the Mississippi at St. Louis - the Eads or Keystone bridge - via private funding mostly.

The series goes on to say elsewhere that JP Morgan actually loaned money to the Federal Gov't at times. Imagine that - private capitalists being worth more than the federal government. Those were the days.

[Xerographica]

The advocates of these public projects, seem to imply that the private sector is not capable of providing them. I must admit, I find it difficult to imagine a private built bridge, but then again, who knows what the private sector would do had they not been sacked.

Why not just allow taxpayers to choose which government organizations they give their taxes to? Tax choice...and/or pragmatarianism...would create a market for public goods and allow taxpayers to shop for themselves in the public sector.

Also, the liberal economist John Quiggin is writing the sequel to Hazlitt's book.

[mohassan]

Why not just allow taxpayers to choose which government organizations they give their taxes to? Tax choice...and/or pragmatarianism...would create a market for public goods and allow taxpayers to shop for themselves in the public sector.

Also, the liberal economist John Quiggin is writing the sequel to Hazlitt's book.

I believe taxation is theft if done so by force. But I think Hazlitt is not too concerned with the idea of taxation in terms of violating property right, but rather its economic effect. This book is not a philosophical book. But yeah taxation by force is wrong, period.

[Xerographica]

I believe taxation is theft if done so by force. But I think Hazlitt is not too concerned with the idea of taxation in terms of violating property right, but rather its economic effect. This book is not a philosophical book. But yeah taxation by force is wrong, period.

Sigh. Here I was looking forward to a nice economic discussion...but unfortunately...you would prefer to talk about religion. If you're more interested in religion then why are you reading Hazlitt's book? If you're more interested in religion then what are you doing in the economics category? There's a specific category for people who believe that their moral views are superior to other people's moral views...Political Philosophy.

The short version...

I generally prefer consequentialist arguments. I think I understand economics better than I understand moral philosophy, and possibly better than anyone understands moral philosophy. - David Friedman

The long version...

I guess the first thing is that it offers arguments which don't require that people already share your religion...using the term "religion" broadly. That as far as I can tell, nobody, whether deontological libertarians or communists or anyone else really has a really convincing argument to show that their moral views are right. Many people believe that they do but I don't think that they do. Ayn Rand, at least, presented an argument. Ayn Rand claimed in effect to have defeated David Hume's is ought problem. Hume argued that you couldn't derive on ought from an is. I have a discussion up on my webpage of the holes in Rand's arguments. As far as I can tell she simply didn't do it. I don't think it can be done as far as I know. So in order to persuade people by a natural rights argument there has to be some reason why they believe in natural rights to start with because you don't have any good arguments to show that they ought to believe it. Whereas my argument...it claims to show...it hopefully shows...that my system would be better in terms of the value that almost everybody already has. So I'm really saying if you regard natural rights to be really important...well look...in my system rights will rarely be violated. If you regard people being happy and being healthy and living long lives...look in my society people will be in effect wealthier than in societies with governments, therefore you should like the results of those things...and so forth and so on. So I think that I have an argument which does depend on convincing people that economics is relevant to human behavior but doesn't depend on convincing them of your particular right and wrong beliefs. - David Friedman

An older version...

That which has no existence cannot be destroyed — that which cannot be destroyed cannot require anything to preserve it from destruction. Natural rights is simple nonsense: natural and imprescriptible rights, rhetorical nonsense — nonsense upon stilts. - Jeremy Bentham

[mohassan]

I only pointed out that any form of taxation is wrong, because you brought up "tax choice". You want to see people choose the public programs they want to support. I am sorry, but taxation by force is objectively wrong, simply because it violates the non-aggression principle. Nothing to do with religion.

What I hoped to discuss in this thread is whether public programs like building bridges, create employment at the expense of employment that might have been created had there been no taxation.

[VoluntaryAmerican]

I am currently reading Hazlitt's Economics in one lesson. I say reading but what I really mean to do is analyse his arguments. I want to do it chapter by chapter here on the forum.

Awesome idea and a great book. I read it this summer. +rep

[Steven Douglas]

The question: Do public work projects like a bridge, provide employment at the expense of employment in the private sector?

Hazlitt's Answer: It is true that a particular group of bridge workers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $1,000,000. They will have that much taken away from them which they would otherwise have spent on the things they needed most. Therefore for every public job created by the bridge project a private job has been destroyed somewhere else.All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers.

Effects of taxation and public works originate from a combination of:

a) money that would have been channeled and circulated elsewhere, and
b) money that would have been saved, not circulated

Simplistically speaking, a) money that would have circulated and been channeled elsewhere, answers the original question in the affirmative.

Following the money:

Public sector employees are also subject to payment of taxes, and make economic choices, including saving, as well as spending decisions that are going to differ from those who originally paid the taxes that paid their salaries and wages. So while much of that money will remain in the "private sector", that private sector is not an homogenous blob. The private sector is like so many arteries and veins that reach out in all directions, and you can feed one while starving the other.

Example: Public sector employees are given a discount opportunity not enjoyed by the private sector (e.g., military commissary, or a store located closest to the bridge itself). Now you've not only channeled funds into the public sector, you've continued to re-channel much of that same money out of the local economy. Even if tax funds are re-channeled within the private sector in a way that provides employment--it will be at the expense of employment in other areas of that same private sector.

Another effect of private sector siphoning through taxation is localized price inflation within certain areas of the private sector. The taxpayer that buys food does not necessarily buy more or less food as a result of a tax. Absent a local work project, the ratio of demand to supply for certain commonly used goods and services (e.g., BREAD) would be smaller (fewer dollars chasing n specific goods). This dynamic is changed by the addition of more buyers of like goods and services that might not otherwise have existed had a local make-work project not existed. So while the increased demand is seen as a windfall for the local grocer or baker, the population overall will suffer a shortfall, as the local price of goods and services are bid upward through greater artificial demand.

In other words, you're not just paying people to work on a bridge--you are also giving them the means to bid against you for like goods in the market.

[Xerographica]

I only pointed out that any form of taxation is wrong, because you brought up "tax choice". You want to see people choose the public programs they want to support. I am sorry, but taxation by force is objectively wrong, simply because it violates the non-aggression principle. Nothing to do with religion.

Did you not read the passages I shared...or did you just not understand them?

What I hoped to discuss in this thread is whether public programs like building bridges, create employment at the expense of employment that might have been created had there been no taxation.

In other words...you wanted to discuss scarcity. Yet, when I brought up the idea of allowing taxpayers to consider the alternative uses of their limited funds...you wanted to discuss morality.

The obstacle we're up against has absolutely nothing to do with people lacking morality. For example...you are obviously morally superior but you fail to understand the economic consequences of allowing taxpayers to shop for themselves in the public sector. Therefore, the obstacle we're up against is economic ignorance.

Consider this passage by Bastiat...

If we now turn to consider the immediate self-interest of the consumer, we shall find that it is in perfect harmony with the general interest, i.e., with what the well-being of mankind requires. When the buyer goes to the market, he wants to find it abundantly supplied. He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall. In all these respects, the immediate self-interest of the consumer follows a line parallel to that of the public interest. He may extend his secret wishes to fantastic or absurd lengths; yet they will not cease to be in conformity with the interests of his fellow man. He may wish that food and shelter, roof and hearth, education and morality, security and peace, strength and health, all be his without effort, without toil, and without limit, like the dust of the roads, the water of the stream, the air that surrounds us, and the sunlight that bathes us; and yet the realization of these wishes would in no way conflict with the good of society. - Bastiat, Abundance and Scarcity

Do you want two artichokes for the price of one? Do you want to save the life of two starving African children for the price of saving one? Do you want more public healthcare for less taxes?

Everybody wants more for less...which is why we give our money to the organizations that do more with less. This is the key to abundance.

Do taxpayers want more public goods for less taxes? Yes. Will they give their taxes to the government organizations that offer more public goods for less taxes? Yes. Will the outcome be an abundance of a wide variety of public goods that people value? Yes.

There's no need to debate morality or debate whether the private sector can supply something more efficiently than the public sector can. Everybody wants more healthcare for less money. Let's allow taxpayers to decide for themselves whether government organizations or private organizations offer people more healthcare for less money.