More on Transparency & Generality
I left the following thoughts in Megan McCardle’s comments, but I thought I would share them here, along with some additional thoughts about liberalism and libertarianism . . .
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Governments use coercion to make things happen. Government coercion can be legitimate, but it has to meet certain conditions. One of the traditional conditions is that a majority of the citizens who are going to be coerced, or a majority of their representatives, have to agree to it. However, if policies are structured so that we can’t see whether or how we are being coerced, then we can’t freely endorse them in the democratic process. So those policies fail the test of legitimacy.
Part of the issue here is a big principle-agent/incentive compatibility problem between representatives and the citizens they represent. Politicians want to get re-elected. If they can subsidize interest group A at group B’s expense without group B really noticing due to the hidden transfer, then that will sound like a real winner to a politician. Which is just to say that the incentives politicians face encourage them to violate the very conditions of transparency and public justification that make their coercive powers legitimate. That sounds like a problem to me.
Politicians would have a constant incentive to try to violate and work around an explicit transfer requirement. Which is exactly why we need one. It would give anyone in the group from which resources are being appropriated standing under the Constitution to file suit in order to repeal the law licensing the hidden transfer. The whole class wouldn’t need to notice the hidden transfer, and then fight it off politically. Only one person would have to notice and win in court. If the politicians can succeed in passing a law that makes the transfer explicit, then that’s OK–it satisfies the minimal conditions of legitimate government power.
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It occurs to me that Charles Murray’s “just give everyone $10,000 a year” plan is a lovely example of a rule that satisfies both the explicit transfer/public justification/democratic transparency requirement and Buchanan’s generality requirement.
For those of us, like Murray and me, who are Hayek/Friedman/Buchanan-style classical liberals as opposed to Rand/Rothbard-style libertarians, things like generality and transparency matter. There is no natural rights beef against transfers per se, but a fundamentally liberal beef against institutional forms that undermine the conditions for liberal legitimacy. If the conditions of liberal legitimacy are met, then the result is the free-market, minimal welfare state. This is a “libertarian” result according to the vernacular, if not according to orthodoxy. It is surely a classical liberal result. (Is Samuel Freeman right that Rand/Rothbard libertarianism is not really a kind of liberalism?)
Here is a hypothesis for debate: The cause of classical liberalism as a really existing possibility for political reform has been harmed by bundling free markets with a ban on transfers. This package deal has influenced people who think justice requires transfers to eschew free markets. If we had spent the last forty years hammering away at liberal fundamentals like transparency and generality instead of the natural right to not be taxed, our society would now be closer to the free market, limited government ideal.
Go!
March 22nd, 2006 13:28
There is no natural rights beef against transfers per se
I’m curious what you think of Nozick’s argument against taxation. I’m certain you’re familiar with it, but I think Edward Feser makes it sound particularly forceful:
“When you are forced to pay in taxes a percentage of what you earn from laboring, you are in effect forced to labor for someone else because the fruit of part of your labor is taken from you against your will and used for someone else’s purposes. Of course, the taxpayer is not forced to perform a specific kind of labor and, in fact, is more or less allowed to perform any kind of labor he likes, but that is not relevant: despite the fact that you may love pumping gas, if you pump gas for three hours for someone else’s purposes and do so involuntarily, your labor has been forced. A slave told by his master that he can choose between chopping wood, breaking rocks, painting the house, or even painting a picture, but that he must do one or the other of these chores, would not be any less a slave.”
I’m still uncertain about this argument. But do you think these kinds of considerations at least establish a moral presumption against taxation, although perhaps not a categorical right against it? Also, I’m not sure whether Nozick’s argument applies to all forms of taxation…
March 22nd, 2006 14:01
Javier,
Are Americans really like the slaves in Freser’s example though? The government doesn’t demand that we work. In fact, if you earn no income or very little income, then you don’t have to pay income taxes at all.
I hear these types of arguments a lot, but I don’t really see the connection between Freser’s slaves and myself.
March 22nd, 2006 16:04
Relevant to the hypothesis:
Consider Sweden. Sweden’s education system is set up as a pure voucher system. Its labor market is relatively free, unlike, say, France. It has other areas too that make it fairly close to a “transparent society with lots of transfers,” or some sort of “bleeding heart libertarian” (in Prof. Kling’s phrase) structure of a relatively free market combined with large but straightforward transfers. This is sometimes referred to as the “Nordic” or “Scandinavian” model. If you’re willing to expand your requirements from transparency to also efficient (EITC/negative income tax instead of minimum wages and highly regulated labor markets, e.g.), the question becomes even keener.
However, these more efficient transfers allow a higher amount of transferring to take place without as negative effects on the economy. It’s entirely possible that if libertarians had been hammering away at efficiency and transparency, then the end result would be a higher amount of transfers, but done in smarter ways. Not that there’s an a priori assumption that that’s a bad thing, at least if you’re not a Rothbard-type libertarian.
March 22nd, 2006 16:38
Wayne, I don’t believe that Feser is arguing that we–those of us who pay income taxes–are slaves. Rather, he’s arguing that a certain amount of our labor is coerced labor. And, generally speaking, it is better to have less rather than more coercion in the world. Thus it is better to have fewer rather than more taxation.
I reiterate that I don’t know if this argument is correct, but I find it particularly challenging.
March 22nd, 2006 23:36
i do think there is a “natural rights beef” against transfers and that nozick’s approach is one of the more effective illustrations of the nature of that beef. nonetheless i was willing to accept will’s proposition on tactical grounds until being reminded of - sweden. ugh. as said of many locations “not a bad place to visit but….” this visceral reaction to the swedish polity is of course conected to my “beef” with transfers.
however there is still a case for tactical compromise. sweden is not anywhere close to the hell found in places like - say - zimbawabe where the principle of transfer is offered to the slaves as proof of the benevolence of the slavemaster. so baring further tactical considerations or empirical evidence i’m still on the fence here.
March 23rd, 2006 00:58
So a big question to my mind is would you consider a Sweden-style situation as “closer to the free market, limited government ideal?” Even an “ideal libertarian Sweden” with very little regulation and interference in the free market, but high use of taxes (broad-based and efficient) for transfers, done in an economically rational and efficient style, like voucher schemes and negative income taxes, if this meant that the total amount of transfers was higher, perhaps even considerably higher, than the current situation? Is that “closer” or not? I’m not sure that there’s a definite answer to the question without revealing what kind of libertarian you are.
March 23rd, 2006 09:45
Consider Sweden. Sweden’s education system is set up as a pure voucher system. Its labor market is relatively free, unlike, say, France.
I would disagree here. Yes, Sweden isn’t as bad as France with respect to labor market regulation, but it’s still pretty bad. The OECD has a weighted average of indicators for employment protection legislation, rated 0 to 6, with higher values representing stricter legislation. Sweden comes in at 2.5, while France is 2.8 or so. The United States in contrast is about 0.7. And the voucher system in Sweden is admirable in many ways, but private schools are also heavily regulated there.
March 23rd, 2006 11:39
“This package deal has influenced people who think justice requires transfers to eschew free markets.”
The crelationship between ideas is backwards. The socialist (n/k/a liberal) begins with the premise that the state, run by philosopher-kings, will have all of the wisdom, and that it will produce perfect justice (as if). tranfer payments are justified by the wisdom and magnanimity of the state. All your base are belong to us.
Mickey Kaus claims tranfer payments lead to social unrest, and I think he has the better argument.
March 23rd, 2006 13:49
Javier—
Your point is fair, in that Sweden, while better than France, is no ideal. That’s why I switched my argument to an “ideal libertarian Sweden.” Would it be preferable or not to libertarians, and does it depend on the type of libertarian?
There is, I think, a fair case that while transfer payments may lead to social unrest, but as a counter efficient transfer payments (negative income tax versus minimum wage, non-distortionary taxes) may lead to a net higher level of transfers due to their very efficiency. Inefficiency puts a limit on the amount of transfers one can do. So it’s entirely possible that an emphasis on efficiency, market-compatible, liberal transfers would lead to more efficient transfers, but at a higher level than currently.
March 24th, 2006 19:38
[...] Will Wilkinson proposes an interesting hypothesis on free market liberalism: For those of us, like Murray and me, who are Hayek/Friedman/Buchanan-style classical liberals as opposed to Rand/Rothbard-style libertarians, things like generality and transparency matter. There is no natural rights beef against transfers per se, but a fundamentally liberal beef against institutional forms that undermine the conditions for liberal legitimacy. If the conditions of liberal legitimacy are met, then the result is the free-market, minimal welfare state. This is a “libertarian” result according to the vernacular, if not according to orthodoxy. It is surely a classical liberal result. (Is Samuel Freeman right that Rand/Rothbard libertarianism is not really a kind of liberalism?) [...]
March 27th, 2006 10:15
Other than the parenthetical question about Freeman– to which the answer is ‘no, he’s not’–I agree entirely. It’s been an unfortuante result of the prominence of the Rawls-Nozick debate that so many people think that the only real question is whether or not transfers are permissible; and in real-world politics terms I suspect that something similar has held. I think it might turn out to be very important that a self-identified libertarian of Murray’s prominence is coming out for unconditional basic income [has anyone read enough of the new book to know whether he seems aware of the UBI debate in pol. philosophy?] At least it will shake some assumptions up.
March 27th, 2006 10:20
WW On Liberalism…
Will Wilkinson continues his strategic critique of the bundling of free markets with militantism against transfers. Tyler Cowen got the ball running by quoting Will’s initial comment over at Asymmetrical Information. I too have some concerns regarding…
March 27th, 2006 10:27
Jacob, I went to AEI to see Murray speak on Friday, and bought the book, and I see no mention whatever of the UBI debate. What is interesting is that Murray is pushes his Plan as a specifically libertarian idea. The conservatives at the AEI talk (Irving Kristol especially, who said, basically, incredulously “Surely you don’t want a government with this little power!”) seemed to be dismayed at the prospect of banning social policy as carrot and stick social control.
March 27th, 2006 11:32
Will Wilkinson: I think the name is McArdle–only one C.
Jacob T Levy writes:
“I think it might turn out to be very important that a self-identified libertarian of Murray’s prominence is coming out for unconditional basic income”
I see a lot of people say this and I’m confused: isn’t Milton Friedman a prominent libertarian whose been saying this for 50 years? Is he any less prominent or libertarian than Murray? Anyhow, history provides no reason to expect that one person saying one thing, even with a lot of coverage to be remembered 6 months later.
March 27th, 2006 12:42
[...] That’s the solution I was proposing in my last post. Free market to get the most benefits and transfers to redistribute them accordingly. One important issue about redistribution is generality versus transparency. Do we redistribute the benefits universally or selectively but transparently? Will Wilkinson expands more on this. This problem in particular is really evident in Indonesia: Part of the issue here is a big principle-agent/incentive compatibility problem between representatives and the citizens they represent. Politicians want to get re-elected. If they can subsidize interest group A at group B’s expense without group B really noticing due to the hidden transfer, then that will sound like a real winner to a politician. Which is just to say that the incentives politicians face encourage them to violate the very conditions of transparency and public justification that make their coercive powers legitimate. [...]
March 27th, 2006 12:43
Friedman’s negative income tax is a bit different. On the one hand, it’s a lot cheaper, because it’s means-tested. On the other hand, it’s got all the disadvantages of means-testing: it’s narrowly targeted and hence unpopular, it’s got the potential to penalize work (unlike the EITC and unlike UBI), it either is open to a lot of fraud or requires a welfare-and-social-work level of intrusive bureaucracy to monitor eligibility.
April 2nd, 2006 21:09
Jacob T Levy: Are you saying that Murray and Friedman’s superficial differences are important, even though an income tax could easily obliterate the differences? (Considering that inflation is ambiguous over 50 years, Murray’s plan probably falls in the range of inflation-adjusted versions of Friedman’s plan.)
Maybe the superficial difference could affect political viability, but I don’t think there’s a difference in terms of discouraging work or the potential for fraud. Either way, it seems to me that it’s just about unreported income, so if the marginal tax rates are the same, the potentials are the same (and probably the same as today).
I’d like to point out that the EITC can have an effective marginal income tax rate as high as 70%. In practice, people who have it together enough to apply for the EITC are ambitious enough to escape it.
June 11th, 2006 21:41
[...] And to bring it down to the managerial level, political philosophy, thinking of a manager as a politician: Governments use coercion to make things happen. Government coercion can be legitimate, but it has to meet certain conditions. One of the traditional conditions is that a majority of the citizens who are going to be coerced, or a majority of their representatives, have to agree to it. However, if policies are structured so that we can’t see whether or how we are being coerced, then we can’t freely endorse them in the democratic process. So those policies fail the test of legitimacy. [...]
September 9th, 2006 09:08
[...] At Catallaxy Jason Soon favours Murray’s model. Introducing a universal cash grant or negative income tax would pave the way for "a vast slash and burn exercise for the remaining welfare and labour market regulatory machines to facilitate a freer labour market…" For libertarians like Jason, it’s the possibility of finally being able to set the market free that justifies the large income transfers. At the Fly Bottle, Will Wilkinson suggests that: [...]
November 14th, 2006 02:57
[...] Classical liberals tend to be less worried about rule-governed transfers than they are about other attempts to correct market ‘unfairness.’ For example, Cato’s Will Wilkinson suggests that, "The cause of classical liberalism as a really existing possibility for political reform has been harmed by bundling free markets with a ban on transfers" because it made makes enemies of those who supported transfers on the grounds of justice. [...]
March 1st, 2007 14:29
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