McMuddled

by Henry on February 22, 2008

Megan McArdle responds to my earlier post on taxes and revealed preferences and really makes a bit of a mess of things. More detailed discussion below the fold.

Henry Farrell, for example, compared paying taxes to shopping at Wal-Mart. Far be it from me to criticize anyone who sends me free books, but this does not really work.

Umm, no. I sent her Tom Slee’s book, which uses the analogy of shopping at Walmart to demonstrate that vulgar revealed preference arguments do a very bad job of capturing situations of interdependent choice. This is something that is quite clearly laid out in the extended Alex Tabarrok description of Slee’s argument which I quoted in my original post. What’s at stake here isn’t shopping; it’s interdependence. When choices are genuinely interdependent, behaviour doesn’t necessarily tell us anything about the ‘true’ preferences of the actors in question. What it does tell us about, (if we think that actors are behaving rationally) is what actors think the best reply to other actors’ strategies is in a given strategic situation. I’d like it very much if Megan – and others who use similarly poorly-thought-through arguments – would read about and absorb this basic lesson of game theory. It complicates the analysis of social situations in some very useful and fruitful ways.

Leave aside my questions about whether people really prefer downtowns to Wal-Marts, which is hard to agree upon empirically—I say I care deeply about poverty in Africa, but if that’s true, how come I bought a new iPod instead of sending the money to Chad? Collective action problems generally apply to situations where the outcome is binary: either you have a Wal-Mart nearby, or you don’t. Tax revenue is not binary—it’s an upward sloping line.

This claim is both bizarre and wrong. Olson’s original analysis of collective goods starts from the assumption that collective goods are continuous, and that each marginal contribution to the good results in a marginal increase in supply. Either Megan hasn’t read Olson (who is the key figure in this literature), or she hasn’t understood his claims and assumptions. Later analyses (e.g. Russell Hardin’s 1982 book, Collective Action) bring in the idea of lumpy ‘step’ goods as a supplement to Olson’s arguments. Neither Hardin nor any other collective action theorist that I am aware of posits that collective goods need to be binary or even lumpy, for the sound reason that we have no practical or theoretical warrants to believe that they need be binary (or lumpy).

Some of the things the government spends the money on are binary—but given the existing level of tax revenues, this is simply not a reasonable objection to sending the government additional money. People who say they want higher taxes on themselves generally think the government does not have enough money to do the things it is already doing; as long as you think the government has a better (in some moral sense) use for the money than you do, then you have a moral obligation to send it in.

Given the basic wrongness of Megan’s argument above, this is all quite irrelevant.

(As an aside, I am afraid that Henry made a common mistake in referring to me as an economist. I am but a lowly MBA, and have never claimed otherwise, but for some reason a lot of my readers are confused.)

This wasn’t a mistake on my part, it was snarkiness that in retrospect I shouldn’t have engaged in. The “noted economist” description linked to one of Megan’s Atlantic colleagues who had indeed erroneously described her as an economist. I find myself very frequently annoyed by the apparent mismatch between the confidence of Megan’s judgments as to what economics does and doesn’t tell us, and her grasp of the debates among economists and other social scientists. Still, I should certainly acknowledge that even if Megan often seems to imply a deeper command of the literature than she in fact possesses, she has never to my knowledge described herself as an economist.

On the broader question of why people do, or don’t pay their taxes, the most directly relevant research that I am aware of is by John T. Scholz and Mark Lubell (this AJPS article is most germane; but they have other work dealing with these issues too). Scholz and Lubell provide good reason to believe that taxpaying is indeed a large scale collective action problem; although they don’t use this term, they clearly think of it as being in part an assurance game (that is one in which people’s willingness to contribute is conditioned on their belief that others will contribute too). They find that individuals’ willingness to pay taxes that they could probably fudge seems to covary with the degree to which they trust both government to do what is right and behave honestly and other citizens not to underpay their taxes. Not only that, but Scholz and Lubell find that these factors seem more important to people’s decisions than the self-interested fear of getting caught cheating. This suggests, contrary to Megan, both that tax paying is in part a collective action problem and that people’s cooperation in this game is partially conditioned on their trust that other people are paying their taxes too.

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{ 96 comments }

1

Seth Finkelstein 02.22.08 at 6:39 pm

This is key:

“I’d like it very much if Megan – and others who use similarly poorly-thought-through arguments – would read about and absorb this basic lesson of game theory.”

Unfortunately, they can’t. I’ve seen this over and over, for more than a decade now. Whether high punditry or low net flaming. It’s one reason that, despite the impoliteness of it, I’ve repeatedly said Libertarianism Makes You Stupid.

That lesson says that individual self-interest can lead to an overall sub-optimal outcome, which contradicts the fundamental quasi-religious dogma at the core of such beliefs. Now, some writers are better at dancing around this than others. But whether it’s a well-read political hack or a forum comment from a tech geek, the reply is always going to boil down to “No! Is not!” :-( .

2

mpowell 02.22.08 at 6:44 pm

This is like shooting a rabbit with a howitzer. Expecting Megan McArdle to actually understand the theory behind the arguments she is making is far too much to expect. She is very nearly the perfect example of a schmibertarian. Anyone willing to actually argue with you that people do not voluntarily give more money to the government is not going to be persuaded anyhow.

3

derek 02.22.08 at 6:51 pm

Once upon a time it was received wisdom that absolutely everything had to be managed by a ruler, or things would go to hell. Then a great economist called Adam Smith showed that some things would work all by themselves, just from the selfishness of the individual actors. This was a milestone in economics.

Unfortunately, a small but influential cult has grown up around the notion that absolutely everything works all by itself without anything going to hell. Adam Smith would kick their asses.

4

alkali 02.22.08 at 7:17 pm

Having taken a shot at Megan’s blog at explaining why I think she’s wrong, I’ll note here that I think she’s asking the normative question, “Should people who favor higher taxes make voluntary contributions to the government in excess of their tax obligations?,” rather than the positive question, “Why don’t people who favor higher taxes make voluntary contributions?”

I think the answer to Megan’s normative question is no, but I don’t think that game theory can completely explain why the answer is no (although game theory might inform the answer).

5

Henry 02.22.08 at 7:26 pm

alkali, as I read her, she seems to be making an empirical rather than asking a normative question (or to put it differently, the normative question is being posed in a rhetorical fashion so as to support the empirical claim). The empirical claim is that people who want higher taxes really want to spend other people’s money. Her purported proof for this and disproof of counterclaims lies in the deeply confused version of collective action theory that I discuss above, and various purely personal suppositions about motivation, for which she doesn’t bother to provide empirical support, and which I couldn’t be bothered with engaging, given that there is some research on this (there may be other research that I’m unaware of that points in different directions – but obviously debates like this should be conducted with reference to data). I agree that the normative question is interesting, but I don’t think that Megan is raising it in other than as a means of rhetorical handwaving.

6

cure 02.22.08 at 7:26 pm

I don’t know, Henry…

I am quite familiar with the collective goods problem, and I’m still confused about how it applies to the marginal tax situation. In fact, it would seem to go the other way.

Say I only care about what government does, and I’m not concerned about, for instance, my relative status in consumption. I believe the government will take some action that will increase my welfare (most likely through altruism) by V if I give it an additional c dollars. If V (in dollar terms using some Hicksian criterion) > c, then I should unilaterally send the money. Otherwise, I should not.

Now, let’s add in other players. If the other n people are willing to pay an additional c, then let each of our welfares increase by V2. You might believe that V2 > V (i.e., there are increasing returns in utility to government action, because, for instance, they can build networks like roads), or you might believe that V2 < V (i.e., the government’s first additional dollar will help a handicapped child not starve, while their priority with the 10 billionth marginal dollar will be to buy rich seniors prescription drugs).

There are a number of government actions where the unilateral or the collective solution is nearly the same, only with the V2 < V situation predominating. In fact, looking at the federal budget, most things seem to be this way. The 1.7 trln dollars of transfers surely help the most needy first, then help the progressively less needy, and I assume most people get more welfare from helping more rather than less needy individuals. The 800 bln of military spending is almost certainly decreasing in marginal utility for all but Lockheed Martin executives. And those two items are 83% of the budget.

Now if we permit individual utility where “fairness” in terms of “I get negative utility when I help the needy and you don’t”, then surely, we get Henry’s solution. But I think Megan, and most libertarians, are in fact making the very point that it’s this strange definition of fairness, and not some concern about the inefficiency of their marginal tax dollar, that cause “voluntary taxes” to be almost unheard of.

7

cure 02.22.08 at 7:27 pm

(apologies for the greater than, let’s close the tag)

8

lemuel pitkin 02.22.08 at 7:32 pm

Henry, I have a serious suggestion:

Next time you are thinking of responding to a Megan McArdle post, don’t.

Instead, pick a lesser-known blogger who you think deserves more attention than they’re getting, and respond to something they’ve written instead.

Deal?

9

Bruce Baugh 02.22.08 at 7:40 pm

I’m reminded that some sleepless night recently, I started thinking that for a lot of libertarians, there actually is an Invisible Hand, sort of like the cosmological constant that might modify various physical processes. If you think of an actual free-market-enhancing force at work, than a lot of other things fall into place. You can (for instance) envision all state action as having an invisible energy cost to the extent it steers against the Invisible Hand’s current state, and you can envision any effort to use market means to achieve moral ends as wasteful to some degree and in any case like trying to steer a current from inside.

The thing is, of course, that there isn’t an Invisible Hand.

10

David W. 02.22.08 at 7:45 pm

This is like shooting a rabbit with a howitzer.

True. That’s why Mark Kleiman used his Holy Hand Grenade of Antioch in his respons to McArdle’s zombie libertarian logic:

So, says Megan, why don’t I just write a check for $300 to some outfit that finances the same sort of research the NSF does? (There’s no mechanism that would allow me to make a contribution directly to the NSF, as opposed to the General Fund.)

But that question answers itself: it’s easily worth $300 to me to increase spending on basic science by $6 billion, but it isn’t worth $300 to me to increase spending on basic science by $300. So I’m willing to vote for the tax but not to make the contribution.

Collective action problem. End of story.

11

Bruce Baugh 02.22.08 at 7:45 pm

I like Lemuel’s suggestion.

12

SamChevre 02.22.08 at 7:50 pm

Mark Kleiman gives a great response, but actually repeats Megan’s point; it’s worth paying higher taxes to get others to also pay higher taxes, but not to get jus tthe effect of your own higher taxes.

13

Righteous Bubba 02.22.08 at 7:51 pm

Bold begone!

I like Lemuel’s suggestion.

I don’t. I’m here to learn and beating up on poor Megan makes it funny.

14

alkali 02.22.08 at 7:53 pm

5: I agree that Megan should clarify the nature of her claim.

10: As I noted in my comment at Megan’s post, there are lots of instances in which people actually do make those kind of contributions. For example, I could think it’s a good idea if my state raised taxes to better fund its public university, and give money voluntarily to that public university. (In that case the collective action problem is mitigated by the fact that public universities retain control of contributions made to them, which isn’t true of most government agencies.)

15

Megan McArdle 02.22.08 at 7:54 pm

Let’s see if we can’t close that tag

Meanwhile, Henry, I’ve responded on my blog. The biggest problem with this argument is that there is absolutely no actual strategic benefit to withholding. You cannot therefore say that people are behaving in actual strategic behavior.

The second problem is that I think you (and certainly Mark) are confusing tax revenue with the goods it secures; the former need not be a collective action problem even though the latter is, or so I mote.

What we are left with is that people do not send money to the budget, even though they complain that various current services are underfunded; and even though they say they want higher taxes. So we observe (I think you agree) that they are only interested in paying higher taxes if everyone else does.

Since an extra voluntary contribution right now could be used to extra purchase public goods that they say they want (and rescinded if taxes should ever come up to the level that they believe is fair), I conclude that people are primarily interested not in the public goods that their own tax dollars could secure, but in getting other people to buy more public goods.

Incidentally, thanks so much for the book. It was very thoughtful of you.

16

harry b 02.22.08 at 7:54 pm

I think alkali’s problem is an excess of good character. That reading requires a lot of generosity to the author. Bags I get alkali as a referee for the next imperfect paper I submit to a journal.

17

RICKM 02.22.08 at 7:55 pm

She’s got a new post up, which basically amounts to ‘nut uh’.

18

David Weisman 02.22.08 at 8:01 pm

Glenn Reynolds has been following, but doesn’t quite seem to get it. If one rich person felt that they only were being undertaxed there would be no collective action problem, but if many members of a whole group of rich people feel said group is undertaxed, there is.

19

Farren Hayden 02.22.08 at 8:03 pm

David w, nice summary. It took me about 10 paras to say basically the same thing to an objectivist recently. After all that he turned out not to be an objectivist at all but a fairly reasonable theist trying to play the devil’s advocate by adopting an objectivist stance in a discussion, apparently under the mistaken impression that all atheists take their ethics from Rand.

20

David Weisman 02.22.08 at 8:04 pm

Oops, my bad, it wasn’t just Reynolds quoting Megan McArdle, but her on instapundit.

21

ajl 02.22.08 at 8:07 pm

“The biggest problem with this argument is that there is absolutely no actual strategic benefit to withholding.”

I hate to wave the bloody shirt of class war, but anyone who does not understand the strategic benefit of withholding has never spent a month deciding which bills to pay on time because there’s not enough in the checking account to go around.

22

David W. 02.22.08 at 8:11 pm

The biggest problem with this argument is that there is absolutely no actual strategic benefit to withholding. You cannot therefore say that people are behaving in actual strategic behavior.

If withholding one’s own resources to maximize their utility, rather than spending them in such a way that others get to go along for the free ride isn’t a strategic behavior, I’m not sure what is.

23

Henry 02.22.08 at 8:11 pm

Bold tag fixed.

Kevin – I have no doubt that you can construct descriptions of the tax collective action problem that would bear out Megan’s arguments. Then the debate would be about the realism or lack of same of the model (if we were engaged in that argument, I’d vigorously disagree with your assumption that the first trillions help the needy rather than Lockheed Martin, but that is an aside). The devil lies in the details of the assumptions of these toy models of course – see Donald/Deirdre McCloskey, _passim._

But that’s not the criticism that I was making. I am saying _contra_ Megan that

a: her claim that a vulgar revealed preferences argument tells us what is happening is false. This is a situation of interdependent choice. My decision not voluntarily to contribute taxes doesn’t necessarily say anything about my underlying preferences on taxation.

b: her claim that the general class of collective action problems is restricted to binary goods is flat out untrue (or if she can show that it _is_ true, she has a _great_ article to submit to APSR, AER or wherever, and I warmly encourage her to do so).

c: What evidence we do have suggests that tax payers _do_ see taxes as in part involving a collective action problem, in which their willingness to pay taxes is partially conditioned on their perception that others are paying their fair share too. This points to the weakness of Megan’s claim that people who (a) want higher taxes, but (b) won’t voluntarily contribute money to government are (c) ipso facto declaring that they want to soak other people. If people’s willingness to pay higher taxes themselves is contingent on the perception that others are paying them too, then they can quite reasonably hold both positions simultaneously. The evidence that I am aware of suggests that many people’s willingness to pay taxes is _contingent in precisely this way._ Megan doesn’t have any counter-evidence to support her position that I can see. Merely seat-of-the-pants presuppositions that bear out what I very strongly suspect to have been her priors on this issue.

If any of these criticisms is flawed, I’d of course be happy to hear why …

Lemuel, Bruce, I understand your point of view, but blog about what interests me, and (more to the point in this case) what annoys me, and needs in my opinion to be corrected. See XKCD …

!http://www.themonkeycage.org/images/duty_calls.png!

24

Anderson 02.22.08 at 8:19 pm

Henry took the cartoon right out of my mouth.

25

Bruce Baugh 02.22.08 at 8:21 pm

Henry, it’s hard to argue with your conclusion. :)

26

Russell L. Carter 02.22.08 at 8:22 pm

“I conclude that people are primarily interested not in the public goods that their own tax dollars could secure, but in getting other people to buy more public goods.”

No. It is the difference between the effects of $300 and $6,000,000,000. If each *applied* sum costs *me* the same and $300 accomplishes essentially nothing, then for most of my targeted purposes it’s stupid for me to send the $300 to the larger organization when I instead have the choice to target it to something where the size of the amount might have some tangible effect. Like WFMU or WWOZ for instance. Or my local AIDs charity.

But in fact, something like the CDC or NOAA or the DoE or the EPA or hell a sane DoD requires a general collective response that needs sums on the order of $6,000,000,000 and much much larger. So we tax collectively, rightfully, and willingly if we give a goddam about stable rich society.

Gawd, libertarians are really this dumb? Yes, yes they are.

27

Henry 02.22.08 at 8:22 pm

Megan – the ‘strategic benefit to witholding’ is a canard. Let me lay the argument out for you again:

(a) people seem, at least in part, to view paying taxes as contingent on their perception that others are paying their fair share too. In other words, they are _contingent cooperators._ This is what Scholz/Lubell find from their stats. In other words, tax paying is at least in part an assurance game, played against a very large number of other players. Here, institutions serve the role of signalling to people playing this game that others are paying taxes too.

(b) when contingent cooperators are in a situation where they are asked to pay voluntary taxes above and beyond what other people are paying, they are highly unlikely to pay them, because their willingness to pay taxes depends on the perception that others are paying too. Here, they face a game in which they are highly unlikely to get others to pay taxes (or to generate the relevant expectations) without appropriate institutions. Their strategic situation means that their best reply is not to pay.

(c ) THUS: your conclusion that people who both want higher taxes and won’t voluntarily pay more money to government are necessarily hypocrites who simply want to soak others, is completely unwarranted. If (as the available empirical evidence suggests) they are contingent cooperators, then they quite rationally will not want to pay (while equally being willing to pay as long as they believe that others are paying too).

Got it???

28

Bloix 02.22.08 at 8:28 pm

Megan – I personally make buckets of money. I think that Bush tax cuts, which benefit me personally, should be rescinded. I don’t send the government extra money with my quarterly estimated withholdings (I’m self-employed). Why don’t I? Because I’m not irrational, that’s why.

I think the Bush tax cuts should be rescinded because they have been financed by borrowing. They are tax shifting, not tax cutting. The resulting deficits mean that I (in my old age) and my children (who are not much younger than you) will have to pay exorbitantly higher taxes, or else they – and you – will suffer from rampant inflation as the government prints money to pay its debts. Unless taxes are raised relatively soon, at some future point there will be a crisis. One solution would be for the government to renege on its debts (for example, the promise to pay social security benefits) and shut down Medicare and Medicaid. Not good choices for me or for society. My sending extra cash to the government every quarter will do nothing to solve this problem.

Many wealthy people are happy with the tax cuts because they have short time horizons – more consumption now is worth more to them than averting a crisis at some future date (For more of this kind of thinking, see global warming.) Others believe that when the inevitable future tax increases come around, middle class people can be forced to pay them – in part by being bamboozled out of their promised social security benefits.

I would be much happier to have the peace of mind that we had eight years ago under an administration that balanced the budget and produced a surplus. I would prefer that the government take steps now to prevent a future financial crisis. But that choice is not available to me. I can’t make the government adopt a rational tax policy by sending it a few thousand bucks every few months.

Because current tax policy recklessly threatens me and my family, I need to protect myself and my children by socking away cash and investments. That’s what I do with my extra money. I’m certainly not going to send it to the government.

29

Righteous Bubba 02.22.08 at 8:28 pm

Megan’s evidence is North Dakota’s Playstation Enablement Act and the Californian Champagne Distribution ballot initiative which passed with 90% of the vote each.

30

Megan McArdle 02.22.08 at 8:35 pm

Henry, I think perhaps our disagreement stems from an initial misreading of what I wrote; one that I noted but unfortunately failed to correct. The positive inference was

What most of us are really in favor of is higher taxes on other people. If we wanted higher taxes on ourselves, we’d give the money to charity.

You’re arguing that people do, too want higher taxes; which can well be true. I’m saying that what they want to purchase with their own higher taxes is other peoples’ higher taxes, not whatever good their own taxes would presumptively be spent upon. I take you to be agreeing with that. We obviously have different priors as to whether this is a salutory desire, but I’m not sure the factual claim is in dispute. I agree with you that people won’t pay taxes if other people don’t because they have a fairness norm. That doesn’t change the fact that they are primarily concerned with raising taxes on other people; it reinforces the point.

But this is a rather uninteresting point, known to anyone who has ever collected money for an office baby shower, or indeed gone to kindergarten; I can’t believe that you needed to read an entire book to learn this, and I certainly hope you didn’t think I do. The more elegant arguments about collective action on things like Wal-Mart simply don’t apply here. Binary was perhaps an inelegant choice of words, but the point stands. The point of public goods is that if too many people defect, we will not secure an optimal level of public goods. But if you think that your contribution is a more optimal allocation of resources than the current one, there is no help needed from me; there is no collective action problem, other than satisfying your resentment at those you think are shirking. And that doesn’t negate my point; it’s simply a special case of it.

On the normative side, I think that this fairness intuition is given too much weight over what should be more important concerns, but that’s a side issue that I should have kept more separate from the positive one.

31

Righteous Bubba 02.22.08 at 8:38 pm

I’m saying that what they want to purchase with their own higher taxes is other peoples’ higher taxes, not whatever good their own taxes would presumptively be spent upon.

Yes, the entire point is to sink a knife in the back of the elite.

32

John Emerson 02.22.08 at 8:42 pm

In point of fact, a lot of people who believe in higher taxes for various purposes do voluntarily donate money for these purposes, but they naturally donate to non-profits, etc., rather than to the government.

A notable case is schoolteachers, who often spend their own money on school supplies and educational materials which they think that the school (= government) really should pay for.

School teachers buy own supplies I

Schoolteachers buy own supplies II

33

cure 02.22.08 at 8:46 pm

Henry – I don’t think you and Megan are too far apart, then, and I do see the source of the disagreement now. Basically, there are four sensible opinions about taxation:

a) I want taxes to go up and I am willing to pay more unilaterally. (As noted, people do this on occasion when they feel the government can use their money effectively, and when the collective good is continuous, such as funding a public university scholarship).

b) I want taxes to go up for myself and for everyone else. (As you note, this is also a common position – in the basic model I gave above, I fail to see how this position can come about other than from a desire for what you would call “fairness” and what Megan would call “soaking other people”, given that government spending is decreasing in my utility rather than increasing. Any discussion of, “well, the NOAA needs 6 billion and not $300 to operate” strikes me as inconsequential since we’re talking about marginal dollars here, and I’m quite sure NOAA could use the 300 that pushes them from 6 bln to 6,000,000,300 at least as well as they could use the 300 that pushes them from 12 bln to 12,000,000,300.)

c) I want taxes to go down for me and up for everyone else (this could probably be considered “soaking everyone else” by any participant here)

d) I want taxes to go down for me and down for everyone else.

The difference, it seems to me, is that Megan is reading b) and c) as being the same, whereas you’re emphasizing some common desire for fairness. But, as I’m sure you know, economists (and apparently MBAs!) are loath to introduce interdependence into the utility function that another person’s *preferences* weigh on my *utility*. That is, it’s tough to consider situations where I get A utility if I buy an apple, but A+B if you buy an apple as well.

Surely you could do it, but it makes the social welfare function even more difficult than it already is, since there are unresolved ethical questions about what preferences of this type are valid – if I, the Serb, get utility from the schadenfreude of driving buy an impoverished Kosovar, ought a social planner take that into account?

(And indeed, as you note, I can hear McCloskey’s anger at my seeming willingness to throw some classes of interdependence out the window…)

34

Russell L. Carter 02.22.08 at 8:58 pm

“I’m quite sure NOAA could use the 300 that pushes them from 6 bln to 6,000,000,300 at least as well as they could use the 300 that pushes them from 12 bln to 12,000,000,300.”

You misunderstood, and I wonder if it’s possible to fix. It’s the incentive to *me* for targetting the donation (voluntary tax) that matters. This is a fairly basic component of the whole argument, so understanding it is crucial. It’s also entirely consistent with Henry’s more technical discussion.

I do note that McMegan still cites no evidence other than her own highly peculiar notions.

35

David W. 02.22.08 at 9:05 pm

You’re arguing that people do, too want higher taxes; which can well be true. I’m saying that what they want to purchase with their own higher taxes is other peoples’ higher taxes, not whatever good their own taxes would presumptively be spent upon.

No one pays higher taxes with the goal being to simply make others pay higher taxes. It’s *always* for a good, even if you’re Scrooge McDuck and you want to fill your pool to dive in mo’ money. Let’s take for example a fuel tax. I could sent a few more dollars to my state via my income tax return, but there’s no way it’s going to go what I want it to do, which is pay more towards the upkeep of bridges. (I drive in Minneapolis, so this is not just a hypothetical here.) So I’m supporting a nickel per gallon increase in the gas tax to raise the millions that will be dedicated to this public good. The fact that it raises the taxes of all those who pay for gas isn’t what I want, what I want is better roads and bridges. It won’t happen voluntarily at the individual level, because of the classic free-rider problem, so being in favor of raising a tax related to the use of public roads is merely the most practical way of going about getting the public good I want.

36

rapid 02.22.08 at 9:06 pm

Megan,
They want people like them, which presumably includes them, to pay more taxes, because they think this is right.

What I can be certain of when I send in $10.00 voluntarily is that the government has 10.00 extra and I 10.00 less. What I can be certain of when it is mandated that people like me send in 10.00 extra is that as a result there will be some, presumably large, multiple of my contribution in the government’s hands and I will have 10.00 less.

37

Matt 02.22.08 at 9:06 pm

_I do note that McMegan still cites no evidence other than her own highly peculiar notions._

Have you ever known here to do anything different?

38

White Male, Jew of Liberal Fascism 02.22.08 at 9:10 pm

Good links, John Emerson. And as a retired schoolteacher, I can certainly attest to the fact that I and my colleagues certainly did buy a lot of our own supplies.

*************

One point nobody has yet brought up: tax cuts only save me money IF I can buy the same service cheaper from the private sector.

For instance, the amount of money I might save by not paying taxes towards the local library would be totally insignificant by the amount I’d have to spend at the bookstore to read the same books.

The education taxes I pay are still cheaper than it would be to send my kids to private schools.

And no tax cut I could ever get does a thing to insure that my neighbors don’t poison the environment in a way that will hurt me and my family.

Furthermore, in some ways, taxes arguably BENEFIT society as a whole and the entire economy.

If you don’t believe this, just visit a third world country that has no highways, sewers, bridges, universities, research centers, or other infrastructure.

My only problem with my taxes is I hate to see ‘em wasted on dumb shit like invading foreign countries for bogus reasons…

39

bobby b 02.22.08 at 9:33 pm

THUS: your conclusion that people who both want higher taxes and won’t voluntarily pay more money to government are necessarily hypocrites who simply want to soak others, is completely unwarranted.

If “others” valued what I value, wouldn’t they all voluntarily contribute towards it, proportionately to my voluntary contribution? Isn’t my $300 tax payment then simply a trigger for their compelled payment in service to my values over theirs? How is that not a soak? I don’t think these analyses work unless you compare people who value [whatever government purchase we’re speaking of] equally.

40

David W. 02.22.08 at 9:36 pm

FWIW, if there’s some subtle aspect of McArdle’s argument with Henry that I’m missing that’s leading me to blither on about something that’s not germane to the topic, please let me know. There’s no need for me to interrupt a lengthy diatribe about an obscure and trivial point. Even if zombie libertarian logic demands it!

41

anon/portly 02.22.08 at 9:43 pm

Suppose U20 means I pay 20% of my income in taxes and T30 means everyone else pays 30% of their income in taxes. And “>>” means “is preferred.”

What MM seems to be saying is:

(U20, T30) >> (U20, T20) >> (U30, T20)

The “(U20, T30) >> (U20, T20)” follows from MM’s claim that “most of us are really in favor of … higher taxes on other people” and “(U20, T20) >> (U30, T20)” is what MM’s “revealed preference” data from Virginia is revealing.

What HF seems to be saying (and what MM seems to be not following) is that it also appears to be the case from research that:

(U30, T30) >> (U20, T30)

Therefore people are not necessarily not in favor of higher taxes on themselves. Put it all together and:

(U30, T30) >> (U20, T30) >> (U20, T20) >> (U30, T20)

What people are really in favor of, if they’re in favor of higher taxes on everybody else, is really higher taxes on everyone, including themselves. (U30, T30) >> (U20, T20).

“What most of us are really in favor of is higher taxes on other people. If we wanted higher taxes on ourselves, we’d give the money to charity.”

MM’s second statement, as HF notes, is in error. We *do* want higher taxes on ourselves, and we *don’t* give the money to charity (i.e. voluntarily contribute more tax money).

42

Christopher Colaninno 02.22.08 at 9:45 pm

” I’m saying that what they want to purchase with their own higher taxes is other peoples’ higher taxes, not whatever good their own taxes would presumptively be spent upon.

Wow. The whole point is other people’s contributions and obtaining the good that taxes would spent on are related. Without the higher taxes on everybody the goal doesn’t get accomplished.

In general people want higher taxes as a means to an end. In that I’m more concerned with other people’s tax contribution it would be related to the fact that other peoples tax contributions would be something like 99.99% of the total amount necessary to accomplish the goals I think the government should be involved with.

Anyone else annoyed by the recent post’s moving the goals posts to giving to ‘charity’, which I’m fairly sure have collected a lot more money in Virginia then $10,000, away from the government. In that people can see tangible benefits they give more. Maybe not enough to satisfy more moral equation presented in a philosophy, but still a substantial number.

43

cure 02.22.08 at 10:00 pm

I should add one more comment.

This strange notion that government buys only public goods is totally not born out by the data. The overwhelming majority of government spending (look it up!) is on transfer payments. In the US, at the Federal level, we’re talking about 2/3 of the budget being interest payments or transfer payments. Of the rest of the spending, the marginal benefit of sending in your money is no different from the marginal benefit of everyone sending in their money – the collective good is not “lumpy”, as noted by Henry, so you’d be paying for some new school supplies on the margin, or road repairs on the margin, even if no one else sends in their money.

anon/portly: I liked your analysis, but I don’t follow that Henry’s research supports (U30, T30) >> (U20, T30). This says that if other people pay more taxes than me, then I’d prefer to increase what I pay! I think the evidence says something like (U20,T30)>>(U20,U20), and perhaps, under some specifications, (U30,U30)>>(U20,U20) also holds at the same time. So the ranking is something like (U20,T30)>>(U30,T30)>>(U20,T20)>>(U30,T20). I don’t think the research he cites says that this rankings *actually* holds, but merely states that there’s no contradiction there. That is, I’d rather pay 20 than 30 if everyone pays 20, but I’d rather we all pay 30 than all pay 20.

At that point, we just get into a discussion of *why* this is – is it because of “fairness” or a desire to “soak it to the other people.” As I said before, utility theory is not going to provide much help on that semantic question.

44

Scott Hughes 02.22.08 at 10:25 pm

Henry Farrell, I really enjoyed reading this post, even though I am not familiar with all the back-story. The ideas of collective action and inter-independence are interesting. But I think people pay taxes simply because they do not want to go to jail or upset their day-to-day lives, and I think the taxers tax people because they want the people’s money. While interdependence and collective decisions are complex and interesting, the example of taxes seems simple to me.

45

Sebastian Holsclaw 02.22.08 at 10:59 pm

a) I want taxes to go up and I am willing to pay more unilaterally. (As noted, people do this on occasion when they feel the government can use their money effectively, and when the collective good is continuous, such as funding a public university scholarship).

b) I want taxes to go up for myself and for everyone else. (As you note, this is also a common position – in the basic model I gave above, I fail to see how this position can come about other than from a desire for what you would call “fairness” and what Megan would call “soaking other people”, given that government spending is decreasing in my utility rather than increasing. Any discussion of, “well, the NOAA needs 6 billion and not $300 to operate” strikes me as inconsequential since we’re talking about marginal dollars here, and I’m quite sure NOAA could use the 300 that pushes them from 6 bln to 6,000,000,300 at least as well as they could use the 300 that pushes them from 12 bln to 12,000,000,300.)

c) I want taxes to go down for me and up for everyone else (this could probably be considered “soaking everyone else” by any participant here)

d) I want taxes to go down for me and down for everyone else.

This seems to be a fair way to describe how we are talking about the issue, but you are being too dismissive of the ‘soaking’ side of it in real life. You seem to be assuming a flat tax.

Once you add in progressive taxation the situation skews toward more people voting for tax parity or mild increases for themselves, and much larger increases for people richer than themselves.

46

Sebastian Holsclaw 02.22.08 at 11:00 pm

Hmm, the blockquote didn’t come in. I’m sorry. My comment starts at “this seems to be…”

47

Tim McDonald 02.22.08 at 11:03 pm

You are all full of yourselves and your opinions. And do not try to claim they are not opinions. If you cannot express it in numbers, it is not fact, it is opinion (cribbed from RAH).

48

Archie Gates 02.22.08 at 11:03 pm

Stop talking right now, Megan.

49

ian fairchild 02.22.08 at 11:20 pm

The notion that people are contingent cooperators with respect to the tax system is seriously naive. People pay taxes because they don’t want to go to jail, plain and simple. You don’t need to dress it up in the language of game theory to explain it. I’d love to see the level of revenue when people were free to enter a game where, on a continuous basis they decide the mutual level of cooperation . Until then, this whole discussion reeks of ivory tower bs.

50

anon/portly 02.22.08 at 11:23 pm

43: “I don’t follow that Henry’s research supports (U30, T30) >> (U20, T30).”

I could be wrong, but I thought that was the implication of this (from above):

“Scholz and Lubell … find that individuals’ willingness to pay taxes that they could probably fudge seems to covary with the degree to which they trust both government to do what is right and behave honestly and other citizens not to underpay their taxes.”

I.e. if everyone else if paying their 30%, I’d rather pay 30% than 20%, even if I could get away with paying 20%. Notice that they suggest this is a voluntary or revealed preferred trade-off, just like the one MM locates in the Virginia data.

Of course if the government announces a 10% tax break for the portly (or the simpering) then maybe I wouldn’t turn it down; I don’t think their point rules out (U20, T30) >> (U30, T30) if the U20 is perceived as legitimate.

Not only that, but Scholz and Lubell find that these factors seem more important to people’s decisions than the self-interested fear of getting caught cheating. This suggests, contrary to Megan, both that tax paying is in part a collective action problem and that people’s cooperation in this game is partially conditioned on their trust that other people are paying their taxes too.

51

anon/portly 02.22.08 at 11:25 pm

Sorry, last paragraph in 47 not in quotes and not supposed to be there.

52

x. trapnel 02.23.08 at 12:36 am

MM wants to say that the proper way to evaluate the $300 is to compare it to the value it would provide; $300 of NSF funding, say. If the liberal really thought $300 of NSF grants brought more value than $300 of personal consumption, why doesn’t she send the check off, etc.?

There are two things wrong with this.

1. You could just as easily see it as not providing $300 more spending but providing $300 less debt service and hence future taxation. That $300 would be spread out among next year’s taxpayers according to the tax structure. This is thus a transfer not merely to folks poorer than you but also to folks richer than you. And there’s nothing in the claim “I think another $300 would be worth paying for $300 more gov’t services” that entails “I think my $300 would be better off divided up among the USA in proportion to effective tax rate.” Leftists are far more likely, rather, to think it should be transferred to the least well off, and hence give to charities that do that.

2. Alternately, one could just see this as another case of the demandingness objection: sure, giving the $300 would probably be better, but there are probably a zillion equally better ways to spend the $300. But you can’t go through life calculating the utilities of everything: that way lies madness. The rational way to live is instead to cultivate appropriate habits that will achieve good outcomes. You set a budget for yourself, taking into account what you feel you owe others, and follow it. You should be ready to revise your views, perhaps reconsidering the appropriate tax rate at election time, and your charitable spending when you get a raise, that sort of thing. But it’s simple insanity to think you need to weigh every latte against a child starving in Africa. And it’s insanity of a peculiarly economistic sort to think a person “really thinks” lattes are more important than Africans on the basis of stuff like that.

53

Russell L. Carter 02.23.08 at 1:38 am

“This strange notion that government buys only public goods is totally not born out by the data. The overwhelming majority of government spending (look it up!) is on transfer payments.”

So what? Keeping old people and poor people, especially including children, healthy and fed is a fine public good. I’m all for it. Raise my taxes. And yours. (But only if it doesn’t go to “libertarian” supported wars)

“Once you add in progressive taxation the situation skews toward more people voting for tax parity or mild increases for themselves, and much larger increases for people richer than themselves.”

Moral hazard, I see. Where oh where did those Donner Party people go?

54

cure 02.23.08 at 1:48 am

Russell…I tend to overlook bad economics in the CT comments section, but the strange use of “public good” to mean “good for society at large” really should be stopped in its tracked. “Public good”, and the justification for providing it, refers specifically to a good that is non-rivalrous and non-excludable. Given that I could certainly exclude someone from using school or health care, and given that they’re consumption of school or health care is rivalrous, these things are strictly not public goods.

Further, it’s simply not true that transfers are simply helping the old and poor eat. I think that most moderate libertarians would be glad to keep transfers as long as they were means-tested. But functionally, transfers go to groups who have political power, not the groups who need them the most. I don’t know why this standard left-wing assumption about the role of special interests in government falls apart just because, say, the Realtors or the AARP are the special interest.

55

Russell L. Carter 02.23.08 at 1:58 am

Cure, I couldn’t care less about your definitions, given that you have a basic misunderstanding of the role of incentives on the issue under discussion.

How about I put it to in the way that will annoy you the most: You have earned an “I” in the course, and please see me during my office hours for the remedial workplan that will enable you to earn a passing grade.

Now after annoying you, you need to understand that I fully appreciate that special interest groups capture some large chunk of revenue. All I need to do to refute the notion that this is a dangerous situation is to simply point out that the US society as a whole is rich enough to fund endless war, to the tune of hundreds of billions of dollars a year, and from the mouth of George Bush, prosperity reigns.

56

Zarquon 02.23.08 at 2:06 am

Hey Rocky, watch me make his brain explode:

If you cannot express it in numbers, it is not fact, it is opinion (cribbed from RAH).

But where are the numbers? It looks like you’ve just given us an opinion, not a fact.

57

Henry 02.23.08 at 2:24 am

. Binary was perhaps an inelegant choice of words

That would perhaps be one way of describing it.

58

david 02.23.08 at 3:17 am

Henry, do you feel like Job? Your patience is remarkable.

Difference is, you brought it on yourself, I guess, by engaging.

59

olivaw 02.23.08 at 3:43 am

I think the issue can be clarified by some simple math.

Take a simple example, a society of two individuals, Tweedledum and Tweedledee.

$10 in taxes paid by Dum provides a public good that Dum values at (I assume) $9. Self-interested Dum will not voluntarily do this.

But what if the public good provided by taxes also provides Dee with $9 in benefits. Then the total benefits from Dum’s voluntarily paying taxes of $10 are equal to $18: $9 each for both Dum and Dee. Dum should do it from a social benefit standpoint.

And suppose that if $20 in taxes are provided, the value of the public good to both Dum and Dee goes up. It could double, or it could go by a lesser or greater amount. As long as it goes up by at least $1 for both Dee and Dum, it is true that

$20 in taxes is less than Benefit of more than $10 each to both Dum and Dee

(so that taxation has collective social benefits)

and if Dum and Dee each pay half of the taxes, Dum and Dee each benefit from the forced taxation solution:

$10 paid in taxes paid by either Dum or Dee is less than (greater than $10 in benefit to either Dum or Dee provided by public good costing $20)

So, both Dum and Dee would rationally vote for a compulsory taxation scheme of $10 each for a public good, while each would refuse to voluntarily pay a tax of $10.

This can be extended to more general cases.

60

geo 02.23.08 at 5:03 am

#30: …if you think that your contribution is a more optimal allocation of resources than the current one, there is no help needed from me; there is no collective action problem, other than satisfying your resentment at those you think are shirking.

Sorry, Megan, but as many people on this thread and Henry’s previous one have pointed out, the above is perfectly silly. No one thinks that the present tax revenue plus $300 from him/her is a better allocation of resources than the present tax revenue alone, when the goal is to address a multi-billion dollar problem. Why would anyone think such an absurd thing? Your doctrinaire methodological individualism has misled you. (And not only you, of course.)

By the way, “optimal” means “best possible,” so “more optimal” is a solecism.

61

notsneaky 02.23.08 at 5:17 am

“Got it???”

Whatever the merits of your position Henry this kind of asshole condescension is just uncalled for. Or at least have the balls to come out an say it.

62

ScentOfViolets 02.23.08 at 5:40 am

I don’t think this is true at all, notsneaky. There comes a point where either a)the person not getting it is seriously slow, and should have gotten the material long ago, or b)is miming incomprehension in rather coy, infuriating way.

In neither case is Henry’s two word question with the emphatic question marks inappropriate.

63

Dan Nexon 02.23.08 at 5:40 am

“Russell…I tend to overlook bad economics in the CT comments section, but the strange use of “public good” to mean “good for society at large” really should be stopped in its tracked. “Public good”, and the justification for providing it, refers specifically to a good that is non-rivalrous and non-excludable. Given that I could certainly exclude someone from using school or health care, and given that they’re consumption of school or health care is rivalrous, these things are strictly not public goods.”

The private provision of universal primary and secondary education does fall prey, however, to collective-action problems. Employers, for example, who benefit from an educated workforce will not pay for it because of the free-rider problem.

Indeed, universal primary and secondary eduction is, by definition, a non-excludable good with respect to the relevant population. Moreover, because a decision to provide universal education renders the good available to all children within stipulated age ranges, it is effectively non-rivalrous.

The fact that education, per se, is not a public good is irrelevant to what Russell has in mind here.

64

Ray 02.23.08 at 8:54 am

Isn’t Pledgebank an obvious example of the kind of thinking McArdle affects not to understand?
From the FAQ, “A pledge is a statement of the form ‘I will do something, if a certain number of people will help me do it’.”
A vote to increase taxes is a statement of the form ‘I will do something, if everyone will help me do it’.

65

Doug 02.23.08 at 12:16 pm

I thought the canonical adjective was McAddled?

66

Robert the Red 02.23.08 at 4:04 pm

McAddled type of “logic” exists to provide pseudo-justifications for vile actual policies. Since the actual base axioms are different than is actually stated, engaging the “reasoning” is pointless.

67

Sebastian Holsclaw 02.23.08 at 5:16 pm

“I.e. if everyone else if paying their 30%, I’d rather pay 30% than 20%, even if I could get away with paying 20%. Notice that they suggest this is a voluntary or revealed preferred trade-off, just like the one MM locates in the Virginia data.”

Again you are assuming a parity of tax rates which does not actually exist in the progressive tax plans of the real world. The real world works much more like Megan described, people may or may not mind mild increases in their own taxes but they would greatly prefer that rich people pay for much more (even on a percentage basis). They vote to have other people pay more than they want to pay.

(Or at least people who want more government. You could be middle class, not want more government and be for lower taxes for everyone, though even then I suspect you would have a preference for rich people to pay rather than you because everyone likes a free lunch.)

68

Righteous Bubba 02.23.08 at 5:24 pm

Again you are assuming a parity of tax rates

And you’re assuming static income. People who accept that they pay taxes also know they will have a higher rate if they earn more and a lower rate if they earn less.

69

cw 02.23.08 at 5:46 pm

“Once you add in progressive taxation the situation skews toward more people voting for tax parity or mild increases for themselves, and much larger increases for people richer than themselves.”

I don’t think people think about what other brackets are paying. When people think about taxes they think about them in a generic sense. The newspaper says taxes are going up and people take that to mean that taxes are going up on them. The tax code is so complicated that it’s really hard to figure out what your share of any increase is going to be.

Also, when you take in to account SS, sales and real estate tax, it is my understanding that on average everyone pays about the same percentage of income. I think this is something felt: we all feel taxed. Although I did notice the substantial extra bite the feds took when my mom moved up a tax bracket due to a one time payment.

70

cw 02.23.08 at 5:49 pm

Correction:

“Also, when you take in to account SS, sales and real estate tax, it is my understanding that on average everyone pays about the same percentage of income taxes.”

71

anon/portly 02.23.08 at 9:26 pm

68: “Again you are assuming a parity of tax rates which does not actually exist in the progressive tax plans of the real world. The real world works much more like Megan described, people may or may not mind mild increases in their own taxes but they would greatly prefer that rich people pay for much more (even on a percentage basis). They vote to have other people pay more than they want to pay.”

I don’t think that contradicts my general point. For lower-income taxpayers each lost dollar (to taxes) hurts more; if the tax system were not progressive then (assuming public goods benefitted all equally) you’d have lower income people wanting lower taxes and higher income people wanting higher taxes. Progressivity may not introduce a distortion so much as it eliminates one.

Note that even with the sweetened deal for lower-income taxpayers, there are still reasons why higher-income taxpayers (e.g. Gates and Buffett) may be the ones most in favor of higher taxes: they may also benefit the most from increases in public goods provision. (The benefit from private goods is decreasing at the margin, maybe).

I think my own suggestion that people (apparently) don’t turn down tax breaks – and frequently push the envelope on tax avoidance – already covered this point anyway. The research HF quotes to the effect that people want to pay their fair share may be a true description of the world, but maybe people want their fair share to be as low as possible.

72

Lee 02.23.08 at 11:55 pm

I think Megan’s revealed preference claim was one of the vulgar kind, but something much more interesting has fallen out of this back-and-forth. Check out Will Wilkinson’s take on it:

I accept Henry’s reasoning. But a lot of folks with roughly his politics don’t[…] [A]ren’t a lot of the people who think they should […] reduce their carbon footprint whether or not other people do, the same people who think tax rates ought to be higher as a matter of distributive justice? If so, then it seems like those people are logically committed to sending big checks to the government, or directly to poor people, whether or not other people are forced to.

73

Consumatopia 02.24.08 at 12:15 am

Again you are assuming a parity of tax rates which does not actually exist in the progressive tax plans of the real world.

Clearly, if you read above, the McArdle’s “logic” is intended to apply to any tax system at all, even per capita.

74

Russell L. Carter 02.24.08 at 1:11 am

“If so, then it seems like those people are logically committed to sending big checks to the government, or directly to poor people, whether or not other people are forced to.”

Yes. It is relevant to the original discussion that Will correctly notes that there is a choice. In fact there are a multitude of choices. And when deciding amongst these choices incentives matter.

75

Matt 02.24.08 at 1:25 am

There’s a fairly strong disanalogy in several of the things Will suggests in that those who support many of the cases he discusses think that the actions are independent moral wrongs. So, if I think killing animals is an independent moral wrong then this gives me reason to eat meat even if I don’t think this will make meat eating the general norm. Similarly, we might think that there can be no general moral duty to ineffectively make one’s self worse off (no duty to be a sucker), so if my paying more money to the government while others do not won’t bring about the change I seek but will make me worse off there can be no duty to do this. Both of these points seem to me to be missing in Will’s account and make it much less plausible and applicable.

76

de Selby 02.24.08 at 4:00 am

I can’t believe you cats are still talking after post #10. Wacky academophiles.

…it’s easily worth $300 to me to increase spending on basic science by $6 billion, but it isn’t worth $300 to me to increase spending on basic science by $300. So I’m willing to vote for the tax but not to make the contribution.

By the same token, it is worth whatever I spend on personal carbon reduction, in my own judgment, Will.

77

mq 02.25.08 at 6:48 am

I understand why people engage with McMegan, since she pipes a constant flow of crap to what is (for the web) a reasonable size audience. People like that should be shouted down if possible, ideally enough to lose their audience completely.

What I don’t understand is why people engage with her so earnestly and respectfully. Unlike at least some libertarians, she barely understands the first thing about economics, she’s too lazy to learn even the basics about the subjects she spouts off on, and she’s so glib that she goes on endlessly even after being disproven.

This particular example is telling enough. But the best one I’ve seen (I try to avoid reading her and only see her stuff when others link to it), was her disgusting post on Food Stamps, when she demonstrates by her usual technique McIntuition that the giving more Food Stamps to the poor is foolish because they are fat, lazy, and stupid and will just spend it on junk food anyway. All the while being too lazy herself to do even the five minutes of googling it takes to look up the extensive theoretical and empirical literature on exactly how Food Stamps affect spending habits. All of which (as usual with the facts) runs counter to the confidently stated conclusions she’s evidently made up out of whole cloth.

http://meganmcardle.theatlantic.com/archives/2008/01/why_not_food_stamps.php

78

Luis Enrique 02.25.08 at 10:36 am

There’s good deal of ugly sneering on this thread, and a lot of people assuming that they’re very much smarter than people they disagree with.

Also, it might be that Megan isn’t deserving of your snide derision as you think – or at least Knzn seems to think so

79

mq 02.25.08 at 1:40 pm

The snideness and sneering is justified. Either McMegan is stupid, or else she was being deliberately snide in her original post and sneering at those who disagree with her. One sees this pattern over and over again in her posts, and certainly in this case.

The entire argument that this is an argument over whether people want to see their own taxes raised or other peoples taxes raised is a distraction from Megan’s shallow, sneering original post. The public policy question, the question on the ballot, is whether *everyone’s* taxes should get raised. A “tax me more” fund with voluntary contributions has nothing to do with one’s “revealed preferences” on this issue.

The real underlying problem issue is that Megan, like a lot of libertarians, starts from the belief that taxation is morally illegitimate insofar as it is coercive. So if one votes for taxation there is a combination of a charitable contribution by the voter (morally legitimate) and an attempt to coerce a whole lot of other voters (immoral). So when she finds that people don’t want to make charitable contributions to government she puts up a snide little post saying “gotcha!”.

But the entire point of collective action is that the action *cannot* be split into my money and other peoples. Taxation is the act of defining the portion of everyone’s property that is owned by the collective. The justification for it is collective action problems in providing certain goods. You can agree or argue with that justification — there are a lot of issues with it — but that’s not what McArdle was doing.

A lot of Megan’s posts start with one of these sophomoric libertarian assumptions and then claims to “prove” it using an anecdote that actually does nothing of the sort. They’re snide because only an idiot would agree with the straw man argument implied by the claim she seems to be arguing against. I’m not sure if this is a reflection of her own shallow understanding of economics and libertarian theory or an attempt to bait her ideological opponents.

There are a lot of good libertarian arguments against taxation — you could argue that a lot of the goods government provides are not actually susceptible to collective action problems. Or (one that I prefer) that government is very poor at converting tax revenue into collective goods, and creates all kinds of unintended consequences when it tries. That is an empirical question that needs to be argued out case by case (ideally with evidence that goes beyond an anecdote about something somebody told you once, McMegan’s preferred source of data). There are plenty of thoughtful libertarians around who do this work (I read every issue of Reason, excellent mag). McMegan isn’t one of them. She’s basically like that guy at your college reunion who made some money in real estate and is contemptuous of those liberals who want to take it away.

80

SamChevre 02.25.08 at 2:22 pm

mq, of cource, manages to miss the point on the Food Stamp argument with stunning thoroughness.

The point was that it would be better to give the poor more money, rather than more Food Stamps.

81

Righteous Bubba 02.25.08 at 3:14 pm

The phrasing was a little less charitable than “give money instead of food stamps”:

5) The economy doesn’t need a food sector more distorted by daft government programs than it already is. If you want to give money to the poor, give it to them. Even if they spend it all on drugs, it will hardly be much worse than spending it all on increasing their already astronomical obesity rates.

What an idiot she is.

82

politicalfootball 02.25.08 at 4:04 pm

If “others” valued what I value, wouldn’t they all voluntarily contribute towards it, proportionately to my voluntary contribution?

We can turn this one over to Yossarian, who was altogether in favor of the Americans winning WW II, but didn’t want to fly any more missions:

…‘From now on I’m thinking only of me.’

‘But Yossarian, suppose everyone felt that way.’

‘Then I’d be a damned fool to feel any other way, wouldn’t I?’

83

mq 02.25.08 at 4:29 pm

mq, of cource, manages to miss the point on the Food Stamp argument with stunning thoroughness.

Wrong. McMegan missed the entire 50 year history of research on the cross-elasticity between Food Stamps and non-food purchases with “stunning thoroughness”. She, and apparently you, didn’t understand the elementary theoretical point that additional Food Stamps should be essentially a cash equivalent for those families that spend more on food than they receive in Food Stamps (this is usually part 2 of the canonical Econ 101 example on the inefficiency of Food Stamps, and used to divide A from B students on the exam). Most Food Stamp families are in this category, and extra “stimulus” benefits could easily be targeted to them.

She also missed the extensive empirical history of randomized social experiments that address the question of how close Food Stamps are to cash. The latest piece on this estimates they are worth about 82 cents on the dollar to the average recipient, and more to “unconstrained” recipients who spend more on food than they receive in stamps:

http://harris.princeton.edu/pubs/pdfs/468.pdf

Based on this, I would argue that increasing Food Stamp benefits to the working near poor only (who draw significantly less than the max allotment and therefore are quite likely to be “unconstrained”) would yield more than 90 cents in cash equivalent on the Food Stamp dollar to these recipients. Further, I would argue that there is no easy, quick way to get direct cash to this population with any kind of income verification, so Food Stamps is best.

Now, if Megan was actually interested in *thinking about the problem* as opposed to making a nasty little pseudo-libertarian slam at poor people and the liberals who loved them, she could have found this stuff out with a bit of googling. Then she could have drawn her own conclusions based on actual evidence. But she’s not in business to think about stuff.

84

Luis Enrique 02.25.08 at 4:37 pm

Mq

If we are arguing about whether [most] people would support higher taxes, levied on themselves and others, we just need to get people to put their money where their mouth is, and vote for it. This revealed preference argument is not a knock-down argument on that point, because people may be conditioning on “only if everyone else is paying higher taxes too”* as you and others point out (and I agree), but her revealed preference argument may be more suggestive about people’s true money-where-their-mouth-is-behavior than you want to credit. So there’s some talking at cross purposes going on. Megan thinks that her revealed preference argument suggests that when push comes to shove [most] people would not vote for an increase in their own taxes (as opposed to non-rich voting for tax increases on the rich), and even though you and I might vote for an increase in our own taxes, perhaps she’s right that a majority would not. If you interpret her as trying to ‘prove’ that nobody would vote for such an increase unless they already make voluntary contributions, then of course she’s wrong. [Re-reading her post, she does overstate her own case, and I may have erred by making a too charitable reading]

Regardless, even if she is mistaken or expressing herself poorly I don’t see why people can’t resist pouring scorn. There are plenty of economically illiterate left-wingers – would you suggest that other engage with them with the same level of derision?

* I’m not sure whether that’s a co-ordination problem as such, or just a sense of fairness. That bit of the argument I need to think about more.

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Righteous Bubba 02.25.08 at 4:54 pm

Regardless, even if she is mistaken or expressing herself poorly I don’t see why people can’t resist pouring scorn.

Oh well.

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mq 02.25.08 at 5:34 pm

There are plenty of economically illiterate left-wingers – would you suggest that other engage with them with the same level of derision?

If they had her prominent platform, consistently refused to do their homework, and were as snide and resistant to reflecting on opposing views…well, I personally might not be as derisive if I found their philosophy congenial, but I’d definitely understand if others were.

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not even an MBA 02.25.08 at 5:51 pm

@ 72
I’m not an economist, or even an MBA like Megan, but it seems that the theory “when people say that THEIR taxes are too low they really mean that RICH PEOPLE’S taxes are too low” is really proven by the progressiveness of the tax system. After all, most of the people claiming that their taxes are too low are in the lowest income tax bracket, no? I mean the only way I can get the homeless guy downtown to shut-up about marginal tax rates is to give him a dollar.

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Barry 02.25.08 at 5:59 pm

luis: “Regardless, even if she is mistaken or expressing herself poorly I don’t see why people can’t resist pouring scorn. “

I’d like to point out that (a) she has an MBA from U Chic, meaning that she should actually know something about how to do analyses like this, and how to explain them, (b) she boasts about her MBA, and about taking econ courses form Nobel Laureates, (c) she can be quite scornful in her errors, and (d) she ain’t J. Random Blogger, writing away in her spare time and energy; she’s now a columnist at a major magazine. Either this stuff is her job, and she’s botching it, or being a right-wing hack is her job.

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Luis Enrique 02.25.08 at 6:08 pm

Barry – maybe she’s a U Chic MBA full time columnist who just writes stuff you disagree with, as opposed to botching her job or being a hack?

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Righteous Bubba 02.25.08 at 6:17 pm

Barry – maybe she’s a U Chic MBA full time columnist who just writes stuff you disagree with, as opposed to botching her job or being a hack?

Gee whiz, Luis, you think she’s botched this one, so disagreement is out.

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Bobcat 02.26.08 at 1:08 am

If Megan is deliberately misunderstanding your point, then I suppose she’s worthy of your scorn. However, I have no idea why she’d do that. Do you guys think that she, on some level, knows you’re right, but goes on disagreeing with you because your point, if true, is too hard for her to bear? I.e., do you think she’s self-deceived?

Alternatively, you might think she’s really trying to understand your point but is not getting it. In which case one could, I suppose, draw the inference that she’s stupid. Do you think she’s stupid?

Alternatively, you might think that she’s neither stupid nor self-deceived, but just likes getting into arguments with people, and doesn’t particularly care if she’s right or wrong. So do you think she’s just picking a fight?

Finally, the fourth option is that she has lots of stuff to do, and doesn’t have as much time to spend on this point as you have. So perhaps she’s just being lazy, or perhaps she’s rationally deciding not to spend very much time on this point?

Is there a fifth option? I don’t see it, but I didn’t think too hard about it, because I have a couple of other things to do.

Near as I can tell, if either of the first two options obtains, scorn isn’t the proper reaction to take. Certainly if she just can’t get it, you shouldn’t attack her character. When you might people who aren’t as smart as you, do you take this to be a moral defect? Regardless, do you insult them and make fun of them for being less intelligent than you? If so, do you think that’s morally defensible?

As for the third and fourth options, those probably do merit scorn (although the fourth one less so), but I don’t see anything in her behavior that makes me think either one applies to her. I’m guessing that option 1 is what’s going on here. But I think scorn will just give her more reason to maintain her self-deception.

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Righteous Bubba 02.26.08 at 1:56 am

I’m interested that Megan has defenders interested in her feelings. Does this interest apply to the feelings of Jonah Goldberg or David Horowitz?

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Righteous Bubba 02.26.08 at 1:58 am

What a shitty writer I am. Do I deserve the scorn I pile on myself?

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mq 02.26.08 at 4:28 am

Here’s the problem: our intellectual life is being infested by propagandists. This is a problem, because propagandists corrupt discourse.

Megan McArdle is a propagandist and not an intellectual. But intellectuals tend to engage with her as though she argued in good faith.

Obviously one can be a partisan of a particular view while remaining an intellectual, being genuinely interested in encountering new evidence, including evidence that contradicts one’s view, modifying ideas based on new evidence, and so forth. There are plenty of really interesting libertarian thinkers out there.

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Barry 02.26.08 at 12:43 pm

mq, nice summary.

luis, you might want to read the actual post and comments, before posting your comment. Megan had been totally trashed in her first posting, mentioned here – and then dug herself deeper with her latter post.

Heck, just go to her first post on this, and see what her normally right-wing chorus said about it.

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David W. 02.26.08 at 2:57 pm

There are plenty of really interesting libertarian thinkers out there.

Interesting, perhaps. Really interesting, not so much.

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