February 22, 2008


Henry Farrell fires back with the delightfully titled McMuddled:

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.

We seem to be talking at cross purposes. Henry seems to be treating tax revenue, rather than the things it purchases, as the collective action problem.

I concede that there is a collective action problem in providing actual public goods, like the military and statues of politicians on horseback; that is why I am not an anarchist, or even a minarchist. There is also a collective action problem in setting up a tax system in the first place; people will not participate if they think other people are not participating. This is one of the many problems with the budget of Eastern Europe.

But if you think that you have more money than is fair–money that the government should, by rights, be using for some more noble purpose–then there is no collective action problem. You can send the money to the government. They will spend that money on either actual public goods, or things that you think should be paid for out of the common weal. (Or at least, they will do this to exactly the extent that they would if you plus 20 million of your fellow citizens were forced to send them money via a new tax bill.) There is no strategic value to withholding the money from the government; your fellow citizens are not going to say to themselves, “Oh, Henry’s paying extra, so I guess it’s okay if I vote for McCain.” There is no interactivity here. You, alone, can secure more public goods by putting your extra dollars in the treasury–exactly as many public goods as your dollars will secure if you vote for a politician who extracts that tax money, plus the same amount from other similarly affluent people, via the tax code.

I suspect that Henry is trying to get, not at an actual collective action problem, because there isn’t one, but the moral intuition that we appear to have evolved in order to resolve these collective action problems at the small group level. We refuse to contribute unless everyone else does out of the sense that it’s unfair for us to do it alone. But it seems to me that if you believe that there are serious distributional injustices in our society that your extra tax dollars ought to be out there resolving, then those distributional concerns should override your resentment at those you feel are shirking their duty. There is simply no strategic benefit to withholding your extra taxes when the tax base numbers in the millions. Essentially, if you think your taxes should be higher, but won’t contribute unless everyone else also does, then you are saying you are willing to punish the neediest members of society for the sins of its more affluent members.

Which just takes us back to where I was before: people aren’t interested in increasing their own taxes; they’re willing to pay to increase other peoples’ taxes. These are not the same thing.

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