Didn’t you write a recent entry about price gouging?

I did, but I don’t see the connection. Water supply is a private goods issue, welfare is a public good.

So most people can be temporarily unhappy with the supply of welfare but, if the pragmatarian market is allowed to freely function, then the supply should quickly adjust to meet the demand. When that happens most people will be happy with the supply of welfare.

One of the problems with implementing pragmatarian principles is that there are multiple levels at which the allocation decision can be made:

  1. I can be led by the absolute amount of my (equivalent) resources — this is the $2,000 you introduced
  2. I can be led by the relative proportion of my (equivalent) resources (e.g. I allocate 20% of my tax).
  3. I can be led by the total amount of all tax money raised to be allocated — i.e. I allocate a fraction of my tax that gets the total as closely as possible to the $2 trillion I think welfare requires
  4. I can be led by the relative proportion of the tax take to be allocated — i.e. I allocate a fraction of my tax that gets welfare allocation of all tax revenue as closely as possible to the 20% I think is a fair proportion to go to welfare
  5. I can be led by what my fellow citizens allocate (e.g. I allocate 10% more than the average tax payer)

These may, or may not be equally important to me, and may or may not be consistent with each other.

Would Bob really be happy if the total amount of money spent on welfare exceeded his preferred amount by one trillion dollars? He must perceive that the trillion dollars is more needed elsewhere… maybe public education. It’s unlikely though that most taxpayers would be unhappy with $3 trillion being spent on welfare. Or, if they were unhappy, they’d adjust their individual spending accordingly, which would improve the total amount spent on welfare… and result in the happiness of most taxpayers.

Perhaps. The issue I pointed out is that free riding is perfectly possible in pragmatarian markets for public goods too. Bob thinks welfare is important, and would be willing to spend $2,000 to fund it, but it is already being made available, so he’s not contributing, and enjoying something he finds important without signalling how important it is. This is what I tried to illustrate higher up: points 1 and 3 are not in line.

Every taxpayer individually adjusting/improving their own tax allocations must result in a distribution of tax dollars that maximizes total taxpayer happiness.

Perhaps, but that may come at the ‘cost’ of individual tax payers contribution not reflecting the relative importance of each budget item… something that is quite central to pragmatarianism, isn’t it?

If Bob thinks $2,000 of his taxes should go to welfare, but he’s allocating it all to transport because he believes his fellow citizens are allocating too much of their taxes to welfare, then he is sending out a message that does not coincide with his preferences. That seems to be corrupting the pragmatarian concept.

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Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

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