Economics

You Can't Force Economists to Think Seriously About Coercion

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Economist Daniel Klein over at Cato Unbound argues that it's OK–in fact, often essential–for economists to deal with the concept of coercion in their science. "The distinction between voluntary and coercive is built into many of the key analytic distinctions we use in economics," he insists. The essay is long and detailed and worth reading in full, but for those who like to leap to the conclusion:

Economic understanding, by experts and the general public alike, would gain by economists doing more of the following: (1) using the voluntary/coercive distinction in their formulations, analysis, and discourse; (2) making that utilization explicit and unabashed; (3) thinking hard about the content of that distinction, particularly by clarifying the holes and gray areas; (4) making it clear that, while they may promote a presumption of liberty, they do not mean to suggest that the distinction carries a necessary condemnation of coercion.

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  1. they do not mean to suggest that the distinction carries a necessary condemnation of coercion.

    I can hardly wait to read the scholarly article that states “The authors do not mean to condemn threats of murder and mutilation as mode of economic discourse, agreements to refrain from murder and mutilation as an economic exchange, or the use of murder and mutilation as a competitive technique in the marketplace . . . . “

  2. This still needs to be said? I thought this was one of our (latter 20th century) wins…

    I could go for a cold one.

  3. In the very few and very far between cases of actual market failure in economics, coercion may offer the most economically efficient solution.

    Klein is noting that the coercion aspect of such solutions is downplayed or not even considered coercion at all. It seems to me that bringing the notion of coercion to the fore will only raise the theoretical bar for using it and be an overall plus for liberty.

  4. Glenn Whitman has some good comments on this at Agoraphilia.

  5. You Can’t Force Economists to Think Seriously About Coercion Anything

    There, fixed that for you Brian.

  6. In the very few and very far between cases of actual market failure in economics, coercion may offer the most economically efficient solution.

    This is true more and more often, especially in DC and state halls across this great nation. After all, who wants to wait around for the market to find a solution through trial and error and creative destruction, when the powers have a half-assed fix and the guns to back it up.

  7. After all, who wants to wait around for the market to find a solution through trial and error and creative destruction, when the powers have a half-assed fix and the guns to back it up.

    This is a different issue from what I brought up. The issues being addressed by legislatures are almost always not market failures, and therefore run counter to economic findings whether or not one considers coercion.

    In other words, DC and the state halls are legislating economically inefficient solutions to pretended problems. It’s coercion for coercion’s sake.

  8. It is worth noting that, as technology and social organization advances, the number of actual cases of market failure decreases.

    To take one example, the advent of digital broadcasting now means that radio and television are no longer public goods. Those signals can now be sent encrypted and subscribers can pay for the necessary decryption in their receivers. Most of the pretended justification for the FCC vanishes with this eventuality. But, to Hugh’s point, don’t hold your breath waiting for the coercion of the FCC to disappear.

    As another example, the ability to place transponders in cars now means that roads are no longer a public good. Users of a road can be charged for actual use with market pricing, and the coercion of taxes on gasoline or general funds to pay for transportation is no longer required.

  9. MikeP

    Good points, as usual.

    User fees on roads based on your model are certainly something that should be kept in mind in any policy of CO2 taxation.

    Might encourage more efficient urban design (if paired with intelligent reform of zoning rules).

  10. If CO2 taxation proves necessary, it should apply per-gallon, effectively replacing the present transportation tax on gasoline.

    Interestingly, since pricing roads by actual use will make road consumption more efficient, road use would likely go up compared to today with more miles traveled. This will be somewhat offset by decreasing traffic congestion, which would lower the amount of carbon burned going nowhere, increasing actual miles per gallon.

    And, since people will get where they are going more quickly without sitting in unpleasant traffic, maybe they will more often choose smaller cars or manual transmissions.

  11. It is worth noting that, as technology and social organization advances, the number of actual cases of market failure decreases.

    Yet government gets larger. Its almost as if the people pushing for bigger government aren’t really trying to fix market failures, but have some other agenda in mind.

  12. MikeP,

    As another example, the ability to place transponders in cars now means that roads are no longer a public good. Users of a road can be charged for actual use with market pricing, and the coercion of taxes on gasoline or general funds to pay for transportation is no longer required.

    Taxing fuel per gallon already has this effect, plus the less efficient users are taxed more, the heavier are taxed more (if you are driving inefficiently you use more fuel and pay more tax per mile, you see).

    If CO2 taxation proves necessary, it should apply per-gallon, effectively replacing the present transportation tax on gasoline.

    Then why don’t we just give it a new, silly, non-descriptive name now and be done with it since we already have one?

  13. Taxing fuel per gallon already has this effect

    A tax on gas is at best a poor proxy for the costs of using a road. It is vaguely proportional to those costs, but it does not allow variation for the quality of the road — e.g., more gas is used per mile on city streets even though they cost less — or for the congestion of the traffic. Furthermore, since the gas tax is collected and spent by government, it is not conducive to free competition from private road providers.

    plus the less efficient users are taxed more, the heavier are taxed more (if you are driving inefficiently you use more fuel and pay more tax per mile, you see)

    How “efficiently” you drive has little effect on the costs to the road or to the other drivers on the road — certainly no effect that is more than slightly related to how much gas you burn per mile.

  14. “Interestingly, since pricing roads by actual use will make road consumption more efficient, road use would likely go up compared to today with more miles traveled.”

    Not sure that this follows.
    Many roads are currently built to remote locales that may not be able to fund themselves with a reasonable user fee. This is as likely to increase density, and reduce the need to travel those longer miles as anything else.

    If you make users fees pay for a road from anywhere to Jal, NM you will be splitting the cost between a very small group of people. The fees would be hugely expensive.

  15. If you make users fees pay for a road from anywhere to Jal, NM you will be splitting the cost between a very small group of people. The fees would be hugely expensive.

    Jal’s actually not the best example since it’s at a crossroads, but I get your point.

    However, since the road that goes nowhere but the remote small town is traveled so little today, totally eliminating those miles because of market pricing of roads will have little impact on total miles traveled on the nation’s entire road system.

  16. And for those who worry that — under market pricing of roads — there will be no road to some productive location in the boonies, consider that the owner of the mine or ranch can include the cost of the road in his total costs and not charge the entirety of that cost to the users of the road.

  17. A mathematician’s view…

    That article is egregiously trite, as well as pretty good evidence that at least one mathematician is not an expert in climate science, economics, or public policy.

    To finish out his lame analogy, the present proposals under discussion have us in 50 years performing half the number of dial twists per day — not stopping twisting the dial. And if anyone tries to twist the dial more than his ration, the state will take away some of his candy. If he refuses to give up some of his candy, the state will imprison him. If he resists going to prison, the state reserves the right to kill him.

    Just to bring this all back to coercion…

    By the way, do you have a link to the article where this mathematician turns his expertise in small and large numbers to the long run costs of Medicare and Social Security?

  18. In the very few and very far between cases of actual market failure in economics, coercion may offer the most economically efficient solution.

    My point was that efficiency is not the highest standard by which a policy, or indeed any action, is to be judged. There are probably good reasons that coercion is wrong beyond “this usually costs too much in the long run.”

  19. It is vaguely proportional to those costs, but it does not allow variation for the quality of the road — e.g., more gas is used per mile on city streets even though they cost less — or for the congestion of the traffic.

    They obviously cost less because they are the most horrible roads in America. I have been on better dirt roads in Georgia than the paved roads of DC, Philly and Manhattan.

    My contention still stands. Crappy fuel mileage in the city equals more tax per mile paid from less miles per gallon of fuel.

    A semi on the highway uses more gallons per mile and pays more per mile in fuel taxes.

    Also, on that CO2 business, each gallon makes about the same amount of CO2 and each gallon is taxed equally. If you only get 10 miles to the gallon then you pay more CO2 tax, already, per mile than someone getting 50 MPG.

    It really sounds like you just want a new excuse for another tax. Just come out and say so.

  20. It really sounds like you just want a new excuse for another tax. Just come out and say so.

    I appear not to have communicated very well.

    I don’t want another tax. In fact I want to get rid of transportation taxes. Now that road usage can be handled as a private good, I want it charged as a private good. The gas tax for transportation should vanish, as should all claims for road funding from general funds.

    The CO2 tax is a completely — and I mean completely — separate animal. If — and I mean if — such a thing proves necessary, then it should apply to gasoline like any other fossil fuel, with the proceeds doing whatever Pigouvian purpose is desired. However, the tax needn’t go to roads because roads can be paid for by transponder.

  21. However, the tax needn’t go to roads because roads can be paid for by transponder.

    Ah, shilling for Big Brother 🙂

  22. Ah, shilling for Big Brother 🙂

    The transponder can be either account based — trackable by the Man just as is any credit card — or an anonymous one filled ahead of time with cash. With a little attention to privacy, the latter could be accomplished with no identifying characteristics at all.

  23. The problem with condemning coercion on purely principled grounds is that coercion is already supported by libertarians in many areas: coercion to support negative rights, contracts, fight fraud, etc. If the argument is about the initiation of force, that’s all very well and good, but that’s shifting the goalposts (and never mind that ‘the initiation of force’ needs further elaboration as well for not all things we accept as crimes can be said to strictly count as ‘force’). If the argument is that coercion should be minimized then that’s fine, too, but also a different sort of argument. Simply equating coercion with all forms of violence such as murder is conceptually simplistic and flawed.

  24. “Jal’s actually not the best example since it’s at a crossroads, but I get your point.”

    Yeah, all that cross traffic between Kermit and Hobbes will make a big difference. The other road IS the road to Jal.

    “And for those who worry that — under market pricing of roads — there will be no road to some productive location in the boonies, consider that the owner of the mine or ranch can include the cost of the road in his total costs and not charge the entirety of that cost to the users of the road.”

    And this is why I don’t think it will result in more miles traveled. The costs of travel would be more directly linked to the activity that requires them. Development patterns would favor higher density to avoid that cost (relative to current patterns).

  25. Your view of the mathematician’s view…

    “To finish out his lame analogy, the present proposals under discussion have us in 50 years performing half the number of dial twists per day — not stopping twisting the dial. And if anyone tries to twist the dial more than his ration, the state will take away some of his candy. If he refuses to give up some of his candy, the state will imprison him. If he resists going to prison, the state reserves the right to kill him.”

    You are off a bit here.

    It would be more like putting some of the shock into the dial so that you share some of the pain when you turn the dial. Or taking away some of your benefit now.

    There is nothing about rationing in any of the current proposals I have seen.

    I find it funny that you would follow an accusation of triteness with “If he refuses to give up some of his candy, the state will imprison him. If he resists going to prison, the state reserves the right to kill him.”

  26. Well, it is a thread about recognizing coercion in economic theory. Whenever a power is handed to government, no matter how benign in appearance, the final pragmatic basis of that power is the fact that the government can kill you without societal reprobation.

    As for triteness, I at least didn’t mention the marvelous conclusion…

    The inconvenient truth is that the electrodes are attached to the heart of our planet.

    …until now.

  27. MikeP,

    Indeed that last line was a groaner…

  28. “the final pragmatic basis of that power is the fact that the government can kill you without societal reprobation.”

    An axiom that lacks veridicality, but it is an axiom I see slung about here, so certainly many buy into it.

  29. Oh, very few people are stupid enough to push the government that far. But by the time it gets to that point, it doesn’t look like, “Local man killed for not paying carbon tax.” Rather it looks more like, “Police kill unstable man in shootout. Children unharmed. Dog dead.”

  30. MikeP,

    Again, a nice story, but not true at its core.

    Repeating it doesn’t improve its connection (or lack thereof) to reality.

    It is this last part,

    “without societal reprobation”

    That is the core of the problem.

  31. This thread typifies why Libertarians are considered to be on the lunatic fringe.

  32. Which part of the thread?

    Suggesting that social and technological advances lead to the ability to privatize more relationships, and therefore fewer public goods issues?

    Or noting the rather obvious fact that what makes government different from voluntary associations is that it can force individuals to behave a certain way, even over their vociferous or even violent opposition?

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