Wednesday, September 25, 2013

Caplan on Coercion

My great friend Bryan Caplan offers an excellent public choice critique of standard theories of taxation. He raises an old question: "why does the sovereign direct tax collection and regulation towards firms rather than individuals?" The standard, Coasean answer is "transaction costs." It's quite difficult to coordinate the efforts of a bureaucratic apparatus towards the great mass of humanity.

The common-sense rejoinder is obvious if you've spent any time studying East European political history: get citizens to rat on each other. It might even pay bounties (which work remarkably well for criminal scofflaws) to enforce regulatory compliance. Caplan says that this sort of Stazi/KGB/Brownshirt menace would be universally reviled among freedom-loving Americans.

Maybe that's true. My experience with nosy neighbors suggests that Bryan might be slightly off the mark, but overall I think he's got a pretty good point. Of course if you would have told me in 1911 that Lithuanian children, residents of one of the most freedom-loving nations in the history of European Civilization, would one day come to snitch on their own parents, I probably would have thought you bonkers. People can adapt to surprising conditions, even famously tolerant Balts, even famously independent Scots-Irish migrants.

At any rate, if I'm reading the literature right, there does appear to be evidence to suggest that the technology for citizen enforcers exists even without any frog-boiling. Immigration. Sniderman &al have a 2004 paper in the APSR called "Predisposing Factors and Situational Triggers: Exclusionary Reactions to Immigrant Minorities" that concludes that native residents are all too happy to invoke exclusionary measures against outgroups. There's a small flotilla of similar studies with similar results.

As a euvoluntary exchangeur, this should bother me. Undue, citizen-led state coercion dams the river of trade, shrinking the trout pond in which we angle for those voluntary arrangements that make us all a little better off each time. As a game theory dabbler, it's actually kind of a relief. Why? Because the folk theorem can also support an equilibrium with more open borders and lower overall regulatory and tax burdens. For at least marginal improvements in this direction, ask yourself if New Zealand, Hong Kong, and Singapore are all just bizarre flukes, isolated island (or peninsular) nations with no great lessons to teach the rest of the world. It might be that that's the case, and their relative freedom of association or lack of coercion or whatever you want to call it is strictly a product of historical accident, irreplicable elsewhere, but I again urge you to consider that Lithuanian schoolchild. If a 4th grader in 1971 can cheerfully yak about the anti-state sentiments of mom and dad to the KGB whereas her daughter in 2001 would find the very notion alien and probably a Paul Bunyanesque tale of fancy (not kidding here folks, these are my relatives I'm talking about), then it's not beyond belief that the US could move in the direction of a stable equilibrium of more immigration and lower regulation.

How to get there? I'm afraid I'm still, to my shame, unable to give Andrea a satisfying answer.

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Do you have suggestions on where we could find more examples of this phenomenon?

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