Saturday, April 11, 2009

Public Entrepreneurship

Just recently the Champaign County Libertarian Party had the opportunity to have a discussion with Joseph T. Mahoney on his collaborative paper (written with Peter Klein, Anita McGahan, Christos Pitelis) about “The Economic Organization of Public Entreprenership”.

I created a podcast of the discussion in AAC format that is available here (6.2 megs, one and a half hours), as well as a google video version which is viewable below:

Among topics discussed were Arrow's Impossibility Theorem, Coase's Theorem, and how the government's role can be to enhance the wealth of nations as opposed to destroying it through the harnessing of entrepreneurship in the public sphere. Some specific examples are thrown in, as well as how the topic related to local politics in Champaign-Urbana.

Some of the arguments were new to me, some of them being more from a utilitarian-libertarian point of view than a deontological-libertarian view. Also, the paper is based upon a minarchist view of the world--that is to say, it assumes that a government will exist. It is a pragmatist idea of how to improve government that could appeal to both conservatives and liberals I think.

For instance, the typical small-government view is that government inaction is better than government action. However, imagine the following hypothetical. A community is under imminent danger from an objectively demonstrable threat (a natural disaster, the collapse of a bridge, etc.). The private parties that make up this community cannot all agree on a plan to remedy the situation. In this case, the government stepping in doing something would be preferable to doing nothing, as a haphazard solution would be better than total disaster. If the government solution is unpleasant enough, or would take too long to implement, this would stimulate entrepreneurs to come together with a plan for the public good. More often then not this plan is more effective, faster, and more efficient than the government plan, and more appreciated by the public as it doesn't involve increased taxes or regulation.

There are surprisingly many instances of this happening, in light of the bungling done with the bridge collapse in Minnesota and Hurricane Katrina at the hands of the government. Just recently I was forwarded an email on how citizens and businesses built a bridge in Hawaii because the government was unable or unwilling to do it. Not only did it get done faster, but much cheaper than the projected cost. Not only that, the cost did not result in increased taxes or government debt--it was absorbed by the businesses who would benefit from the repaired bridge. The "free rider problem" in this case was averted. There are other examples of course, such as citizens volunteering to sandbag an overflowing river. Their efforts not only save their own property, but help save the property of their neighbors as well.

The only downside I can think of, is that while public entrepreneurship is better than a government solution due to government's use of force, is that it sometimes requires the threat of force. In other words, action is only taken because the government bureaucracy's solution is more feared. This of course is tied into legitimacy of the government's force (see: Arrow's Impossibility Theorem), which may be called into question if the democratic process is absent or easy to manipulate--the paper discusses this issue in some detail.

Overall it was a fascinating topic that I think will gain more traction as people realize that the government isn't very good at creating value or solving things--and we may have to rely on ourselves and our neighbors.


Pete said...

It seems unlikely that a Stateless situation would remain that way for any length of time, and so any discussions about theoretical anarchy is amusing but unattainable.

"The only downside I can think of that action is only taken because the government solution is more feared."

By feared, I assume you mean because of the horrible inefficency and cost. Is that really a downside? For most things, I actually see this as a positive! Since everyone agrees that a plan and some action must be taken, government gets the job done - albeit in a totally different way. Example:

The reason why many people settle financial disputes outside of court - by hiring private negotiators - is because going to public court is so undesirable, inefficient, and requires the hiring of expensive bloodsucking lawyers.

In early America, the people were actually encouraged to settle financial disputes out of courts, partly by making it so tedious on purpose.

Civil court is the measure of last resort - the WMD that nobody wants to use unless they have exausted all other solutions.

Normally, any agreement reached during private talks can't really be enforced. So the major motivation to try and follow through with your side of the agreement - is that you know talks could degenerate into using the WMD.

Just like with real nukes, both sides being armed with them actually maintains the peace. Nobody wants Mutually Assured Destruction.

Using government in this way actually compliments free market solutions to problems and gives even more incentive to use them. Is that so bad in the end?

Without the presence of tedious government courts, private talks would not have the same productive power that they do.

If you're going to have government, make it so shitty that nobody will turn to it for help.

Pete said...

Oh, and a compromise to the Tax Problem could be to de-criminalize tax debt, so that your taxes become similiar to your other bills. You can't go to jail for not paying a bill, or for being in debt, so the same should apply to your taxes. Debtor's prisons have been abolished for how many centuries now?

This way, if you refuse to pay taxes, the worst that the IRS could do is deploy angry letters and annoying phone calls - and maybe hurt your credit rating. All much better than going to jail.

Unknown said...

If tax debt is decriminalized, I'm sure very few people would pay taxes... then again this would force jurisdictions into competing towards more streamlined services and taxation. Taxes would become either extremely low, or be transformed into point-of-sale fees or automatically paid when people use credit cards or ATM machines.

However, I am not optimistic that government would decriminalize tax resistance, unless huge segments of the population started committing civil disobedience or even rioting. People still live in fear of an IRS audit and the marshals taking their stuff.

Speaking of which, are you going to one of the Tea Parties cropping up at a town near you?

Pete said...

I haven't seriously planned on going to one, I'm not even sure when and where they will take place at the moment.

Are you going? Will there be a Tea Party down in the sticks where you live or would you have to come back here to the civilized inner planets?

I might decide to join you if you are planning on going to one.

Unknown said...

My better half will be attending the local Tea Party, as I'll be working in debt-servitude for The Man.

As for Chicago, you may obtain more information here:

Peeet said...

You pleb!

Xerographica said...

So what do you think would happen if donations to government organizations were 100% tax deductible?