I did, but I don’t see the connection.
Koen Smets

Bob believes that taxpayers are allocating too many tax dollars to welfare? This means that he perceives that welfare has enough money. In this case, why would he think that $2,000 of his own taxes should also go to welfare?

We aren’t mind-readers. In this scenario we can pretend that Bob’s true preference is to allocate $2,000 to welfare. But in reality all we could see is that he allocated $2,000 to transport instead of to welfare. We either conclude that Bob is confused/crazy… or we conclude that he perceives that transport needs the money more than welfare does.

A pragmatarian market would give Bob the option to use his tax dollars to help clearly communicate and prove which public goods shortages concern him the most. We can reasonably guess that he wouldn’t randomly allocate his tax dollars. He must have some information which leads him to believe that transportation is a priority. A pragmatarian market would incorporate and integrate his information.

It’s entirely possible that his information is faulty. But if people’s information is generally less reliable than the information that a small handful of government planners have, then this wouldn’t just throw pragmatarian markets out the window… it would throw markets in general out the window. We really wouldn’t want people helping to determine the distribution/allocation of society’s limited resources if the information at their disposal is less trustworthy and accurate than the information at the disposal of their elected leaders.

Regarding the issue of free-riding… it’s only a problem when it results in a shortage. If Bob doesn’t perceive that there’s a shortage of welfare then there’s no problem if he doesn’t allocate any tax dollars to it. And if he doesn’t allocate any tax dollars to welfare then, from the economic perspective, we would say that, in that unique time and circumstance, there are other public goods that are more important to him… such as transport.

In a sense food is very important to Bob. But this doesn’t mean that he eats all the time or always spends his money on food. In many cases food isn’t a priority for Bob. Sometimes clothes are a priority… or books… or furniture… or… it’s a long list.

Let’s say that Bob tells us that welfare is important but he never spends any of his tax dollars on it. This kind of importance is useless to us. What matters is the kind of importance that’s based on his actual tax allocation decisions. These sacrifices that he is truly willing to make reflect/reveal his actual perceptions of scarcity/shortage… assuming that he isn’t crazy.

I can say “Let’s gag Bob!” or “Let’s blindfold him!” or “Let’s bind his arms and legs!”. But unless he’s a criminal we generally want him to be able to respond to, and signal, significant changes in his environment/circumstances. Free-riding is only a problem to the extent that his responses and signals don’t accurately reflect significant changes in his environment/circumstances. If Bob sees that more people need welfare, and he perceives a significant shortage of welfare, but he doesn’t respond/signal accordingly, then this is a problem. In this case Bob is essentially a defective member of society. He’s not substantially (via sacrifice/spending) informing the rest of society of a change in his environment that he truly perceives is significant.

In the absence of compulsory taxation then Bob’s incentive to not respond to, and substantially signal, the significant change in the necessity of welfare is that he can spend the money on things that only benefit him. This strong incentive is eliminated by making taxation compulsory. Then he has absolutely no reason to not use his tax dollars to respond to, and signal, significant changes in his environment involving the need for welfare and other public goods.

If Godzilla starts rising up from the ocean, and Bob happens to see this, then he might as well signal the significant change in his need for safety/security by allocating a serious amount of his tax dollars to national defense. The more people who do so the more quickly that society as a whole will utilize its collective strength, intelligence, information and other resources to defeat Godzilla. In this case Bob would be an effective member of society.

We should want every citizen to be an effective member of society. But in order for this to happen we need to replace all non-markets with markets.