Sunday, 13 July 2014

Leviathan, Inc.: Why We Ought to Pay Taxes

     In the previous post, I argued that law exists for the purpose of increasing the freedom of those bound by it, and I spoke of a liberty dividend, the net gain in liberty that we receive in exchange for the freedoms we surrender. In this post I want to further explore the analogy of the State to a business corporation.

     A corporation is an artificial legal person. It can own property, enter into contracts, and exercise various other legal rights. Unlike natural persons, however, the corporation is owned by its shareholders. Yet it is important to remember that the assets of the corporation itself are the property of the corporation; just because you're a shareholder in the Coca Cola Company doesn't mean you can help yourself to free Cokes at the local bottler. Rather, you own a stake in the enterprise as a whole, which means that you get a say in how it is run. (Which means that if you want free Cokes, you need to elect a board of directors who will implement a policy to give away free Cokes.)
     There are lots of reasons to form a corporation, but most importantly for this discussion, a corporation allows one to undertake large projects beyond the capacity of any individual. If a bunch of entrepreneurs wanted to build a ship to engage in merchant trade, it would be prohibitively unwieldy for each to manage their own portion of the investment, hiring the shipyard and crew and buying materials and cargo and fuel and supplies. It's much easier to simply pool all the money, and appoint someone to coordinate the whole project and delegate responsibilities. And by constituting the enterprise as a separate legal person, the investors can greatly simplify the dealings with customers, contractors and clients.

     Now, the state differs from a typical business corporation in several respects. For one, you don't get much of a choice as to whether or not you invest your liberty with the state. You may have the option to emigrate to a different state, but wherever you go you're going to be subject to the local laws. As I argued in the previous post, it's actually a good investment and you ought to welcome it, even if you're not practically free to refuse.
      For another, you buy shares in a business corporation with money, which means you can own multiple shares, and that entitles you to multiple votes when electing the board of directors. The investment we make in the State for our shares is not money, but the liberty we surrender to its laws, and since each of us in principle surrenders the same individual sovereignty, each of us should have exactly one share; no one's vote should count for more than anyone else's.

     But our liberty need not be the only thing we invest with the state. There are various sorts of things which we can think of as collective assets, valuable finite resources that all of us have moral claim to but which cannot be conveniently divided up into individual shares. It makes sense to manage these resources as a single unit, on behalf of the people collectively. Governments already do this for many resources when they allocate radio bandwidth, establish fishing quotas, and charge royalties for logging and mining.
     It's true that there are some laissez faire ideologues who believe that all collective assets should be divided up and owned privately, and that a robust private law system (i.e. torts and contracts) would be sufficient to resolve the conflicts that would arise. But that would require an ideal world like the one of introductory high school physics, where the absence of friction and air resistance makes almost everything seem possible. In the real world, rivers flow and the wind blows and what I do in my allotment of ocean will unavoidably spill over into yours. In fact, it's a good thing that air and water circulates around the planet, as that's fundamental to keeping our ecosystems functioning. Sorting out who has rights to what would actually call for much more government involvement (in the form of courts hearing private tort/contract cases) than simply managing shared assets as a single unit.
     Some shared resources can be divvied up, of course, but others can't, not just because it would be impractical to do so but because the value of the resource comes from its being unified into a single cohesive system rather than broken up into many competing parts.
     Consider measurement systems, for example. We are so used to everyone knowing what a meter or a kilogram or a second is that we rarely imagine how much more complicated everything would be if we didn't all use a single standard system of measurement. It's only when we have to deal with backward countries that still use inches and ounces that we have some inkling of the confusion, but even there we enjoy the benefit of having fixed conversion rates between standards, rather  than everyone just picking their own poetic description for "This much".
     Think for a moment how insanely complicated our lives would be if we didn't have single unitary standards for standard units. We'd get by, but it'd take up a lot of our time trying to sort out how much rice it should cost to trade for how much cotton thread. Because, after all, the other hugely important unitary standard we all rely on and take for granted is money.

     Like standard units of measurement, the existence of a single system of currency improves our lives in countless ways. The time and effort saved by being able evaluate our trades with standard units is truly staggering, but we are so used to to using dollars that we don't even think about how powerful the system is. We take the convenience of money so much for granted, that we don't even think to put a price on it; we assume it should be free.
     But why should it be? Why should anything that makes your life easier be given to you for free? If there's a widget that saves you $10 of effort every day, it doesn't matter how much it costs me to produce that widget; if I can let you have it for less than $10 you still come out ahead, and have no reason to complain.
     So stop and think about how much it's worth to you to have a functioning system of currency. How much does would you pay for the benefits of living in a world where you can use the concept of a dollar to speed up your calculations and negotiations? Where you can buy insurance against risk, or pool your money with others in a joint stock corporation, or buy a house with a mortgage instead of having to save up enough gold to buy land outright? Money's a ridiculously powerful thing that we all benefit from, but the benefits are greater the more you use it. People who use a lot of money, and who therefore have access to the more powerful uses of money, ought to be willing to pay a lot more for the use of the money utility than people for whom it is a mildly more convenient alternative to barter.  It does not matter how much it costs to create and maintain the money utility; the price you are willing to pay for its use should depend on the utility you get from it.

     Now, what makes the money utility useful is the fact that all of us collectively agree to use it as a standard, and that we all agree to accept its promise of value. (Indeed, you could argue that the person who will do an hour's work for $5 contributes much more to maintaining the value of a dollar than someone who bills out at $300.) It therefore is arguably one of those collective assets of the sort the State can and should manage on our behalf, and if it is economically practical for the State to turn a profit by charging a premium for the use of money, then it ought to earn as much profit as it sustainably can for us by doing so. In the case of the money utility, the premium the State charges has a special name: tax.
     What I am trying to suggest here is that the way we usually think of taxes is wrong. We have traditionally thought of taxes as a necessary evil at best. Historically, warlords extorted tribute from people they subjugated. In time, they justified it by spending some of that money on public works that benefited their people. We still think of tax as the powerful government confiscating our property, sometimes for our own good to pay for roads and hospitals. But it's a mistake to think that what we're paying for is roads and hospitals, because then we (quite understandably) get angry at having to pay for benefits that other people use and we don't, and we elect politicians who promise to cut taxes, cut taxes, cut taxes, whether or not that's actually a good idea (sometimes it is, but not always).

Tuesday, 8 July 2014

The Liberty Dividend: Why We Ought to Obey the Law

     I've recently been involved in a number of conversations about the proper use of law and the role of government. Since my thoughts have been coalescing around a general theory of such things which I haven't fully articulated yet, I have decided to attempt to do so in a series of blog posts. The first element I'm going to address is law, which I've touched on before but not quite with the attention I mean to in this essay.

     As I've previously written, I think of law as the weapon of choice for final resolution of disputes in any society that aspires to consider itself civilized. But I haven't yet explained in detail how I think this weapon works, why we should prefer it to guns or swords, and what that means for how it legitimately can and can't be used.

     To begin with, a weapon is a tool which is used to diminish the capacities of a target in some way or other. A gun or sword takes away an opponent's choices mainly through blood loss and the incapacity that results, while the law takes away choices by agreement. (Sure, there may be coercion involved through penalties imposed for breaking the law, but law-abiding citizens generally obey the law because they have agreed to do so.)
     But why would anyone choose to give up choices? All other things being equal, aren't more options better than fewer? Isn't it irrational to surrender freedoms that one might conceivably some day wish to exercise? (You might think you would never want to murder someone, so why not give up that freedom? But if no one ever had a reason to murder anyone, we wouldn't need a rule against it.)

     In fact, surrendering freedoms can sometimes be a very smart move. On his way home from the Trojan War, Odysseus had to sail past the Sirens, whose song invariably overcame the willpower of any who heard them, drawing them to sail onto the rocks where they would be shipwrecked and drowned. Clever Odysseus knew that all he had to do to get past this peril was put wax in his ears and the ears of his crew, so they could not hear the Sirens. But Odysseus wanted to hear the song, too, so he had his crew lash him to the mast and ordered them to ignore him until after they had sailed clear of the danger. And so, by deliberately giving up his freedom to control his ship, Odysseus achieved what no one had ever done before: he heard the Sirens' song and lived to tell about it.
     There are lots of non-mythical examples of how surrendering some autonomy can be a smart choice. With respect to the criminal law, we are all better off (more free) if we give up the right to murder each other in exchange for the right not to be murdered, because being murdered extinguishes all freedoms. Perhaps even more significant, though, is the surrender of autonomy through contract law. Seriously, would you do business with me if I said, "I will bring you a bushel of wheat for that piece of silver, but I reserve the right to break all my promises once the silver is in my hand"? The whole point of contract law is to allow us to make (and thus rely on) binding promises. By giving up the ability to break our promises, we gain a greater ability to trade with each other.

     I argue, then, that law is something which we ought to obey as rational beings because doing so has the net effect of increasing our practical liberty. We may, on occasion, obey the law out of fear of coercion rather than civic duty, but that need not undermine the legitimacy of the law itself. Odysseus wanted to steer his shop onto the rocks, and was prevented by the brute force of the ropes around him, but his choice to be bound by those ropes in the first place was not invalidated by the fact that he changed his mind under the influence of the Sirens. What matters is that law over all must increase our liberty, regardless of how we may bicker about any particular instance of its constraining our liberty. If law in general makes us freer, then we ought to obey it.
     So, the principle I want to articulate here is that properly constituted law represents an investment of liberty: we surrender some of our liberty to the State, which then uses that liberty capital to generate a profit, a surplus of liberty which is then distributed back to us as a liberty dividend. (A regime whose laws do not generate a net gain in liberty is owed no obedience by its citizens. It may impose its will by force, but it cannot claim to be lawful.)

     And this is where the moral obligation to obey the law comes from. I need know nothing about your personal moral beliefs and what other moral duties you may feel you have, but can assert that a moral duty to obey the law almost certainly follows from your own value system.

  • If freedom itself is a value, this is trivial; you ought to do that which maximizes your freedom, which is what a properly constituted law is meant to do.  
  • If you do not directly value freedom, you probably value something else for which freedom is at least an instrumental good. That is, if you think being nice to puppies is important, then you should want as much freedom as possible in order increase the likelihood that you will be able to find a way to be nice to puppies in any situation that arises. The same logic applies if you think you ought to sacrifice puppies to Cthulhu, or put things on top of other things, or whatever it is that you may value. Ergo, you ought to obey the law in order to maximize your capacity to advance whatever primary values you do have.
  • If you do not value the freedoms that law creates, and prefer the freedoms that it constrains, then and only then do I admit you have no particular internal duty to obey the law. But if you are willing to bear the risk of being murdered or maimed or violated by others, in exchange for your own freedom to murder or assault and violate others, then you can have no principled objection to being imprisoned yourself.