* This slipped through the cracks: A podcast with Patrick Donohoe, who is big into the whole life movement. (Doesn’t it sound like a New Agey thing?)
* I warned Bryan that if he didn’t retract his statement that the “first-best” policy for education would be to tax it, that I would write a Mises Daily. I am a man of my word. Here’s the punchline:
At bottom, I think what’s really going on here is that Caplan is trying to tell people that he thinks a person’s decision to purchase more schooling can negatively impact other people. But instead of saying that, Caplan says, “A first-best efficient education policy would actually tax education.”
Yet notice that Caplan could just as easily have written, “An optimal solution to education would actually involve gang members randomly beating up college freshmen.” I am not exaggerating. Caplan’s statement is literally equivalent to my own suggestion in terms of both the economic analysis and even his own (practical and moral) misgivings.
I am not kidding; I really think our proposals are very close. And I addressed at least one loose end in a geeky footnote:
Purists might object to my analogy, because (they learned in grad school) that a government transfer payment is neutral in terms of Kaldor-Hicks efficiency, whereas a gang beating doesn’t seem to be. In other words, if the government taxes a college freshman $500 for going to school, then the freshman is down $500 but the government is up $500, so it’s apparently a wash. In contrast, if a gang member beats up that same freshman, then he imposes harms that are not offset by gains to anybody in society. Hence the “efficiency” of the tax, in correcting the alleged market failure. But this analysis is wrong. In the real world, the government doesn’t gain $500 in disposable income for every $500 it takes from citizens, if for no other reason than the salaries it has to pay bureaucrats at the IRS. Furthermore, in what possible sense is it “efficient” for the government to have $500 more to spend? Since the US government in actual practice uses its funds to impose all sorts of “negative externalities” on people all over the world, even on Caplan’s own terms, it’s not at all clear that extra money in the government’s coffers should be construed as a “social gain.” Finally, for all we know the gang members would be willing to pay more to beat up freshmen than those same freshmen would be willing to pay to avoid the beating. (Maybe the students will get sympathy from their girlfriends or professors and get excused from a hard test.) So we see that, literally, the differences between Caplan’s proposal and mine are merely empirical; they are qualitatively equivalent in terms of the mainstream economic analysis.
As I said, I am being serious. A bunch of professional economists read this blog. If you would never in a million years say with a straight face, “A first-best efficient policy would involve gang members beating up people,” then why can you say that the US federal government should impose a new tax? If anything, I prefer the former policy recommendation.