Wednesday, June 11, 2008

assumed consent

I've had the privilege this week to hear a number of amazing speakers talk on liberty and society. One speaker was Tom Bell, who has a really interesting theory about assumed consent and government services.

The idea is that typically when we talk about "consent," we mean express consent, such as an explicit agreement or contract. Another kind of consent is "implied consent," which we infer from the actions of the individuals involved. There's also "hypothetical consent" - consent that is assumed because it ought to be consensual because of some hypothetical reasoning. (You would agree to it under a veil of ignorance, for example.)

The theory we heard put forward is that a normal market is based on express consent. However, in the market for government services, it may be that there is implied consent based on a "love it or leave it" attitude towards the law - the assumption that if you didn't like living under a set of rules, you would leave.

Government services are provided, obviously, by a monopoly. Because the government doesn't have a pricing mechanism available, though, (since its services are delivered free at the point of use) it could be argued that they use the "implied demand" they could get from, say, census numbers, to determine the number of services to offer.

The problem? If assumed demand is too high (as it likely is - the fact that someone is in the country doesn't mean that they demand a service), the point at which marginal cost is equal to marginal revenue (which determines how much of a service is offered in a monopoly situation) might be at a point where the price for such a service is negative - that is, some people would pay to get rid of government services, rather than paying for the services they're receiving or being subjected to. Note that the price charged to deliver this service would also be quite high, as monopolies price off of their supply curve.

It's an interesting theory that I find persuasive, though I'll have to think it over further.

Since I have a million thoughts running through my mind after these talks, here's more thinking aloud:

Since agricultural subsidies in the developed world do so much to discourage farming in the poorest countries, it stops the development of farms - that is, the cheapest and easiest way for poor people to develop and add value to their land. Additionally, bureaucratic nonsense makes it nearly impossible to develop land legally when building anything unless you have the money or connections to bypass the system.

Since land that is or would be used by poor people remains undeveloped or is developed illegally, there is less of a demand for property rights. (Why bother laying a claim on something that isn't valuable, and how would you try to lay a legal claim on something that's not legally valuable?)

Could it be that governments see this and that in the absence of a pricing mechanism they make an assumption that the demand for property rights is lower than it actually is in the same way that they might over-predict the demand for other services, and that this is a reason for under-providing an effective legal system to protect these rights?

1 comment:

zolton said...

Governments put the value of individuals over money, capitalism does not.
In a way you kinda said it yourself.

"Note that the price charged to deliver this service would also be quite high, as monopolies price off of their supply curve"

Manitoba Telecom services were publicly owned until they were sold off by our last conservative government. Since then rates have gone up 60%.

In Manitoba we also have one of the the lowest insurance rates in North America. Manitoba public insurance had generated increased capital in the last two years and sent our $100 dollar rebate checks to all users.
I wonder where that money would have gone in A private system?

http://en.wikipedia.org/wiki/Canadian_and_American_health_care_systems_compared
Nuff said about health care!

I wonder if your a proponent for the wheat board yet? They don't subsidies their farmers, like the Americans do!
Only if those farmers through the CWB could gain access to grain terminal storage and transfer, instead of getting screwed by the rail yards.
It's also funny to see the price of fertilizer and pesticide go up in Canada (unjustly) whenever we have planting season!
Was that plebiscite on the barley monopoly fair in your opinion.

If the private industry is so competitive why are they so afraid of publicly owned infrastructure?
The statistics in allot of these area's tend to prove the all encompassing rhetoric that the private industry is better in all cases.