The preference revelation problem is by far the most important economic problem. Over on my Wikipedia talk page, I posted an overview for a few other editors. I'll just kill two birds with one stone and post it here as well. If you truly want to understand the problem with our current system...then I highly recommend carefully reading over this and posting any questions that that you might have. ***************************** Preference is just another word for "demand"...as in supply and demand. The aggregate of individual preferences (all our preferences added together) is the total demand. For private goods...our spending (time/money) decisions express our true preferences/demand and our demand shapes the supply. For public goods, because of the free-rider problem, we are compelled to pay taxes. But our current method of paying taxes does not convey our true preferences/values for public goods. There are three main ways of trying to discern people's true preferences...stated preference (contingent valuation), revealed preference and demonstrated preference. Identification key Identification keys are used by biologists to identify species based on their characteristics. Here's a very basic identification key for the three most common "species" in the preference revelation "genera". The source discusses the idea that what you say accurately conveys your true preferences/values. Surveys are frequently discussed. Words speak just as loud as actions. See the entry on stated preference The source discusses predicting...or guessing..."underlying utility functions" or identifying "independently existing functions". Math is frequently used. Samuelson's theory of revealed preference. See the entry on revealed preference The source does not discuss stated preference and it does not discuss Samuelson's theory. But it does discuss the idea that your choices reveal your true preferences. Actions speak louder than words. See the entry on demonstrated preference Example How much public funds should be spent on protecting the environment? That would depend on the demand for environmental protection. Here's how the three different "species" would try and determine the demand... Survey people and ask them exactly how much they value environmental protection (stated preference - current system) Congress guesses/predicts all our preferences (revealed preference - current system) Taxpayers choose where their taxes go (demonstrated preference - tax choice system) Each method would produce a different answer. In other words...each method would indicate a different amount of demand. Therefore, each method would supply a different amount of environmental protection. The less accurate a method was...the greater the disparity between supply and demand...the greater the shortage/surplus of environmental protection...the greater the amount of deadweight loss. Importance The vast majority of economists agree that our true preferences/values are required to determine the optimal supply of public goods. Because they understand the basic concept of supply and demand, many economists have spent large amounts of time/energy/effort trying to develop accurate preference revelation mechanisms. The more accurate the mechanism...the more efficient the allocation of public funds would be. For example, Caltech scientists even developed a way to try and read your mind in order to try and accurately determine exactly how much you value public goods. There's plenty of scholarly material on the subject. If you're interested in this subject...then demonstrate your preference by reading these reliable sources, sharing any other relevant, reliable sources that you might find...and making constructive edits to the relevant entries. Passage This passage, by far, provides the best summary of the public finance problem... See also Benefit principle Dollar voting Opportunity cost Public choice Public economics Rational ignorance References Meghnad Desai - Public Goods: A Historical Perspective Richard Musgrave, Peggy Musgrave - Providing Global Public Goods Bernd Hansjürgens - The influence of Knut Wicksell on Richard Musgrave and James Buchanan Alain Maricano - Why markets do not fail. Buchanan on voluntary cooperation and externalities. Douglas Ginsburg, Joshua Wright - Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty John McMillan - The Free-Rider Problem: A Survev C.D. Throsby, Glenn A. Withers - Strategic bias and demand for public goods Daniel M. Hausman - Revealed preference, belief, and game theory David Bradford, Gregory Hildebrandt - Observable Preferences for Public Goods Marcel K. Richter - Revealed Preference Theory Dennis C. Mueller - Public Choice: An Introduction Robert Mitchell, Richard Carson - Using Surveys to Value Public Goods
Non-sense!! It assumes the answer within the frame of a left vs right narrative. Want to know how to decide how much government money should be spent on protecting the environment? I can't tell you, because when not trapped in that box, I will tell you that the solution to our energy problems is also the solution to our environmental problems, in that the only proven path forward is efficiency. I would solve this problem with a tax and dividend system that said 100% of the tax will go into a dividend account and 100% will be paid out each year to American citizens to make efficiency improvements(Better MPG car, re-insulate your home, re-do your home windows, add solar panels, ect.) As far as the most pressing economic question of our time, I would say that would be more in the lines of, how do we force capital away from the swaps market, and back into commercial banking for loans that will actually grow the economy!
pimptight, uh, 100% of what? In a tax choice system, taxpayers would have to pay their taxes anyways, so they would have absolutely no incentive to lie about exactly how much they valued environmental protection. At anytime throughout the year, you could go directly to the EPA website and make a tax payment of any amount. The EPA would give you a receipt and you'd submit all your receipts to the IRS by April 15. Therefore, there wouldn't be a disparity between the supply of and demand for environmental protection. In other words...it would be an efficient allocation of public funds.
Problem with the argument is BRAINWASHING. Most people vote and think out of circumstantial politics that have nothing to do with their intrinsic beliefs. You are an Obamanot trying to commandeer the thought of USA society. You should be banished to Siberia where you belong.
A tax on gasoline and electricity. 100% into a dividend account, that is paid out each year to Americans citizens to improve efficiency. We know higher energy prices drive efficiency, so why not artificially raise energy prices, and then give that money back to people to make efficiency upgrades? Economic boost + Energy independence +Reduced CO2 output = WIN!!!!
