Saturday, September 8, 2012
Broken Road Fallacy
A few weeks ago, on Facebook and elsewhere, I asked "Are taxes theft?" Among the answers I received, one of them was "Only if you don't like roads." While I feel that response does not actually address the question, as it speaks to economics rather than morality, I have thought about it further. In essence, I believe it is fundamentally flawed - a victim of the "Broken Window Fallacy".
To briefly explain (longer explanation in the video), the theory goes like this: When a window is broken, it stimulates the economy. The window must be replaced, which employs the glass maker, and the sand harvester, and the farmers who must feed them, etc. This is a fallacy because, drawn to it's conclusion, we should employ people to break windows, purely to stimulate the economy.
There is more to it though, especially in regards to the road response. The reason one would even consider the broken window "stimulating" is to only look at what happens, not what could happen. Collecting taxes to pay for roads creates a better world, because we gain all the benefits of having a road. But what would happen without collecting the taxes (breaking the window) in the first place?
While the specifics of any given situation are outside the scope of this post, think about what is removed. By creating a guaranteed source of road growth, there will be less innovation spent on reducing the need for roads - better or alternate forms of travel such as mass transit or industrial rail. There would also be less sprawl, as it would be more difficult to drive to work from 3 suburbs outside of city limits. Less travel distance, so reduced gas consumption, so prices wouldn't rise as rapidly.
In the end, from an economic standpoint, I find the road response (and the general line of thinking behind it) to "Are taxes theft?" still wanting, and lacking any serious persuasiveness. If individuals and businesses are unwilling to pay for roads on their own, I do not find it economically logical that the population should be taxed en masse to pay for them.
Broken Window Fallacy more completely explained: http://www.youtube.com/watch?v=erJEaFpS9ls