Fri, 12 Mar 2004

Freedom of Trade

I'm very skeptical of the idea that taxation can solve free rider problems and transaction cost problems and create positive externalities. Controlling taxation has free rider and transaction cost problems and creates negative externalities. In essence, rule by majority turns into rule by special interest minorities, and since everyone is a special interest, everyone ends up trying to lord it over everyone else. Sure, you can saddle up the horse and it's a lot faster than walking, but by the same token it doesn't pay much attention to how you yank on the reins.

I wouldn't be the first person to propose this theory. The Anti-Federalists wrote it all down over two hundred years ago. They predicted what we have now. It's hard to argue against a theory that produced a correct prediction.

Here's the analogy I make: Three hundred and fifty years ago, everybody thought that a country had to have a single religion. Politics and religion were thought to be inseparable. These days, politics and economics are thought to be inseparable. The idea of politicians not interfering in the economy is unthinkable. Most people seem unable to think of such a thing. And yet ... I believe that some day in the future, people will consider it a basic human right to have freedom of trade, just as we do for freedom of speech, press, assembly, and yes, religion.

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