Coase

Zomby is unhappy about his taxes. In his comments he says,

I want my money back because I make better choices with it than the government does, because the government is at its very basis wasteful and removed from the reality of the problems that it tries to solve.

That's an important fraction of the anti-tax argument. The entire discussion of taxes and government inefficiency got me thinking about economist Ronald Coase. He put a lot of thought into the subject. His theories have yet to be digested by the political class, or perhaps they just chose to ignore what he learned. I read this a few years ago:

What was perhaps Ronald Coase's most important contribution to economic understanding, however, was not as an author. As editor of The Journal of Law and Economics from 1964 to 1982, Coase exercised a huge effect over the sort of topics that economists chose to investigate. Located at the University of Chicago Law School, the journal is written by and for economists, but economists working in areas that were recently the sole purview of lawyers and policy makers. The JLE under Coase was relentlessly relevant, dedicated to exploring the actual effects of actual policies. This paddled against the flow of virtually the entire profession, which was drifting to increasing abstraction and formalism. Due to its rigorous analytic standards, as well as to the demand for a reality check on the theories of economic scribblers, the Journal led its own paradigm shift in the social sciences.

Coase in his own words:

When I was editor of The Journal of Law and Economics, we published a whole series of studies of regulation and its effects. Almost all the studies--perhaps all the studies--suggested that the results of regulation had been bad, that the prices were higher, that the product was worse adapted to the needs of consumers, than it otherwise would have been. I was not willing to accept the view that all regulation was bound to produce these results. Therefore, what was my explanation for the results we had? I argued that the most probable explanation was that the government now operates on such a massive scale that it had reached the stage of what economists call negative marginal returns. Anything additional it does, it messes up. But that doesn't mean that if we reduce the size of government considerably, we wouldn't find then that there were some activities it did well. Until we reduce the size of government, we won't know what they are.

And:

Regulation of transport, regulation of agriculture-- agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: The effects were bad.

Those quotes are taken from a 1997 interview in Reason magazine.

Ronald Coase won a Nobel Prize for his trouble. As David Friedman said, the Swedes got it right.

Friedman also notes:

His ideas are sufficiently simple to be understood by a layman, as I will try to demonstrate in the next few pages, and sufficiently deep so that they have not yet been entirely absorbed by the profession; to a considerable extent what is still taught in the textbooks is the theory as it existed before Coase.