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“Patriotic Millionaires”: Demanding an Assurance Contract Does Not Imply Hypocrisy

November 20th, 2011 by Howard Ditkoff

Several days ago, it was reported that a group of millionaires visited Capitol Hill and held a press conference in which they urged that people of their economic status be more highly taxed.

A couple of days later, on Neil Cavuto’s television show on Fox, I saw Michelle Fields of the The Daily Caller calling these “Patriotic Millionaires” hypocrites.

I then found this article where she insinuates the same.

Here is the basis for her charge of hypocrisy:

As shown in the video below, Fields attended the press conference with an iPad displaying the US Treasury’s donation page. She then approached some of these millionaires and asked each to donate to the treasury individually. When they refused to make isolated donations, she claimed that is was hypocritical for them to ask wealthy Americans as a group to pay more while being unwilling to immediately do so themselves.

Fields’ argument struck me as a very instructive example of the type of toxic sophistry - structured and presented cleverly enough to fool many people, yet logically flawed - that is so commonly employed within our public discourse.

In response, I sent the following email to Michelle Fields:

I rarely bother responding to issues like this. But I just wondered your thoughts on this argument.

You say that, if the millionaires think they should be taxed more, then they should start by paying their taxes by themselves and that they are hypocrites if they don’t.

By this reasoning, do you think that stores that participate in things like Groupon should not require a threshold before the deal kicks in? On Groupon if, say, 20 people are willing to buy the deal it may not be worthwhile to the store to offer it, but if 500 buy it it is. Similarly, on a site like Kickstarter, people will pledge to donate, but ONLY if enough others are donating to make it worthwhile and for the project to become viable.

According to you this would be hypocrisy because you try to spin it as a principle. If a vendor believes in a deal being good or if a person believes in a project, they should be willing to go ahead even if not enough others are committed to it. I think this is a fallacy. The entire reason Groupon and Kickstarter are brilliant ideas is because they recognize that many things only are worthwhile and make sense when enough people commit to them. Nobody says a person is a hypocrite for wanting the commitment of others before they donate.

The proper question for these millionaires would be one of these:

1) Exactly how many other people would have to commit to also giving more of their money (or exactly how many dollars would have to be committed) for you to find it worthwhile? Does it have to be the entire country? Could there be some alternative so we can get started even without a major reform of the tax code?

2) Is there a way that we could set up certain specific projects so that a group of you could donate to particular things knowing that you have met the threshold to get something actually done?

All of this is separate from the larger debate about taxes in general. But I really think your argument about them being hypocrites is wrong. I’m not saying none of them are. They may be. But I think that the line of argument you’re making, when you consider things like Groupon and Kickstarter, for example, just doesn’t hold water.

My counterargument here revolves around a concept that is becoming increasingly popular and that is exemplified by the models of Groupon and Kickstarter. Before I knew the common technical term for it, I used to call it “contingent commitment,” but I later learned that it is known as an assurance contract (also sometimes known as a provision point mechanism). An assurance contract is a mechanism whereby a person or group commits to take a certain action, but makes that commitment contingent upon the achievement of some threshold level of simultaneous commitment from others. If that threshold – typically the collection of pledges from enough parties or for enough value to make the desired goal feasible – is reached, all parties to the contract are then bound to take their promised action. If the threshold is not reached – in other words, if the total contribution by the committed parties would still be insufficient to achieve the desired goal anyway – then the contract is not enforced and no action must be taken.

The important thing to recognize is that the reason that this model is becoming more popular and that organizations that use it, such as Groupon and Kickstarter, have become so noteworthy and successful is that it accounts for and assuages some very valid concerns among participants and donors. One of these valid concerns is wasted investment. Investing in something that may never receive enough additional investment to become viable is a risk. Taking such a risk can be noble, can demonstrate an especially strong, though isolated, example of support for a cause and can, at times, inspire enough others to follow suit to ultimately generate success. But it can also quite often lead to the loss of resources that could have, for the sake of not only the investor, but other beneficiaries, been better invested elsewhere. And, meanwhile, an assurance contract allows for many of the same benefits without the need for such a degree of risk.

Thus, it is hardly reasonable to insist that full investment without sufficient assurances of simultaneous commitment from others is our baseline for proving the sincerity of one’s commitment to a cause and that demanding somewhat greater certainty about the level of complementary support expected from others, and in turn the likelihood of achieving the desired return, before investing exposes one as a hypocrite. Yet this is precisely what Michelle Fields is insisting in regard to these tax-increase supporting millionaires.

In fact, it is not hypocritical at all, but simply sensible and wise, for these millionaires to seek assurance, before they commit to investing more of their money in improving the country, that enough others will be similarly committed to make success reasonably likely or, at least, possible.

Some of the millionaires touch on this point in their responses to Fields’ challenge shown in the video. In addition, more of them may have made the point in the portions of their responses edited out of the video.

At least one person in the comments section of Fields’ Daily Caller piece understands and emphasizes this point, as well, though he frames it quite aptly, but slightly differently, in terms of donation matching.

Nonetheless, Fields simply ignores this very valid point and continues, in writing and on television, irresponsibly leveling the hypocrisy accusation.

It only struck me later that that there is a tremendous irony in the fact that many of the more right-leaning conservatives most likely to view the millionaires’ responses to Fields as evidence of hypocrisy are themselves being hypocritical in making this accusation since they would act exactly the same way when it comes to their own investments. In considering investing in a company or a project of some kind, they would almost certainly take into account which and how many other investors, managers, big name stars and so on are also committed. Other conservatives wouldn’t label them hypocrites for withholding investment until they had some level of confidence that the project had sufficient buy-in from complementary others to even have a chance at coming to fruition.

Some may defend Fields on the grounds that the there is a difference between the assurance contract model exemplified by Groupon and Kickstarter and the model these “Patriotic Millionaires’” proposal implies. In the former case, all of the commitments are made entirely voluntarily. But, in the latter case, these millionaires aren’t calling upon their fellow wealthy citizens to voluntarily commit, but rather are asking the government to forcibly extract those complementary contributions.

This is indeed an important distinction and it merits further comment in two regards.

First, the fact that the millionaires advocate taxation at all may indicate to some a moral flaw in their characters. Those who believe that forcible taxation itself is violent and immoral can, with internal consistency, criticize the millionaires for their pro-tax position. But this is a very different criticism from the one that Michelle Fields is making. She is calling them hypocrites. And regardless of your stance on taxation, you must admit that the millionaires, far from being hypocrites, are quite willing to submit to the same taxation themselves that they advocate for others.

Second, even though Fields’ test for hypocrisy among the millionaires is, in my view, an invalid one, I believe that, because their proposed form of contract differs from a fully voluntary assurance contract, we cannot yet substantially rule out some other important and relevant forms of insincerity. Commitment to a fully voluntary assurance contract would, in my view, constitute rather solid evidence of a sincere belief in their cause. But, demanding a similar contract that involves government coercion of some potentially unwilling participants does not provide quite as reliable evidence for their integrity.

What interests me is whether these millionaires’ highest priority is, as they would surely wish us to believe, contributing to constructive solutions or if, instead, they have some ulterior motives. Are they truly most concerned about helping to improve particular aspects of our country or are they actually more concerned about, for example, receiving publicity or promoting big government and transfers of wealth from the private to the public sector for ideological reasons?

I believe that these questions could, to an extent, be answered if the millionaires were approached with the types of alternative queries that I suggested to Michelle Fields at the end of my email to her. This more ingenuous approach basically probes whether they would be as willing to support other, possibly voluntary, means of achieving similar goals as they are to support their pursuit through taxation, as long as those other means still included assurances of sufficient commitment from others. If they are sincerely most concerned with facilitating improvements in the country, then they should at least be open to fully contributing to their achievement through such alternative means. If, instead, they respond to inquiries by stubbornly refusing to consider participation in even comparably low-risk alternative strategies and appear more concerned with insisting on taxation than they are with the supposed purpose of levying those taxes, it would then raise strong suspicions about their true motives.

But note that, even though this latter case could indicate various forms of lack of integrity that should indeed trouble us, hypocrisy is likely not one of them.

Among the most important things that we can do to develop a healthier society are learning to recognize various types of fallacies that are employed in public discourse and calling them out strongly when we spot them. But carrying out these tasks alone is not enough. Just because someone attempts to support their criticism about a situation with fallacious arguments does not necessarily mean that the situation is free of corruption. Upon investigation, we may deem it to be corrupt in the very ways that were being expressed, though for different, more valid, reasons. Or we may instead discover it to be corrupt in completely different and unrelated ways. So it is always important to keep an open mind and to critically examine any situation that is called into question, even if the original questioner did so based on faulty reasoning.

Michelle Fields’ method of investigation and charge of hypocrisy in regards to the “Patriotic Millionaires” were misguided. But they brought about an excellent teachable moment – an opportunity to illustrate the need for and to practice these important skills of identifying and challenging sophistry and then following up by considering and suggesting more constructive methods of investigation.

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    2 Responses to ““Patriotic Millionaires”: Demanding an Assurance Contract Does Not Imply Hypocrisy”

    1. The Biz of Life Says:

      When you pull a publicity stunt like “I really want to pay more to the government in taxes but will only do so if the government forces everyone in my income group to pay more” it just invites people like Michelle Fields to expose them. There is a reason the Buffett/Gates Billionaire Challenge wasn’t a pitch to donate private wealth to the government. Government is a very poor steward of tax dollars (look at the idiocy of the last 11 years). The country would be much better off if these people used their money to grow businesses and create jobs rather than giving it to politicians who will use it to pay off cronies and buy votes. Government excels in the art of capital destruction. There’s a big difference between Groupon’s profit motive and voluntary cooperation among consumers as opposed to the government’s motivations behind taxes and redistribution…… or Kickstarter’s venture capital model (though some might argue the US Government is the least successful venture capitalist in the history of the world).

      Maybe these guys ought to do their own version of Kickstarter for US Government contributions with the goal of raising a billion dollars in donations and see how many like minded gazillionaires ante up. It should take the government only a couple of hours to fritter away a billion dollars.

    2. SystemsThinker Says:

      Thanks for your comment.

      I am all for someone like Michelle Fields working to expose anything she suspects may be awry with the situation. But, unfortunately, what she did here does not expose what she claims. To say that what she did exposes the millionaires as hypocrites shows to me at best a misunderstanding of what hypocrisy means or at worst a calculated ploy to make an accusation she knows is not true just because she realizes many people won’t see through the faulty logic.

      So I suggested what I think would be better questions to truly test the millionaires’ sincerity and actually have a chance of exposing them for any real shortcomings.

      Your view that giving the money to the government is not the most efficient means of achieving the desired ends is a perfectly valid possibility. And that’s why the approach Fields should have taken, I believe, is to test whether they are more committed to the means (getting more millionaires’ money to the government) or the ends (whatever they hope to accomplish through those means). If they are sincere, then if someone offers a more efficient, effective method of achieving the same ends, they would jump on it. Or at least they would have to make a solid, convincing case for why they feel the tax route is more effective than a more voluntary approach.

      Like you I see potential flaws in what this group is doing - potential, not certain ones - and I think they should be tested for. But Fields did not do that and it is irresponsible of her to pretend she did.

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