Tax Returns and Game Theory

Mitt Romney still hasn’t released his tax returns, and the Democrats aren’t letting up. Senate Majority Leader Harry Reid now claims he has “sources” that say Romney paid no taxes for ten years, and that it’s up to Romney to prove them wrong.

Justin Wolfers summarized the liberal logic a few weeks ago when he tweeted, “Bayesian logic: If you won’t reveal something, then I infer you have something to hide. Given this, you should only hide it if it’s terrible.”

But this is terrible reasoning built on arrogant assumptions. I don’t remember liberals being excited when the Tea Party used the same bad logic to insist that Obama reveal his birth certificate. There are multiple reasons you might not want to cooperate in this game.

First, cooperation might be expensive or inconvenient. You might accuse me of saying nasty things about Harry Reid in my personal emails, and insist that I reveal all my emails to prove you wrong. I could certainly do this, but it would take a lot of time to gather all my emails to send to you as well as contact my email providers to confirm that I didn’t leave any emails out, and I just don’t feel like doing that.

Second, the request might be unreasonable. If there’s a serious accusation with convincing evidence, it might be worth it for me to submit to the costs of cooperating. But if you’re just slinging mud to make me look bad, I might not feel like complying even if it would be easy, because all I’m doing is legitimizing you and your accusation.

Third, this game is a repeatable game, and cooperating increases the chance you’re going to have to play again with more requests that might be more inconvenient or unreasonable. Obama knows this better than anyone. He finally released his birth certificate, but now conservatives want him to release his college transcripts, insisting that he must have had terrible grades or else he would have released them by now. Maybe so. Or maybe Obama just knows his opponents will never be placated and doesn’t want to give them more ammunition to cherry-pick through. I can imagine Romney thinking the same thing.

Now liberals could argue that releasing tax returns can’t be too hard or unreasonable, because Obama has done it himself. But they’re not arguing that these reasons don’t apply in this situation; they’re pretending that they never exist in any situation. They’re claiming as a general principle that you should always reveal anything anyone asks you to reveal unless you have something to hide.

I think Harry Reid’s new shameless attacks only make the folly of this reasoning even more obvious. No one seriously believes the burden of proof works in this direction. Reid himself probably doesn’t believe this, as there are now plenty of Twitterers claiming to have “sources” that Harry Reid is a pedophile who beats his wife and doesn’t pay his casino tab… It reminds me of Austrian economists challenging Paul Krugman to debates and people claiming that he must be refusing because he knows he’ll lose! You can’t make people play your game by claiming they must have something to hide if they don’t; you’re just arrogantly assuming that there are no other possible reasons they might not feel like playing.

This is so important because the same arguments are used regarding privacy from the government. As I’ve argued before, if you don’t believe in limits on government surveillance because you have nothing to hide, why don’t you give the police a copy of your house keys and invite them over whenever they feel like visiting, day or night? Even if you have nothing to hide, you might not want to suffer the inconvenient costs of compliance, whether the request is made by a government surveillance agency or just an irritated senator.