Thursday, April 29, 2010

Edmunds Brave New Wealthy World

John C. Edmunds, Brave New Wealthy World: Winning the Struggle for World Prosperity Prentice Hall Financial Times Press, 2003

Edmunds has precisely the opposite philosophy of this blogger--asset sales are good, the problems in the Third World are due to the fact that their assets are not worth enough, securitization and selling assets is good. In Costa Rica, a car that would be worth $2500 would sell for $500.00 and a house renting for $700.00 would sell for $15,000.00, a coffee farm of 300 acres sold for $4,000 in Nicaragua. But then he described the lack of good title on the farm.

But he described booms in Cambridge, Madrid and Argentina. The last was an internet boom funded by venture capital. The middle one was fueled by asset speculation when Spain joined the European Common Market. Edmunds described the chexck out in a department store where people were buying so many "fancy tools," "ornate light fixutres" that they "could barely carryt heir purchases." "Some of the items were competely frivolous and way overpriced."

"Financial assets pile up more quickly than the phyiscal assets and the output that collateralize them," Financial assets are simply a document (or a computer blip) that one receives when one invests. Historically, they were illiquid, but now they sell. He looks forward to the date when borrowers don't deal with financial institutions, they put their application on the market, and people invest in it directly. Where Dr. Edmund and this blog differ, is that they should not trade. The borrower keeps the financial asset and receives the income represented buy that investor, say a share of a physicians income for their life, when they invest in a medical student's education, or a share in the revenue for the railroad to which they contributed money to build, repair or reconstruct.

He had a straightforward excellent of financial engineering was the government selling an airport. There probably isn't anyone who is both rich enough to buy a whole airport and who would have the interest in managing it. Thus, we need to break down the item into securities. They would have to rely on trusted management, auditors and lawyers. And these little bits of the cost of the airport would be held by savers around the world. But where we differ is that the airport should not be sold. And the municipality would not be able to spend the windfall from the airport wisely--instead they would trade shares of the revenue from the airport which presumably would last a long time the airport for a share of the saver's income for a shorter time, perhaps for the duration of the resurfacing project.

Of course, with an airport there is a part of the expected revenue that one is confident to receive, even if we have another September 11th 2001 incident or an economic slowdown, and there is additional revenue that would come in boom times or if the country gets to host the Olympics. What financial engineering is, is splitting the bond holders get the first part and the stock owners make a profit only when the second part comes in. Individuals needing secure investments buy the bonds and individuals wanting to take a risk buy the stocks. The latter would see the value of their stocks drop close to zero after a second September 11th while the bond holders still get paid--if the financial engineer model holds up and airplane travel doesn't go down still further.

Instead, what do we do, is simply share the revenue directly. The stereotypical retirement investor starts out accepting risks and then sells their investments thirty years later investing it in secure bonds. I see that investor investing early in their life on relative long shots. When some of they morph into revenue generators, e. g. Google that gets twenty three billion in revenues, the investors will take their share and invest it in a more secure firm, e. g. a utility, or lending it to a government in a stable country whose revenue is less likely to gyrate. Those Googles who are still willing to take risks might plow it back into google, assuming its revenues amounts are more volatile.

And we encourage people who deal with airports, e. g. pilots, workers at other airports, to invest a little bit of their retirement savings in this investment. That way, they get to be on the sortition juries when the airport managers have to take a decision.

Samuelson calculated that a countries total financial assets could be two to five times their annual GDP. The United States is at about that level while the emerging market is much smaller. Thus, the financial engineers should securitize assets and investments in the emerging bmarket (for example building This will product tremendous capital gains for the savers in the first world, and a few in the emerging markets, which will finance their retirement. The globalization critics say this is companies relinquishing "their economic sovereignty" so that 300 million retirement investors could passively earn tremendous capital gains.

And the poor people would have their standard of living raised to form a new middle class, earn money, want to invest it for their retirements and buy the securities owned by the aging first world middle class. Financial Planning is not relying on the market in which to sell assets, but accumulating revenues from the real investment.

John Edmunds recognizes that financial systems where banks lend to their friends or family or the Central Bank lends to the dictator's friends are corrupt, don't serve any purpose to the countrie's development, and waste valuable capital and savings! This is obvious. And he illustrates this by reporting many half-finished sky-scrapers in citries such as Manila, Peru and Caracas--politically connected members get loans below the cost of inflation, they half-build a building and then wait for the need for the building before finishing it, earning a profit on the fact that construction costs were more than what they were lent and paid out in interest. And there was the totally fraudulent flour mill in Nicaragua paid for by a loan to the Interamerican Development Bank--and even if the flour mill was built, there was little need as Nicaragua does not produce flour and it ground flour costs about the same as wheat which needs to be milled. But getting rid of corruption is critical, regardless of whether one has capitalism and finance as we have it now, the share economy proposed here, or a strictly socialist or communist regime!

Wednesday, April 28, 2010

Belo Horizonte participatory budgeting

from Communications of the ACM April 2010, Vol 53, No 1.

Belo Horizonte did an online vote on whether to spend eleven million dollars on:

  1. a new sports complex
  2. a library
  3. streeet renewal
  4. commerfcial center regeneration project
500,000 votes were cast and the sports complex won.

This has been done every year since 2006, and just recently, they introduced phone voting. (I will be preparing a Thoughtful Thursday piece on participatory democracy in Brazil, and I just found Tiago Peixoto's paper on e-Participatory Democracy in Belo Horizonte.)

Monday, April 26, 2010

Environmental Values Clash: Green vs. Green

Environmental and related values compete. Brazil plans to build " huge dam in para. It will provide six per cent of the country's electricity needs. But it will displate 20,000 indigenous. Foreign Policy described the obvious reaction in a country when foreign governments or do-gooders tell them how to handle their environmental needs--they view them as patronizing and people who have screwed up their own area and are now telling other people not to and who have no experience on the ground. (The head of a logging group, 'To speak about the Amazon, an indivdiual must have come down at least once with malaria, be bitten by a snake...only flies first class.. five-star hotels.')

And they wish to develop solar energy in the Majove desert in California-- great for the environment, except for the damage to the fragile ecosystems in the desert. This pits green against green

Would sortition juries sort this out better in approving investments for retirement savings and for wait to be rewarded until we really know" accounts, and in a sortition tax.

Thursday, April 22, 2010

Data Mining, Criminal Sentencing, and Analogy

Florida will be using data mining to suggest the program to which each juvelile delinquent is to be assigned.--which extracts rules from data, just as the machine learning techniques such as ID3 do-- Data mining is just a sophisticated version of these techniques.

This is not new. People have been talking about using techniques such as regression to predict recidivism and help judges make good sentencing decisions. (I won't take the time right now to do the research.) Many states used very specific guidelines--I had a programming course with many students from my University Law Enforcement and Justice Administration Departments. I had the students program the guidelines as a real-world example of a complicated if statement.)

The question is which is most likely to sentence a juvenile correctly, the lowest recidivism rate for the lowest cost in incarceration, the predictions made by a set of rules, a prediction made by an expert such as a judge or criminologist,, or a prediction from a randomly selected jury. A relatively simple study could do this--have all three make a prediction, sentence the juvenile to one randomly and watch the outcomes. WorThat is a question that could be ank going back to the sixties show that statistical approaches predict recidivism better than "clinical experts." (Caroll, John S., "Judgments of Recidivism risk: Conflicts between Clinical Strategies and Base-Rate Information", Law and Human Behavior volume One, Number Two 1977, page 191-198

The challenge of participatory democracy, just as it is for conventional sentencing, is how to incorporate the decision making. The Participatory Democracy could develop a set of rules for sentencing while being given the results of these regression tests. These then would be applied with little or no discretion to each individual offender. Or each offendor could be sentenced by a participatory democracy jury, with the juries receiving a prediction or data from the statistical model or data mining model. However, sadly, Kahnmean and Tversky showed that individuals did not properly use statistical data. The alternatives for jurors to use for sentencing are similar to that for tax decisions--and if prison and jail availability is a limited resource, society could independently decides how many slots are for rapists, how many slots for armed robbers, etc. and the participatory democracy jury could vote for which armed robbers would be assigned to those slots.

There are many references in Dr. Carroll's article to literature on human judgment in using statistical models in general and its use in criminal sentencing decisions in specific. I will track many of these down for a future Thoughtful Thursday.

Wednesday, April 21, 2010

Mark Bauerlein, the Dumbest Generation, versus Neil Howe and Millenials Rising

Two thirds of high school students cannot explain a photo of a theater whose portal reads "COLORED ENTRANCE" One fourth of college seniors cannot identify James Madison. Only twenty two percent of college seniors recognized a line from the Gettysburg address. Ten percent of fifteen to twenty-six year olds cannot identify the speaker of the House of Representatives and only fourty percent knew which party controlled Congress.

Only fifty per cent of students have read a single book outside of school (or work) requirements. And Dr. Bauerlein cites numerous statistics showing how dumb America is in, that our children and teenagers are dumber than we (middle aged boomers), and that the internet is dumbing us down. Each day, kids spend 37 minutes reading a book or magazine and hours watching TV, playing video games, and library book circulation goes down.. And fifteen-to-seventeen year olds spend less tghan an hour per day on homework and eleven percent spend more than two hours in the previous day on homework. (Mark Bauerlein, The Dumbest Generation, Penguin,2008) And most people scan briefly the Internet sites on which they look, and young people have a 45 percent failure rate in "ordinary web tasks."

This Professor/Bloggist must be crazy! Asking for groups of these people to judge important decisions such as how much taxes business should pay or to vote in a system to determine the penal code and penalties for such crimes as murder or exactly who can own what type of gun and possess it, where.

Yet the "Millenials" are doing better. A survey of teachers in 1999 had elementary and middle school students with "better" "oral english skills." American Demographics said that teenagers would overwhelmingy like to possess intelligence. And Neil Howe said that much of the decline of SAT scores was Generation X problem and is now reversing. Neil Howe said in terms of voting that the MIllenial Generation And as a comment on the YouTube copy of the debate would do Lauerlein quotes an absolutely puerile and incoherent political blog from teenagers in his book, including bad grammar, syntax and English. And Dr. Howe cites the civic achievements in his book. And he cites that children ages six to eight spend three times more time on homework in 1997 than in 1981. (But that is only three hours per week!) And more children are meeting "National Education Goals in Mathematics" but that is only twenty-five percent, at best. He cites that the average SAT score for the best schools is increasing and IQ's for the top are increasing- in spite of statements that the Flynn effect does not apply to the brightest individuals. And Lauerlein is concerned that the biggest increases in IQ tests are in content-free tests such as spatial reasoning, performance ability or memorizing numbers. And he cites increases in AP test taking, but unfortunately fourty percent are failing, up from 36.5%. And related to this debate, scores are going up on Physics and going down for English.

But what reading would be useful for a person to serve on these sortition juries. Would it be Macbeth--and in the debate between Neil Howe and Dr. Bauerline, it was clear that this was the debate. Dr. Bauerlein talked about children not reading Macbeth in high school or as students in College and refers to passing through a three-hundred page novel. And Dr. Howe, said that for people organizing about some injustice, is Macbeth useful or contains the answers they need. (Also, Dr. Bauerlein said in the debate and his book that if one doesn't take the time to learn the great books in high school and College, they will never do it. I ran for office as Representative to the Curriculum and Standards Committee at Polytechnic University on a platform of getting rid of the humanities/social science requirement and I was very much anti humanities. As I approached and just turned fifty, I picked up and read completely: Hamlet, the Mishima novel SAilor Who Fell From Grace with the Sea (because they touched me after the death of my mother, but that is another story for another blog), and Solzhenitsyn's Cancer Ward by Solzhenitsyn, One Day in the Life of Ivan Denisovich, To Kill a Mockingboard and All Quiet on the Western Front. At the end of his book, Dr. Bauerlein talks about the role of our classic works in art, film and literature--as one expects from a Professor of American Literature and employee of the National Endowment for the Arts. Is it to provide a common reference point for shared civic discourse, Cultural Literacy , is it so when does not look like a rube to potential employers (Lauerlein cited a young art student who had a disdain for Rembrandt and Picasso, particularly copying him), or does it truly help in individuals deliberating together about issues as Dr. Paul Woodruff mentioned about piadaia in Ancient Athenian democracy when he was interviewed on his book First Democracy.

And later chapters of Dr. Bauerlein's book show that he favors classical lierature, the traditional humanities.

Bauerlein is concerned about individuals not reading things seriously Take computer manuals. If I am going to make serious use of software, I like to read the manual first. Now, I am taking a computer graphics class I am taking and am reading manuals or have read manuals for two Computer Graphics packages and Open GL, a library for programming graphics. When I was sixteen years old, I purchased IBM manuals from the IBM office on Assembler language, Job Control Language and other things that seemed intereting and useful.

But as Jacob Nielsen pointed out, "the fundamental truth about documentation is that mot users imply do not read manuals and jumpt right in to the software citing references from 1987 and 1991 before the time of the Internet. And they documented that online manuals are faster to printed version. And as a professor of computer science, I certainly don't like this inconvenient truth!

And studies have shown that people learn better from summaries, from digested text and multimedia that just makes the points that one wants, than the full text. Both on paper and in multimedia, students learned better from a concise summary. The effect of having a summary is from two thirds to a full standard deviation--a large effect. Teacher's castigate Cliff Notes, but the evidence is that they are more effective than the real thing. Lauerlein complained about a person answering a school homework assignment by finding a few things via Google, finding the "nut" of the idea, throwing in a few personal remarks and handing it in. So the problem with people not reading and not reading books in advance certainly predates the internet.

So what is better for a jury, whether conventional or the sortition jury I proposed countless times in this blog, little bits of information reading a whole book or one hundred conventional pages on paper, perhaps as a briefing book like they prepare for the U. S. President. We know that for a jury, scanning the internet to look up a term is illegal. But what about pieces of information that we remember--if I serve on a jury in a criminal case and remember something about the cautions and vague preconditions in Elizabeth Loftus's book on the problem in witness identifications. Can I use that information? Can I use that in the deliberations and my own thought process? What if I happened read the book several years ago--I have not gotten around to reading it? What if I read it when I knew I was summonned for jury duty but before I was impanelled? I guess I would be disqualified if I read it after I was assigned a case. And what of the anecdotes that are floating around in every citizen's brain. Would the criminal trial system be best served if the citizens were required to read a relevant book in its entirety just before the case? Surowiecki proposed in Wisdom of Crowds that although people have lots of bad information, it all cancels out and the result is something that is more likely to be close to the truth than expert opinions. If a sortition jury was called in to decide on which proposal NASA should fund or how to reward and allocate money for different health care providers, how should they prepare? How should our educational system best prepare them?


  1. Jacob Nielsen, Usability Engineering, Sun Soft 2550 Garcia Aenue, Morgan Kaufman, 1993
  2. Mayer, Richard E., Multimedia Learning, Cambridge University Pres, 2001, 2009

Follow up on

  1. Rettg M. (1991) " Nobody reads documentation" Communication of the ACM, 34, 7 (JUly) 19 to 24
  2. CCarroll, J. M. and Rosson M.B. (1987) Paroado of the Actie User In Carrol, J. M. (Ed.) Interfacing Thought: Cognitie Aspects of human Computer Interaction MIT Press, Cambride MA 80 to 111
  3. Egan, D. E. (1989) Formative design-ealuation of SuperBook ACM Transactions on Information Systems 7, 1 (January) 30 to 57
  4. Borenstein N. S. (1985) The Design and Evaluation of On-Line Help Systems Technical Report CMU-CS-5-151, Deartent of Coputer science Carnegie Mellon Uniersity, Pitsburgh PA
  5. Mirel B. (1991) Critical REview of Eperimental Research on the Usability of Hard Copy Document IEEE Transactions on Professional Communication 34, 2(June) 109 to 122.
  6. Reder, L. M. and Anderson, J. R. (1980) "A Comparisons of Texts and their Summaries: Memorial Consequences" Journal of Verbal Learning and Verbal Behavior Volume 19, 121 to 134.
  7. Steven Johnson, Everything Bad is Good for you: How Today's Popular Culture is Actually Making Us Smarter. I heard his interview on CSPAN-- definitely for another Thoughtful Thurrsday.

Monday, April 19, 2010

UK "consulting the public"

United Kingdom is having some sort of "public consultation" on whether to pay people for transplants and donating eggs and sperm. However, the article is not clear whether this is sortition, a poll, or deliberative polling.

Sunday, April 18, 2010

NPR Trust in Government

NPR had two wonderful sessions today:
  1. California's Initiative. Half its budget is tied up in laws created by the innitiative. And California Forward is pushing new proposals on governmetn process. I just looked at their web site and they are vague on their proposals, but they do include changing the budget to two years, allowing the budget to be approved with fifty percent but require two thirds for a tax increase, and preventing the use of one-time increases in revenues for continuing expense.s
  2. A new series on Trust in Government--beginning with an interview with DR. Zelikow, who was part of the Bush Administration and also is a professor who wrote a book on Trust on Goverment. He pointed that trust in government goes up and down--but now government has more responsibilities than ever before.

Saturday, April 17, 2010

Grand Challenge

The grand challenge of economics is to allow each voter to play with the tax code at a detailed level -- and combine these results in a meaningful way into The Tax Code. That is they should be able to say that a person with an income in the range of $80,000 to $100,000 with two kids in an expensive suburb, whose income, 30% comes from investments and the rest from working should pay thirty four percent in taxes.

We have had many good analyses of how the income tax burden is distributed and whether the wealth or the workers are paying enough, and that half of Americans are not paying any income tax but may be paying Social Security tax as well as state and local taxes.

  3. And a Dangerous Economist Posting on April Ninth 2010, "Does Everyone Pay Taxes?"

Our Federal Government is a huge insurance company with an army" as Dr. Krugman put it. Thus, the voters also need to say how much money a Colonel who had fifteen years of active duty when he lost his hand to a road side bomb in Afghanistan, how much money should a eighty-year old man earn from Social Security after working 160 quarters and whose total input was $100,000. And who do these interact and what is the optimal way to have people weigh their desire for public programs and their desire to keep the tax burden down, an issue raised at least half a century ago.

This part would use the best of MultiMedia Learning Theory and visualization. ( I was very impressed by E-Learning and the Science of Instruction: Proven Guidelines for Consumers and Designers of Multimedia Learning by Ruth Colvin Clark and Richard E. Meyer and and Richard E. Mayer, Multimedia Leaarning. There is a science to this, but that is a subject for other posts).

The second part is combining the individual choices and budgets into a tax code and budget. This can be done by Genetic Algorithms, the classical Machine Learning from Examples algorithms (ID3 and C4.5). But another question, building on the grand question of discretion versus the rule of law, is replacing some or all of this tax code by sortition juries who would look at each tax payer's situation holistically, and letting the tax burden be a competition among both businesses and individuals to be "good" as broadly defined by the jury.

Grand Challenges

There are many other grand challenges and grand challenge lists out there:
  1. Engineering which is a list of fourteen challenges developed by the National Academy of Engineering by a panel of eighteen indivudals including Google Co-founder Larry Page and J. Craig Venter
  2. the DARAPA Grand Challenge to develop autonomous vehicles that can drive off road.
  3. Improve Scientific Result and Data Communication
  4. global health
  5. David Hilbert publishing twenty-three unsolved problems in mathematics in 1900
  6. And in the 1980's, a list of challenges for Computer Science

Friday, April 16, 2010

Financial Industry Profits

In this quarter, Bank of America made five billion dollars profit on buying and selling assets--trading currency, bonds and commodities. Dr. Paul Krugman just pointed out that the financial Industry accounts for a third of domestic profits. Not as bad as the 45% from 2001 but more than the only fifteen percent at the financial crash of 2008.

Thursday, April 15, 2010

Dr. Dudley of the Federal Reserve again

I blogged and posted a link to Dr. Dudley's paper on Asset Bubbles--Dr. Dudley is president of the Federal Reserve Bank of New York. NPR's Planet Money has picked up on this. His interview showed that some consider it difficult to control asset bubbles, the FED has not done this up to now, and should in the future. And the FED does not have the power to make detailed regulations, to say these financial transactions are good for the economy and these are not.

But sortition juries can look at individual transactions. If someone needs to sell their home or a piece of land they bought because they need intensive medical care, perhaps a senior citizen needing to go to a nursing home, then that purchase is good. Other transactions between investors or speculators are not as useful. A sortition jury could rate each of these. The Federal Reserve coudl respond to asset bubles, inflation or other macro-economic bads by setting the percentage that needs to approve a transaction. If the economy is heating up, then a transaction needs 70% of the sortition jury. At other times, financial transactions only need a third of the jury approving it.

Factors and Participatory Democracy for the High Court

Vincent Aleven and Kevin D. Ashley developed CATO to help teach law students legal reasoning; They based it on factors. This Thoughtful Thursday explores the work of Dr. Ashley and his colleagues and how it can be applied to let sortition juries or the whole population replace the Supreme Court. ( At the end of a Thoughtful Thursday on Judiciaries and Judges of February 25th, I closed with problems in Constitutional interpretation by high courts in Illinois, Italy and Indonesia. A Case decided for the plaintiffs has F15 and F21. A second case has F15, F21 and F1 and third case could identify F15 but did not have F21. A lawyer could distinguish the second case by the presence by the presence of F1 And an arguer with the third case for a defendant would point out the lack of F21. As Drs. Aleven and Ashley pointed out, boiling down the judges opinion in a case to a set of yes/no values on factors does not capture all the subtlety of legal reasoning or the theories involved.

(Although irrelevant to a participatory democracy, it is fair to point out than in a controlled test of argument skills and querying a legal database, the students who had the instruction from CATO did better than the students who had a conventional law lecture.)

Drs. Aleven and Ashley used trade scecret law in their studies and the codes corresponded to:

whether a product was unique [F15], whether the plaintiff disclosed the trade secret in the course of a business negotiation [F1] and whether the defendant knew the information was confidential [F21]. The first case might have these three factors (F1, F15, F21) and

The concept of factors was also illustrated by Fourth Amendment law in Rissland's wonderful review article on case-based reasoning, analogy and similarity in the law. She pointed out resoning in dealing with fourth amendment cases, those that determine whether the police can do a search without a warrant. The Supreme Court had already decided that the police can search a car when they make a stop. On the other hand, a warrant is required to search someone's home. But what about a mobile home? What about a mobile home being driven down the highway? What about a mobile home moored semipermanently in the mobile home park? In the words of Rissland, what about "a vehicle..hooked up to water and electricity but with its wheels still on," a "camper's tent with the person's things" and "a van with a bed and upholstered chairs."

One can develop hierarchies to help organize factors, e. g. combining several factors into the uberfactor of "home" Then "home" is another factor, along with "emergency" "permission" and who did the search. (A person not affiliated with the police might find evidence of a crime and alert the police officers--this could be a person with permission to be in the dwelling, a roommate, a family member, or a landlord coming in to do a repair. It could also be a person who is not authorized, a vigilante or a common burglar.) Then these factors might be the ones combined to determine whether evidence is supressed, the outcome of the case. Figure Four of the conference paper >shows the factor hierarchy used in CATO, a tutoring system to help law students argue cases appropriately from precedent. F15 (Unique product) positively influences (supports) the abstract factors of F104 that information is valuable and negatively influences F106 that "information is known." These in turn positively impact the determination F101 that there was a trade secret. Factor F21, that the party knew "the information was confidential" influences F115 that there was a "notice of confidentiality" which in turn positively influences that F114 that there was a "confidential relationship." F114 and F101, leaves of the directed graph, could be considered final legal factors that determine the case.

Ashley and Aleven identified eight sargument strategies with cases for lawyers and law students to use. But what are the strategies for judges or sortition jurors to use. I will use the term "case at bar" for the new case for which the jury is voting on a decision and legal argument. And any of the prior cases is a "precedent case." (generically P1, P 2, etc.)

  1. The jury could simply say, choose or vote that the "case at bar" matches one of the "precedent cases" and match up the factors. That is P1 has factors F1, F2, and F3. The Case at Bar also has factors F1, F2, and F3. Case P1 was decided for the plaintiff, without loss of generality(wlg). Therefore case at bar would also be decided for the plaintiff. Presumably, this is what will happen in many cases.
  2. The jury could distinguish. That is the precedent P1 has factors F1, F2, and F3. They would say the case at bar has F1, F2, F3 and F4 They would in doing this by labling P1 as having factors F1, F2, F3 and not F4. (by "not" F4, they might mean that the case has not demonstrated F4, not necessarily that the lawyers in that case demonstrated conclusively or presented sufficient that F4 did not occur.)
  3. The jury could change the reasons for a precedential case. Assume the precedent P1 was decided for the plaintiff factors on factors F1, F2, and F3. However, from the writing in the opinion, they also find that the case had factor F4. P1 was decided for the plaintiff.

    But the case at bar has factors F1, F2, and F3 as well and the jury would like to vote it for the defendant. They don't want to overrule it. They could decide that the precedential case was decided on the basis of F1, F2 and F4. The jury then decides the case at bar on the basis of factors F1, F2 and F3 for the defendant.

  4. And, lastly, the jury could simply overrule the precedential case.
In an experiment with precedential participatory democracy systems, the computer program could allow all four of these strategies or only the first two or three, and we could see what the result is.

These strategies are not as arcane as they might appear. Parents do them all the time, at least in homes with siblings. Bob, Age 18, is allowed to say out past midnight. His sister, Janet, Age 16, is not allowed to do the same thing. Their parent distinguishes. Bob is age eighteen, you are sixteen. Of course when Janet becomes eighteen and wants to say out late, she is going to cite that precedent. The parent really doesn't want to let her out and then says, Oh, you are a girl, and ... Or perhaps, she might want to add a new factor, "Just last month, I heard that there is someone preying on. Back then, our suburb was peaceful." Or she could overrule, "I was wrong then, I shouldn't have let him out-- we were lucky he came back safely."

The System

In the real world, the lawyers would present their arguments and the record would be available. The justices would assign factors to the case and write up an opinion. They would also say whether the opinion supports for plaintiff or defendent. Note that not all justices might render an opinion if other justices prepared one with which they agreed.

The system would ensure that any outcome was consistent with with prior precedents. Justices could apply the strategies above, such as adding factors to prior opinions to distinguish them or perhaps overruling them.

Assume that there was more than one opinion. Then the voting would begin. In the real world, there could be a different set of voters than justices. I proposed that the judges would write opinions and if there was a disagreement or dissent, then the American people would vote which opinion would rule.

(This raises the analogy of concurring opinions. Let us consider an example with three opinions and four factors. A third of the voters might vote that factors F1 and F2 -> plaintiff. Another third might vote that factors F3 and F4 ->plaintiff. And the remaining third might vote F1 and F2 ->defendant.) Obviously the plaintiff will win the case at bar. In Marks versus United States, as cited by Wikipedia, the narrowest opinion would rule. IN the above case, there would be no holding but what if the layout was: A third of the voters that factors F1 F2 and F3-> plaintiff. Another third might vote that factors F1, F2 F4 ->plaintiff. And the remaining third still voting F1 and F2 ->defendant.) See the Wikipedia article for some more work and I will hold Marks versus United States, 430 U. S. 188 (1977) for a future Thursday post.

In experiments, we would probably use squibs or short synopsis of the cases. We might help the authors along by requiring them to use a set of factors that we predefined with the help of legal experts or might allow them to add factors themselves.


Drs. Ashely and McLarenalso did an experiment with factors and a case body of ethics decisions that showed the power of precedents in information retrieval. And Ashley acknowledged that there is more to legal opinions than just a few yes/no values. But I propose an interesting experiment where groups would try and set up opinions and judge cases in various topic areas such as the fourth amendment or trade secret law.

Some groups will just write their opinion in prose. Other groups will just get to assign factors. And the third groupw ill do both. We can measure the predictability by giving people half the opinions and ask them to predict how they would decide the remaining cases, and then see how they do. We will also try splitting the decisions after half the cases were decided. Assume that a specific area has twenty questions to decide. Each group would get the first ten. Then, they would be given the next ten cases to decide. They will be asked to be true both to the precedents but also to apply their own opinion. I would assume there are some sophisticated statistics that could see whether each group is influenced in decisions eleven to twenty by the precedents that they are to follow-or they simply find a way to write or assign the precedents so as to write a justification for what they believe.

When I was at the 2001 International Conference on Artifical Intelligence and Law, Dr. Schauer lectured us in the Old Court House in St. Louis of Dred Scott fame. Aand he said that most of the time an appelate court judge could write the opinion and justify the opinion to meet his personal desire of how the case should be decided, but every so often, they say "it just won't write." And I recall a Clarence Darrow biography where he said that a lawyer must make the judge want to rule in their favor from an emotional sense more than provide the precedents and legal reasoning. To what extent would a system based on factors guide the participants, especially a jury or a whole democracy, to maintain stare decisis?

For Future Thoughtful Thursday

Marks Vs. United States


  1. Aleven, V., Ashley K., "Evaluating a Learning Environment for Case-Based Argumentation Skills" In the Sixth International Conference on Artificial Intelligence and Law: proceedings of the Conference University of Melbourne Law School, Melbourne, Victoria, Australia June 30 to July 3 1997, ACM Press, New York, NY Pages 170 to 179.
  2. Vincent Aleven and Kevin D. Ashley, "Doing Things with Factors" The Fifth International Conference on Artificial Intelligence and Law, May 21 to 24 1995, Page 31 to 40.
  3. Vincent Aleven and Kevin D. Ashley, "What Law Students Need to Know to Win" in the Fourth International Conference and Law, June 15 to 18, 1993 in The Netherlands, Pages 152 to 161.
  4. Bruninghaus, S. and Ashley, K. Improving the Representation of Legal Case Texts with Information Extraction Methods" In The Eigth International Conference on Artificial Intelligence and Law Proceedings of the Conference (Washington University, St. Louis, Missouri, May 21 to May 25, 2001). ACM Press, New York, NY, 2001, 42-51.
  5. Ashley, Kevin D. and Bruce M. McLaren, "An AI Investigation of Citation's Epistemological Role" In The Eigth International Conference on Artificial Intelligence and Law Proceedings of the Conference (Washington University, St. Louis, Missouri, May 21 to May 25, 2001). ACM Press, New York, NY, 2001, 32-41
  6. Rissland, E. L. AI and Similarity. IEEE Intelligent Systems 21, 3, 2006, pages 39 to 49.

Saturday, April 10, 2010

Asset Bubbles from the President of the New York Federal Reserve

William C. Dudley, president of the Federal Reserve Bank of New York presented a wonderful paper on Asset Bubbles, valuable for pointers on experimental results that showed that Asset Bubbles and crashes happen in simulated markets, even when there were clear indications of the dividend stream, and everyone knew them. Dr. Dudley also showed that asset bubbles are likely to occur when one cannot easily sell short and when there are innovations whose results cannot be predicted accurately such as the internet boom. Because central banks cannot easily predict the future (Yogi Berra), they do not know if it really is an asset bubble and how big. (E. G., the central bank predicted and headed off thirty of the last ten asset bubbles.)

Also, bubbles involving debt create more damage when they burst, because people depend upon receiving the income stream from a debt and because of leverage. And he pointed out, as others have, the ease with which people could avoid leverage regulations by going offshare or using a different instrument that might e regulated differently.

On, I argued for a more extreme solution, outlaw the buying and selling of financial assets altogether. You buy it, you own it, you get the income stream, period! And here, I argue for a share economy, one invests in a real company or enterprise and gets a share of the income.

To be included a later Thoughtful Thursday:

  1. "Bubbles, Crashes and Endogenous Expectations in Experimental Spot Asset Markets", Vernon L. Smith, Gerry L. Suchanek, Arlington W. Williams, Econometrica Volume 56, Number Five, September 1988, 119-1151
  2. Vivian Lei, Charles N. Noussair, and Charles R. Plott, "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality" Economitrica 69 Number 4 (July) 831 to 859 in 2001.
  3. Richard Thaler, "From Homo Economicus to Homo Sapiens" 2000 Journal fo Economic Perspectives 14 Number One (Winter) 133 to 141 (Overconfidence)
  4. Adrian Tobias, Arturo Estrella nd Hyun Song Shin, 2010 Monetary Cycles, Financial Cycles and the Business Cycle Federal Reserve Bank of New York Staff Reports 421.

Immigration International Issue!

Setting up rules for immigration and the bringing in of guest workers by businesses creates contention in many countries. Jeffrey Kaye talked about this in a Huffington Post blog. Could a sortition jury provide a way to distinguish between a business that needs a few people with special talents or skills, often in an exporting industry that creates many jobs in the home country, and a business simply trying to get cheap workers.

I talked about a solution to immigration for those wishing to permanently immigrate last June.

Peremptory Challenges

I spoke about sortition juries for various things--one can say that this is a mantra for the participatory democracy movement, in the same that the free market is for many on the extreme right. In our conventional juries, we allow either side to remove juror's. This is in addition to allowing either side to refer to specific reason for bias--in an extreme example, a family member of the defendant by random luck is selected randomly. However, peremptory challenges can be used to eliminate those of a particular ethnic group. Justice Stevens wanted to preserve peremptory challenges but prevent what most would consider abuse. And, the peremptory challenge is a legal tradition and right going back to England. and

What is the role of peremptory challenges in sortition juries? Perhaps, larger juries, such as used in the Athenian System. where an occasional biased juror would be overwhelmed, is the answer. Could we have a jury on juries to handle the disqualification of jurors, instead of a possibly biased or bribable judge?

Thanks to the Juries blog for the reference to this article.

Businesses, Pay What you Wish and Type AB Money

Businesses are offering to wrok for what one thinks is fair, but this does not deal with the free rider problem.

The Type AB money system does offer a solution on a society-wide basis:kkkkkkkkkkk

Friday, April 9, 2010

Supreme Court Nomination in Honour of John Paul Stevens

WWe will be hearing more about Republican Fillibusters of Supreme Court Justice with the retirement of John Paul Stevens. The problem is our Rube-GoldBerg system has the President choose judges for the Supreme Court who then make decisions by close margins (like five-to- four) on such important matters as a women's "right to choose" versus "right to life" and Bush Versus Gore.

There is an alternative, allow all citizens to form the Supreme Court, rather than just nine judges. The constitution sets no limit on the number of Supreme Court justices, nor does its provide for a "Chief Justice." These decisions are made by the Congress. The nine existing judges would have a Chief-Justice role. If they vote unanimously, as they did in Brown vs. Board of Topeka Kansas to outlaw school desegration, or United States versus Nixon that decides the issue. However, in closer votes, the matter gets thrown to the entire voting population.

There is a way of organizing decisions, based upon factors, that preserves precedential value for future decisions. This technique is used to develop computer-aided-learning systems train lawyers to make arguments to a court at the University of Pittsburgh. Factors make clear what an opinion means. The role of the current justices would thus often be to identify the possible ways of combining factors to decide the case at bench. However, determing which way applies, which is where moral values is used to determine which judgment to deliver, will be given to the people.

Employer Mandates Including Breast Milk and the Sortition Tax

A new employer mandate--that companies with more than fifty employees provide a space for women to express milk for their baby. There are many mandates existing or proposed:

  1. Vacations
  2. Sick Leave
  3. Family and Medical Leave Act
  4. and, of course, American Disabilities Act
But what are the incentives for a company to provide more than required or for a business of fourty-eight employers to provide these valuable benefits? And for some businesses, these are burdensome or at least irritating.

Rather, at consumption time, businesses should be rated and compete on how they treat their employees, and those that treat their employees well, pay less taxes and of course, have a competitive advantage in the American Market Place. And this goes for those who export their products into the United States as well. I call this a consumption-based sortition tax.

What are now mandates would be a checklist for the sortition jury and possibly even a set of guidelines for them.

Thursday, April 8, 2010

Krugman on carbon tax, capa nd trade

Paul Krugman just wrote a wonderful New York Times article and a blog post which outlines cap and trade, carbon tax and regulation the economic analysis thereof. He did not consider our sortition tax.

He mentioned Arthur Cecil Pigou who published The Economics of Welfare in 1920, which I will add to the future Thoughtful Thursday list

Thoughtful Thursday, Can Voting Optimize? Can the Voters Learn

"Learning, voting and the information trap" Aleksander Berentsen, Esther Bruegger and Simon Loertscher! (I saw this in Public Choice 2005, but it seems to be at The authors published a journal article of the same title in Public Economics Volume 92 5 to 6, June 2008 pages 998 to 1010, which I will track down for a future Thoughtful Thursday.)

Can voting optimize? In engineering, optimization is finding the values of the parameters of an object or process so as to minimize weight, cost, environmental damage, etc. There are often constraints. Thus, what thickness of material, size of pipe, temperature in furnace gives us the best output from our chemical process. Constraints would be from the fact that at certain tempertures, materials would break down as well as the stoichiometry or arithmetic of the chemical process itself. In social science, it might be what is the tax rate that makes people on average happiest. That is basically the question that Berentsen, Bruegger and Loertscher asked. The voters don't know how effective tax money is in accomplishing a "public good," let's say education. So they increase or decrease taxes, see how much education they got for their taxes and vote again.

Will the voters find an optimal or at least Pareto optimal tax rate? (If the tax rate falls unequally upon individuals, more taxes for the wealthiest, the wealthier might prefer less goods and less taxes while those paying less taxes would prefer the opposite.) How some tax rates, very high ones, might lead to a situation that everyone considers bad--and a very low tax rate with no education at all everyone also considers bad. These are not Pareto optimal!

But there is a problem, the voters don't know exactly how much good they will get for their tax money. In other words, does more money equal better educated children, and by how much? Can the voting system find this out? The answer from their mathematical proofs based upon probability theory is that it would not. They don't. It is likely that society will end up believing the wrong thing about the relation between education and the amount of money put into it. It is likely that they would not achieve a Pareto optimal result for the amount of tax. The more mistaken society starts out, the more likely they would never get to the right place. They also looked at random noise or shocks. That is, other factors affect the quality of the students coming out of the school that have nothing to do with the amount of money in taxes--that upon which the people are voting. Some of these might vary as shocks--more like a sudden rise in oil prices affecting the economy.

There is a well known model of candidate voting, where each party chooses a position on the issue, in this case how much to tax. The authors use this rather than a participatory democracy rule. Obviously, I hope to simulate some of the tax policies I discussed in earlier postings to see if we get similar results--I expect that we will.

Although the authors did not look at it, this is a good model of the recent arguments over taxes. To what extent do high taxes discourage work and investment. As a people, we try high tax rates and see what happens with the economy and vice versa. Will we ever learn the true relationship between taxes and the economy? Assume one has a progressive tax. Can the voters find the optimal amount of progression. If it is too progressive, confiscatory, it might destroy incentives for people to work hard and achieve. And we would have less revenue -- Laffer's Curve. That is, as tax rate goes from zero to one hundred, there is a peak. The government of course gets no revenue at zero percent for obvious arithmetic reasons. They get no tax revenue at one hundred percent because they have no incentive to work or they find a ways to avoid the tax. If it is not progressive enough, insufficient revenue might be achieved to get public goods. I proposed voting on taxes and budget in the form of genetic algorithms--can the voters find the optimal function and find the true function determining work as a function of progressivity.

Tuesday, April 6, 2010

Australia Incentive Program to improve Diabetics care

One of the problems with incentivizing anything is that the description of what one has to do to earn an incentive will not accurately match the mental image of what should be incentivized. Australia will have a new program for improving Diabetes care, where they give money to the doctors when the patients avoid the complications from diabetes (32% of the health care costs there).

Not only is the article excellent, the link excellent, the comments are very well informaed.

Monday, April 5, 2010

India Right to Information Law Fights Petty Corruption

Sixty-seven countries have a law that allows individuals to request information from their government. In the United States this is known as the Freedom of Information Act. I know my home state of Illinois has a similar law--and I assume most other States in the Union.

Ms. Lina Khan just posted a wonderful article on the India's version, the Right to Information Act. Many peasants and those below the property line have used this to fight corruption and make dramatic improvements to their lives. For example, a neighborhood got the government to connect five hundred people to the sewerage system. Indians filed two million of these in the fifteen years of the law.

Of course, this instance of participatory democracy does not give the citizens any control over the government, just a method of accountability as this blog's purpose is to advocate-- but more importantly, RTI works.

Thursday, April 1, 2010

Health Care, Congressional Approval and Republicans versus Democrats

The Democrats and congress are losing in the polls after health care reform--because they do not understand the true difference in democrats and republicans, along the axis of representative democracy and participatory democracy, not the division between left wing and right wing.

Americans should have been able to vote among the competing health care reform proposals and given a continuing voice in them.

Yet Another Health Care Law Poll

Another poll on the new health care law. People feel that it will hurt their own health care, raise costs, butg improve health care overall.

Soda Tax

Another article on the soda tax--Philadelphia's Mayer is talking 24 cents on a can of soda. Of course seven cents or twenty-four cents per soda is not going to solve the obesity problem. We need to move all taxes to fight badness.

Two articles on China, Thoughtful Thursday

Constitutional Choice of Villages in China, Jianxun Wang

This was presented at the Public Choice Conference in 2005. It seems to be part of his Dissertation

Villages in e China were relatively independent of the Central Government and the author compares the village independence in China to that Tocqueville observed in American small towns.

In some cases, lineage resolved itself into a sort of 'direct democracy' When dealing with some important lineage affairs, all lineage members participated in decision-making process. Usually, the meetings were held in the ancestral hall, and lineage leaders led the discussion and junior members voiced their assent (citing Hsiao 1960, 332)

They also mentioned that councils did NOT have a head.

Yongjing Zhang Public Choice and China, An Introduction, Also part of the 2005 Public choice Conference

China may be overinvesting. Obviously, China has had a dramatic increase in its economy, export prowess, and standard of living, especially for those living in cities. He recognized the problem of waiting to reward people when we really know they did good work. In his case, he talks about those who managed towns and municipalities encouraged to get two much foreign direct investment, perhaps at economic cost. The managers are encouraged to show good economic growth in the short term. The government bureaucrats move on, the people move on (fiscal federalism) and then things collapse in the town.

We have at the same time the problem of CEO's of public companies. They are rewarded for showing a short term profit. And stock turnover is very high, managed mutual funds turn over their stock holdings within a year on average. And individuals (77% for males, 53% for females) and investment clus are in the middle at 66%. Thus, the person who invested in 1980 in stock X probably does not hold it in 2010.

He argues that just shifting to a market economy and taking advantage of abundant labor (its competitive advantage), was responsible and outweighed any problems due to inefficiency or corruption in government. But this may not be true any longer. Note that this article ws published in 2005 and China enjoyed economic growth although it has suffered due to the drop off in demand for its exports during the Great Recession.

Lastly, Dr. Zhang took the time to analyze what articles the Chinese who were publishing public choice cited in their articles. He found it very uneven with classical works in Public Choice, especially those not translated into Chinese not being cited. Of course, my first question was is this the same in other social science disciplines in China? Do other countries, where some have published in Public Choice, also show this unevenness?

To be in future Future Thoughtful Thursdays

  1. Hsiao, Kung-Chuan 1960, Rural China: Imperial Control in the Nineteenth Century, Seattle University of Washington Press
  2. Economic Reform and Constitutional Transition