Sunday, June 27, 2010

Jury Pay

Due to the recession, people are requesting an excuse for jury duty for extreme financial hard ship. That's because the fee is often ten or twenty-two dollars a day and if the person is self-employed, they cannot afford to lose a days work.

The ancient Athenians paid common citizens the equivalent of half a days wages for an ordinary laborer. They had to use rope to keep people away when too many came.

RBefore I became interested in participatory democracy issues, I always thought there should be two shifts of juries and courts. One would be the conventional nine to five. The other should be four hours a night during the week night plus eight to ten hours a day on the weekend--for those working conventional jobs that they could not afford to miss.

Friday, June 25, 2010

Private Equity sitting on half a trillion dollars, about to be wasted

Five Hundred Billion Dollars in Cash has been given to Global Leveraged Buyout Funds. It is sitting waiting for a good deal, buy an existing company at a hopefully low price. This money will not go to make one new windmills. It will not go to research new medicines. It will not build reliable electric distribution systems or water treatment plants for the developing world. The buyout companies are under pressure--if they don't buy something soon, the investors will feel, rightly, that their money isn't earning anything and walk away. If they under presure, overpay or buy a lemon...

Much of these funds are from Pension Funds and insurance companies. Others are from wealthy individuals. (I have not been able to get a percentage break down of the source.)

Source: The New York Times Thursday June 24th 2010, Page A1 and A3, CLIX, No 55081.

For a future Thoughtful Thursday, "The Economics of Private Equity Funds" Andrew Metrick, Review of Financial Studies Ayako Yasudo, 23(6), 2303 to 2341.

Thursday, June 24, 2010

Icelandic Crisis

Icelandic banks gave out a whole lot of loans in Kronurs that were in fact a currency speculation. Apparently, the Icelandic Court has ruled that the balance due is based on the amount in Kronurs. Iceland voters in an initiative rejected paying back their bail out. I since found a detailed article that showed that this was a rejection of a deal at one point and since the referendum was put on the table, another better deal was offered to Iceland. Thus the no was a foregone conclusion since the voters would not accept a deal when they were already offered a better one.

Thoughtful Thursday, a second Review of Constitution for a Future Country by Dr. Martin Bailey

Martin J. Bailey, Constitution for a Future Country, part Two

In Chapter Four, Dr. Baylor pointed out--as I have long felt--that when a new government was forming, the leaders were only given the U. S. Constitutions or the parliamentary system to serve as a guide. There has been no improvement in government for two hundred years. He recognizes that a country does not throw out its old Constitution and put in a new one just because logic or economic theory or public choice theory says this one is better. But when there is a situation like the collapse of the Soviet system in Eastern Europe or Afghanistan forming a new government, the leaders of the transition might ask for help looking for a better way.

Dr. Baylor wrote this book in his dying days to provide that help. It is my goal to provide this help also, but in the form of computer programs. We simulate things on the computer before we build them, whether it be the finite element analysis of a bridge resisting the forces of winds and the trucks riding upon them or the robustness of a electric grid as loads change and generators or alternative power sources upon them. The people who must ratify a constitution should be able to simulate it. Just as a pilot practices emergency moves such as an engine stall in a simulator, the people must practice dealing with budgeting during a depression, handling a natural disaster like Katrina. And the judicial system must be practiced as well. How would a one-state solution to the Palestinians and Jews in the Middle East deal with a Palestian Police Officer shooting an Orthodox Jew or the other way? A Law Enforcement class might enact a trial to learn criminal procedure. The people will first vote on a judicial code under a trial constitution. Then, they will have whatever election process that would include for judges. Then the judges and the jury, if their constitution so provides, will try moot cases. This would definitely include staged charged situation of one ethnic group shooting a member of the other. If they can't do it in a mock trial--is there any reason to believe they could accept the results when it happens for real. And we should do it in the more quotidian cases such as those that one might see in Judge Wapner's People's Court.)

As an economist, Dr. Bailey is very concerned that government expenditures are handled efficiently. And he starts with Lindahl taxes. Each possible group, doctors living in Wyoming, wealthy financiers living in tony Connecticut towns, coal miners in Apalachia, single people, married families, will be represented by random samples from their numbers. These will be chosen randomly, what Dr. Bailey refers to as a stratified sample. They will each propose a tax to fall on their group proportional to their marginal benefit. Dr. Bailey that each group can be divided into other groups. But each division would be based on some objective criteria, such as gender, race, occupation group, income or the like.

And taxes would be either based upon property or income and have a tax schedule. The taxes would be categorized by budget category. Thus, there might be a property tax on automobiles to fund the highway system. The goal is to get a near unanomous vote. Also, every two years, there should be the opportunity to vote for a minimal budget for basic public safety needs--equivalent to the partial shutdown of the government that were used during budget stalemates in some states.

As each funding proposal comes through, citizens vote their uninsured harm (VCG taxes) and also can purchase Thompson Insurance for monetary losses. Dr. Bailey proposes limits of about ten to twenty percent of income for these. This means there is no way for a citizen to express extreme concern-- for example a pro-lifer expressing extreme concern about legalized abortion, or a Native American expressing extreme concern about a mine on a sacred burial ground.

And Dr. Bailey proposes a complicated formula for legislative pay which includes a variety of incentives. (See below.) The first is at the start of the public good chain. If their estimate of Lindahl Dr. Bailey believes that legislators should be sequestered like juries in major cases. They should only get information in an organized way through formal hearings and not emotional impacts. More importantly, there would be no way to lobby legislators. Legislator's wealth would be replaced by a mutual fund weighted like theinvestments of their demographic groups. Thus, a physician representing his fellow physicians would sell their investments and be given a set of investments that matches what an average physician has. Cumulanis' Constitution (that's what Dr. Bailey calls his hypothetical State) specifies that legislators shall vote the amount of money they and their family would pay to put through or stop a certain legislature.

And Dr. Bailey believes in referenda, anyone including corporatins can put a referendum on the ballot if they pay the costss including evaluation. Dr. Bailey calls for impartial statisticians to estimate the possibility of referenda passing--I guess after polling. If the odds are ten percent ormore Obviously, there are various technical correction bills that are not controversial. The statistical groupo could find which ones have a 95% chance of passing and these could be grouped in a single up or down vote. He furthermore proposes that referenda be voted on twice, with the first vote just to see if there is interest and requires 25 per cent of the vote. If a legislature makes a proposal rejected by 75 per cent of the people shall have the costs of the ballot deducted from their incentive pay.

Of course legislators have important roles, including determining the size of ebverybody's taxes--although with his mechanisms less of a role than currently. But many other jobs including the election commissioners that administer the non-trivial software systems, the statisticians are critical. And, what about those making decisions about deep oil drilling equipment. Or those administering large contracts for the government.

Dr. Bailey realizes that the VCG mechanism although a Nash equilibrium is not immune to collusion. Cumulanis' constitution simply says that attempt to organize voters to misrepresent their harms that would defeat the nice economic properties of VCG taxes is a felony! Dr. Bailey notes that under the bill of Rights, it is perfectly legal to encourage voters to vote strategically, e. g. a citizen could take out adds encouraging Republicans to cross over and vote in the Democratic Party and vote to nominate an extremely liberal candidate so the Republican party candidate wins.

Dr. Bailey believes legislatures should be paid on a contractual basis with the voters who are sovereign. Thus, every bill should have measures of success. The education bill should state that 70% of the children shall read at grade level for example. The legislature making the education proposal would be responsible for contracting out the education function and monitoring it. If the education system got only 65%--then any citizen can sue them. "The criteria for standing admissibility of suits shall be identical to those for suits against private parties as specified by the laws of torts and contracts." Now, who would have the right to sue here. Would I as a taxpayer or simply a citizen who cared that kids get a good education or a professor who felt that I want students who know how to read and write in my class have the right to institute a suit? (The Supreme Court has restricted this right. Taxpayers do not have the right to pursue a generalized claim that their funds are being mispent. Parents of a particular ethnic group could not sue regarding giving tax exempt treatment to schools that discriminated against their children. And lastly individuals could not sue on behalf of animals under the Endangered Species Act. A generalized claim that the person might not see the animal when they are traveling is not sufficient.)

In the same article, Dr. Bailey proposes mechanisms to make budget estimates more accurate and realistic. Each tax schedule shall have an estimate of how much revenue it will bring in. (And he provides for macroeconomic downturns that are not the estimator's fault.) Legislators cold be sued when their budget estimates were simply incorrect--presumably discouraging the budget shenanigans we say at the state and federal level in the United States. (I have pointed out that there are ways of organizing the budgeting structure constitutionally without budget estimates. One specifies the tax schedule and whatever it brings in is what that government has. Also, one can specify an expense and the people who shall bear it. They compete on a goodness or badness basis before sortition jurors to determine who should pay it. For example, the car owners shall be required to pay for the highway expenses. Each goes before a tax sortition juror and pays a tax based upon how safe they drive, how much they needed to drive (those who lived on a farm out in the boonies might have no choice but to use their vehicle and the sortition jury would assign them a small share of the highway taxes. But someone who might use their vehicle when the Greyhound bus went where they needed to or who drived for vacations.)

One can also use approval voting to determine expenditures. That which 100% vote for gets funded first, then what 99% vote for, etc. The tax schedule brings in whatever it brings in. The things wanted by the most people gets funded first.

Thompson Insurance

A street project would improve the value of some people's property. It would lower the value of others. Every proposal would be associated with a Thompson insurance. The first parties could take out insurance against the proposal failing. The other parties would take out insurance against it passing. A neutral government body must offer this. Dr. Bailey cited work in the law and economics literature that insurance really doesn't work for intangibles such as pain and suffering. And a majority could keep proposing the same thing, bankrupting a minority. That is if the majority might keep proposing the mine on the ethnic group's grave field. The ethnic group would take out insurance against the bill passing, defeating it. However, they would eventually run out of money.

Thus, this really does not deal with the pro-life individual concerned about legalizing abortions or the pro-choice concerned about a proposal to restrict abortion. Dr. Bailey's constitution would have would have limits that would not allow a person to declare the severe harm for their ethical sensibilities. Dr. Bailey realizes this and he says that his mechanisms could not handle it. He says, "The performance of a country with our proposed constitution could be almost an arbitrary and capricious on this issue as the ... United States has been. That is a pity, and if the reader can think of a constitutional order that would arrive at sound policy on such issues more reliably than that proposed, please publish it." I have an idea--and will be posting it shortly here. I should also mention Dr. Bailey's concern about entry into war on spurious grounds. He mentioned the Gulf-of-Tonkin resolution that got the United States escalated in the Vietnam war and the less-disastrous Spanish American war. This book was published and Dr. Bailey passed away before the entry into IRAQ, a situation that has been compared. And Dr. Woodruff discussed the problem in the Greek invasion of Syracuse. system. (I proposed a solution of waiting to reward our statespeople and military leaders.)

Appendix -- Incentives for Legisltuares

Section Eleven includes detail for all legislators. Here are some of the formulas to give a flavor: "0.1 percent of the budget amount contained int he proposal plus thirty percent of the total declared insured and uninsured harm from non-adoption, net of the declared harm from adoption, relative to the next most valuable distinct and differeent proposed by another legilature, less five percent of the net inferiority of these proposals, relative to distinct and different alternatives of the ballot, for each population that on net would have supported an alternative proposal int he group, under the legislature's proposed taxes and accurate taxes for the alternative."

Thursday, June 17, 2010

Thoughtful Thursday, Robert A Dahl, Democracy, Liberty and Equality

Robert A. Dahl, Democracy, Liberty and Equality, Norwegian University Press, 1986

Worker Democracy

Worker democracy can work. Would workers take all revenue as pay or would they invest as needed The Mondragon cooperative was owned by workers--increased at 8.5 percent year and improved market share from one to ten percent. They invested four times the average rate for firms and cooperatives voted to increase their capital contributions. Mondragon also educated its own employees so they could become managers. Each cooperative decides on the ratio of pay between executives and workers. And Dahl observed that the worker-managed cooperatives of Yugloslavia. But in contrast producer cooperatives were short lived in the late nineteenth century, giving this idea a bad name.

Our proposal here is not socialism, but that workers and investors share revenue and control. Organizations such as library and universities spend eighty percent of their income or government funds on the employee salaries and benefits. (I just read in Queens Gazette that the Queens Public Library spends eighty per cent on employees. My University is a little bit more than eighty percent.) On the other hand, chemical processing plants pay only ten to fifteen percent in wages. Midway, Neogenomics that tests for Cancer has fifty percent of its revenue going to workers. Capital intensive industries would of course have most of the revenue going to the investors on a share basis, so it is neither socialist nor on the other hand advocate firm owner control. (This is an issue raised by Benjamin Ward in his book on Socialism and article on "Illyria" loosely based upon Yugoslavian experience. I recall he was concerned that a worker-managed firm wasting the capital. I will put out a Thoughtful Thursday when I get some books out of storage after I was forced to move.)

And the socialists in Denmark proposed a payroll tax was invested back into the employee's firm giving them a vote but limited to fifty percent to protect he conventional owner. He reports that worker-managed firms are more productive than conventional managed firms.

But not all socialists believe in workers. There is a contrast between the Fabian socialists and the old Labor Party of Britain and the Syndicalist. In the 1920s, the webbs said that each nationalized firm should be appointed by a mixture of workers, the administrators and the consumer community. But by 1932, the British Trade Union Congress called for business to be run by Government appointees. Advisory Boards would represents interests of both consumers.


True federalism is different from delegation. A political subunit or school district may have total autonomy to handle education matters with the larger commonweal having upper categories. If this is in the constitution and considered a right like free speech, then it is true federalism as opposed to administrative convenience of delegating responsibility. Citizens are represented in all fields, at the local level for education, at the national level for everything else.

What Dr. Dahl ignores is that federalism is not clear cut. Yes the Constitution might declare local control for education? And national or federal control for such things as foreign policy. What happens if the National Government signs a treaty that limits educational autonomy? The United States has concern over Madrasah's in Pakistan and Pakistan created an education board--so this is not far fetched. And, of course, the United States Federal Government has forcefully integrated American schools.

So, in setting up a government, what rights should individuals or schools or states be given? This is a difficult problem for constitutional courts, and one that might be abused either way. I propose a 100% rule. A law that affects a local area requires approval by x%+y% = 100 where x is the pass rate at the local level and y% is the pass rate at the federal government. When there is a conflict between the federal and state or local aegis, the percentage at the higher level voting down the law as repugnant, e. g. the federal government saying this "education" is religious indoctrination must be larger than the percentage that passed it. Thus if a locality votes 99% that its education should do t would need at least a 99% vote at the national level, or the sortition jury hearing the case in the national court, to overturn it.


This is another book I borrowed from the Columbia University Library. Dr. Dahl proposed at the descriptive level that there are many elites that control government rather than just a narrow one at the top. Wikipedia article on him used the term "dean of American political scientists"

Wednesday, June 16, 2010

Rooting out Marriage Fraud for Immigration

As is well known, a person who marries a U. S. citizen can get citizenship. (There are a couple of restrictions such as criminal background checks and the like.) But the most important is to make sure that it is not a sham marriage. The United States Citizenship and Immigration Services interviews couples separately. I wrote a letter that I worked with a student in their apartment. (I am known for helping my students extensively. Most of the time I work wit the students in the University-provided computer labs but occasionally it is convenient for me to make a house call.) And I wrote observed that appeared to be two people living there, him and his wife. In some areas, the immigration office might randomly and unexpectedly arrive in the morning to see if the partners are obviously living together or not obviously together.

The United States citizenship and Immigration Services interviews couples separately, creating what the New York Times described as a Kafkaesque procedure reminiscent of TV quiz games to see if the couple knew what color toothbrush each partner had. There is a special procedure for those where the first interview raised an issue of the marriage being a fraud. THis office employs twenty-two officers, and they don't have any specific rules, expertise, or statistical evidence to determine which marriages were fraudulent or not. Just interesting phrases like, I should not be able to know more about your husband in fourty-five minutes than you do.

I wrote earlier about Using sortition juries for all aspects of immigration. And I don't see how twelve randomly selected citizens could be any less logical or scientific in making these important decisions, both for the nation and the couples involved.

Monday, June 14, 2010

Constitutional Convention Campaign Finance

Rhode Island is considering calling a Constitutional convention, a procedure in the United States Constitution, but never exercised. Their concern is campaign finance.

There is a question of whether such a convention would only consider that issue or any or everything. The Rhode Island Resolution said they should only consider amendments referenced by forty percent of the states. Two thirds of the states are needed.

Thursday, June 10, 2010

Martin J. Bailey, Constitution for a Future Country, Thoughtful Thursday,

I am reading Martin J. Bailey, Constitution for a Future Country, Palgrave-McMillian, 2001 JC 330.15 B35 2001. It is available at Columbia University library at which I am taking a game theory course--more on that later post. I only have read the first two chapters-but the ideas are there. (I have not been able to get it at my usual discount I am hesitant to spring for it until I am sure it was worth it, which it is.)

He proposes a finely crafted construction of the best that public choice/game theory can provide and sortition/direct democracy.

  1. The legislature is elected by sortition.
  2. All things passed by the legislature are approved by the referendum.
  3. Start with Congress, I will refer to as the legislature, estimate of Lindahl taxes
  4. Use the Vickrey Clarke Groves Tax, about which I need to blog later, for each proposal. People can offer a payment to have a proposal pass or not pass. Thus gunowners can offer a payment to not pass a gun law. Similarly, those in crime-ridden neighborhoods might offer a payment to get the bill passed. The Vickrey Clarke Groves tax only registers if one needs a little bit of money to pass or not pass the item. Thus many people might offer a payment and it not be taken. For large populations, many people would pay a small additional payment and even larger amount would not pay anything out as they pay nothing.
  5. Citizens can pay for insurance for or against the passing of a new referendum. E. G., stock holders of power plants could purchase insurance Dr. Baylor states that although sortition for legislatures has been "proposed from time to time," one should combine it with the above-mentioned strategies.
  6. He argues that legislatures could compete. Several legislatures could propose proposals and may the best one win. (He didn't mention but approval voting comes into play here!) In my second post in May 2009, I proposed this idea for health care plans. Forty percent of either house as well as the President directly could propose a plan.
  7. He argues that payments to the destitute should be mandated by the constitution with other payments by the VCG mechanism. He points out that payments to the needy can create perverse incentives. Payments to those who lost their house in a hurricane encourages people to build to close to the beach. And Malthus argues that payments to the poor encouraged them to have more children and not to move as needed to find work. (People are still saying that. I recall reading that some historian found such arguments in Italy eight hundred years ago but unfortunately I can't find it right now.)

    Dr. Baylor argues that such arguments poison our commonweal and argument and should be settled one and for all. I proposed that such matters can be handled by sortition juries on a non-entitlement individual basis in the health care field. Yes, your house went down. Could you have done something about it? Should you reasonably have bought private insurance? Are you more needy than others who also lost their house, whether due to a hurricane or just an "ordinary" fire.? (I need to blog more on sortition juries for charity as opposed to bureaucratic rules.) He argues that there should be one Commander in Chief of the Armed Forces. I have argued here for multiple chief executives..

  8. He also argues that there is no reason for a supreme court for statutory. That is the role of the elected legislature or as I have argued elsewhere, a referendum when the justices disagree. Dr. Bailey argues that a statute which is vague enough to be interpreted or where the legislature left a case not considered, means the law should be patched up. I have always wondered if there is a need for a separate court for interpreting statutes. However, the court does have a role to preserve enduring values of the republic and civilization--in the United States these would be individual rights.
  9. In civil cases, the parties could hopefully agree on arbitrators. If so, that would be the arbitrary and the private arbitrator earns a fee. If the parties do not choose an arbitrator together, or one is simply obstinate and refuses to even appear, then a magistrate chooses one randomly. (He calls them magistrates. The term clerk or ministerial action come to my mind.)
  10. He argues for contracting stuff out. Legislatures would be judged and paid on the success of their proposals and would have an incentive to find good firms to implement the programs they proposed and were voted on by referendum.
He talks about how his proposed constitution comes to pass. The Vickrey-Clarke-Groves mechanism, The Thompson insurance plan, are not easy to explain. In fact, I suspect that many reading these do not understand them. However, Dr. Bailey points out that once the Constitution is approved, it is not hard for the voter to understand what to do and how to make their preferences heard. The hard part is at the beginning. I propose, we have nationwide simulations of these mechanisms-- in fact all proposed mechanisms in a constitution.

He realized that the best time to propose this new idea for how to govern a country is when the country is in in transition. The change to the Post-Soviet regimes in Eastern Europe or post-Saddam Iraq. Does it depend upon an enlightened statements or by a process of simulation by the whole population and then voting.

I did not see in the first two chapters or the index, federalism. How do some groups maintain their integrity in a Constitution, such as in a one state or two state solution.

A Deeply Sad Note

Martin Bailey passed away in 2001 from a brain tumor. I knew about this book for some time, and thought/fantasized that perhaps Martin Bailey could work on a project to simulate his ideas, and maybe I could modestly help with this programming.

Wednesday, June 9, 2010

Neo Mercantalism?

We all know what mercantalism is--accumulate gold. Just as there are neoclassiscists--I studied about them in Intermediate MacroEconomics course, there was bound to be neo-mercantalism. Are these people who push financial wizardry above all--ignoring what money is for to buy or spend on needed for a better day. Or is those who push exporting, saving above consumption so the country can be stronger and more self-reliant.

And that free trade has take into account difference of environmental standards.

Volcker Again

I posted before Dr. Volker's statement that an economic Nobel prize Winner for aspects of financial engineering admitted that financial engineering does not help the economy. He has an article in the New York Review of Books quoted himself give years ago predicting the problems of the 2008 Financial Crisis in 2008.

Monday, June 7, 2010

American Spending

Although not relevant to participatory democracy, Ritholz had a wonderful graph of how Americans spend their money including entertainment

Wednesday, June 2, 2010

Cadmium Solar panels-- the green vs. green theme

Another example of the conflict between environmental aims is cadmium telluride solar panels. solar panels are green as a renewable resource, but Cadmium is a toxin and is not good to get in landfills.