Peter Elkan, Adjustment of Sectors to stop pay-cost inflation, thoughtful thursday

The New Model Economy: Economic Inventions for the Rest of the Century, by Peter G. Elkan, pergamon Press, Oxford, New York, etc. 1982, HD82 E485 1982

(I promised a review of this when I wrote up Kenneth Boulding's review of this book.)

To prevent pay-cost inflation, the salaries negotiated by unions and management and individuals and management should be adjusted. They would be adjusted to equal the amount agreed upon. Thus, each union would negotiate a pay increase in the normal manner. The total pay would be added up and compared with the target figure. Then, each pay would be adjusted to the following. This can be done by the total pay, which means that some people might receive a decrease in total pay.

And it can be done by the increase, which Dr. Elkan suggests is more politically feasible. Here is a simple example. Society agrees that the average pay increase is two per cent. Half of the population (group A) negotiates a 2.5 percent increase.. Other half of the population (group B) negotiates a 3.0 increase. The adjustment factor is 4/5.5. Group A gets an increase of 1.81% and group B gets an increase of 2.11.

In the United States and Britain, union agreements are made throughout the year. Dr. Elkan is concerned that unions should not wait until the end of the year to find out what increase they would get with thei ncrease delayed-- int he same manner that a worker with high deductions on their income tax would have to wait until the following April for their tax refund. Thus, he proposes that all pay go through a central computer and the adjustment made on a running basis. (That might not have been practical in 1980 when he proposed it but it is with modern computers.)

He was concerned about pay-cost inflation, when each union tries to leapfrog other unions in negotiating a salary. And trade unions are so used to insisting upon regular increases, that they do so past the point of productivity growth. When this causes inflation, the unions try to leapfrog the inflation by asking for a cost of living increase that includes what they fear will be a runup in prices. (NPR Planet Money talked on another approach to dealing with the psychological factor in inflation on the price side that worked in Brazil which I will cover in another blog post.) And of course, there is the Share Economy solution--on the pay side, suggested by Dr. Weitzman and expanded by myself.

Certainly, one could organize an economy and political system where the voters vote on the amount transferred frmo each major sector to another, corporations to investors, corporations to labor, etc.

However, the same thing can be effected by tax policies. The increases that Dr. Elkan is trying to control are less than the tax bill. The people could vote ont he amount of taxes paid by each sector. This could be adjusted, at least in part, by the increase of that sector relative to desires. There is an empirical question. Would the voters best think about the magnitude of each flow in the macr economy. In my Intermediate macroeconomics course, we started with a circulation model showing the flows from economy part to economy part. Or, would the voters just say this sector is too big, this sector is too small, adjust the taxes higher in the big sectors, adjust the taxes lower in the smaller sectors. (If needed, one could have modify the reverse flow, payments to corporations that provide services to the federal government, if it was desired to send more money to the corporations.) Dr. Elkan cited Sir Roy Harrod in 1965 for using the taxes to adjust the distribution to sectors.

And whether we structure the adjustment by the sector-to-sector flow or by taxes, the demos can vote using median voting for the adjustment. That is everyone would say that the total amount payed out by corporations to their investors should be x1, x2, x3, etc. And the median is the amount that would be used.

Constitution Construction Kit, Harel State Chart, Yunker Federal World Government, Thoughtful Thursday

Fairly frequently, countries try to change their constitution. A committee drafts a constitution and the people have two choices, to ratify it or not.

Examples include:

1. Italy presented to its voters a complicated constitution that was rejected.
2. The European Union presented a new constitution that would increase the Union but it was rejected by the voters in Denmark.
3. The Iraqi's voted on a Constitution in 2005. But again, it was a take-it or leave-it proposition. Thus, many Iraqi voters felt that they really did not like the one offered, but voted on it because it was better than not having any Constitution.
4. And more recently, Turkey and Kenya had Constitutional referenda.

And there have been proposals for unions, all that would require a Constitution:

1. a United States of East Africa as reported very ably by the Economist.
2. And a board game entrepreneur promoting a vision of a United States of Africa.
3. And lastly, uniting the entire world.

I proposed a Constitution Construction Kit, more later, which brings in the idea of workflows, nesting workflows. Lastly, the ontology for legal affairs, or computer representations of legal knowledge, help a constitutional court or a Supreme Court deciding whether an act obeys the Constitution. And it helps us simulate.

WorkFlow

An insurance company claim system exemplifies a business work flow. The insurance company decides that a claim under $1000.00 is handled and decided by a type A employee. Those above that amount are preprocessed by the type B employee. But a committee of seven makes the final decision and five out of the seven of these employees are needed to approve the claim. In either case, the claim is escallated to the president in three days if a decision is not made.

The workflow diagram is shown below.

The workflow starts when someone submits a form. In the example, the policy holder submits a claim. And one might have a workflow starting at a certain time, ensuring that a person execute a backup and that someone verify the backup was successful. Different individuals might fill out forms in a certain order. That is the electrical engineer reviews the plan and then the mechanical engineer reviews the form containing the plan. And in business, small groups might approve or vote on an activity. For example, an investment committee might have to approve a major capital project. Thus, the work flow system would have to count the number of positive and negative votes. And as we see above, based upon the results at each step, or the contents of a form, the system wil determine which new state go into. Thus, whether we go into State A or State B is determined by the amount of the claim. Whether a commitee votes in one way or another determines what happens to the large claim. And time passing will cause us to go into an "escalation" state.

Some workflows, based on a Petri net model allow parallel activities. Thus, the Electrical Engineer and the mechanical Engineer can review the document at the same time. When both give their approval, it goes on to the next state

The workflow system will have things happen as we transition from state to state. An email might go out, a credit card might be charged, or a letter might be printed and sent via conventional postal mail. It is not difficult to conceive of a workflow system activating a solenoid controlling a valve in our chemical plant at a certain state.

There are commercial workflow systems, where a computer professional enters the equivalent of the dataflow in some language or in XML, perhaps to be discussed in a future thoughtful Thursday.

Political Work Flows

The passing of a bill shows how workflows can model something in a Constitution. At the risk of being chauvanistic, I will use the United States Constitution, specifically the passing of a money bill, which our Constitution specifies must start with the House of Representatives.

We start with the House, which from the Constitution itself, simply emits the bill with no explanation or specification of how (more about that later). From there, as many readers will know the bill has to approved by the Senate and then on to the President, who may sign, vetoe or do neither.

1. Awaiting Senate Approval, after the House approves the bill
2. Awaiting the President's Signature, after the Senate approves the Bill
3. Depending upon what the president does, it may go to a termination state. One of these is obviously Law Passed. If the President does nothing, in ten days, and Congress is in Session, the bill is considered passed. (I recall reading that Cypress Semiconductor set up work flows where if someone who was supposed to approve something simply failed to do something about, it went on as if they did approval. This prevented someone from having to go chase a document that was on a procrastinator's desk.)

   However, should Congress ahve adjourned, then the bill is considered failed-- a pocket vetoe.

4. The rest of the flow is an override steps, going back to the House of Representatives, where the bill originated and then to the Senate if 2/3 override.

Nested workflows and Harel's State Charts

Simply, at any transition, there can be a whole workflow embedded. The Constitution has a simple transition from the start of a bill to it passing the house and awaiting the Senate to approve it. But that is a whole workflow of a Representative bsumbmitting the bill and being assigned to a Committee and being scheduled for debate and being ammended and finally have a vote of the full house.

At any point in that time, the House could adjourn to be reelected in its two year cycle, in which case the bill would fail. At any point in the process of the Senate reviewing and voting for a a Bill, the Congress could adjourn for a new session after new elections.

An additional feature is that one can model a flow from the superstate. Thus, when the HOUSE or SENATE adjourns that kills any bills in process. We can show that as a single arrow. The alternative would be draw an arrow from every substate of the HOUSE or SENATE to the dead state for adjournment as below.

One could also think of the boxes as a dataflow diagram--and I will have to consider this later in the discussion of the Constitutional Construction Kit, below.

State charts add to a simple state diagram, the ability to group states into logical superstates. Sometimes these are called HIGRAPH's for Hierarchical Graphs. State tables are often used in modelling computer software embedded in device. In avionics software, "in all airborne states, when yellow handle is pulled, seat will be ejected." And these need to handle several things going on at the same times. In a modern electronic wristwatch, the stopwatch might be in a state, the date setting might be in another state, and the normal watch itself is in a state. If one is in the process of setting the stopwatch or using the stopwatch, one might hit the button to go to the regular display state. When the owner then clicks a button to go back to the stopwatch, we may want to leave them wherever they were, perhaps in the process of setting the stop watch or the stopwatch is clicking off times, rather than going back to a start state. Dr. Harel did a masterful writing in his article using his own Citizen's electronic wristwatch as the example.

These features are not as relevant in political state tables. However, I can think of one example. In some states in some circumstances, one can appeal an order in the lower court to the upper court, even if the lower court has not finished with the case. Let's say one is getting ready to try one's case. The Judge rules that your star witness cannot testify because you made a spelling error in sending his name in. You could then request the appeals court to review that decision and if whatever happened, the case would go back to the lower court in same place as it was left off, perhaps with allowing that person to testify.

The Constitutional Construction Kit (CCK)

Every couple of decades, the United States engages in Regime Change with the nation somehow selecting a new Constitution. We saw it in Philipines in the 1900's, Roosevelt writing a new Constitution for Haiti new Constitutions for Germany and Japan after World War II, and of course much later, a new Constitution for IRAQ. Whether the United States will do this again is a subject ripe for speculation, but not in this blog.

In simulating a Constitution, unlike working with a business, one has to allow the particpatnts or members of a body to create a new workflow.

In the United States Constitution, Article One, Section Five, "Each House may determine the Rule of its Proceedings." We also have to allow various ways for individuals to be come members of bodies. That is we have to provide for elections appointments and random selections. The latter is only used today for juries., It is a very viable way of doing participatory democracy, sortion. Thus, if one were modelling the United States Constitution, we would see a workflow from each of the House and Senate to create or modify the workflow for creating and passing bills.

This concept is in other countrie's constitutions. For example, the Iraqi Constitution has the Council of Representatives cratings its bylaw for its rule. And article 93 designates that the Council chooses how the courts will be run and how judges and other officials are selected. Bahama Constitution Article 55, provides that each House of its legislature can regulates its procedure and make rules of procedures. in the Iranian Constitution, Article 62(2) specifies that the law will set how their legislature is elected. And like the United States, in Iraq and the Bahamas, the legislatures determines their own procedure.

And if there is an election, we need to provide for the rules of that election. And who resolves disputes. And in Secton Four, both State Legislatures and Congress can change the Workflow for the election of representatives.

A workflow has roles. For example, one specifies that an Insurance Adjustor of Rank Two or Higher can prepare a claim of over $1000.00 for Committee Decision. And we have a role called Member of Claim Approval Process. In a business workflow, one generally assumes this process is outside the workflow diagram. That is, one does not have a workflow to hire or promote a person to Insurance Adjustor Rank Two. And we certainly don't have the computer program handle those people authorized to change that procedure approving the decision to change it. (The appropriate manager would simply tell the computer professional to go change it ....) But in a Constitution Construction Kit we need all these roles. The people who elected to the House or Senate can change these workflows, as can the State legislatures. And our CCK must model these.

Approval Process

Our Constitution Construction Kit (CCK) will allow multiple parametric Constitutions to be prepared, and a vote to be conducted. Thus before the process starts, there has to be an optimized funcction. This will be a natural generalization of the requirement for ratification. For example, our constitution required nine out of thirteen states to vote. The Iraqi Constitution required n-2 out of the n provinces to approve by a majority vote. There are two obvious extensions. One can find the constitution that can get the majority vote in the most states or provinces. Or one can find the constitution that maximizes the vote in the province or state that gave the nth lowest approval percentage. Thus, if constitution A got votes in provinces:

33, 45 , 47, 49, 57, 58, 62

and constitution B got these votes:

22, 43, 49, 60, 62, 68, 70

If n were three, Constitution B would win as its third lowest vote were 49. But if n were only two, Constitution A would win. (Thus, one can see the importance of specifying the ratification procedure in advance.)

And if we had chosen in advance to look for the Constitution that had the most provinces with a majority in favor, Constitution Two would win as four states had a majority.

An ontology for constitutions

An ontology is a way of organizing knowledge, where there are links between various concepts. Several groups, notably in the Netherlands, are developing ontologies for legal concepts. One of these is the LKIF-Core Ontology, funded by the European Union.

Organizations, Artifacts, and the Purposes they serve. More specific to law, might be Statement, Declarations and Assertions and Document, as a bearer of Statements. The LKIF also has NORMATIVE statements such as prohibitions. They include obligations, allowance, obligations. Thus, a penal code might be defined as a Document containing prohibitions. Our group will also include classifications, so we can say that all persons who meet a condition are permitted to or required to do.

Thus the United States First Amendment giving freedom of speech would state that a particular ORGANIZATION (congress), could not contain a PROHIBITION of a particular SPEECH ACT. (The capitalized things are core concepts in the LKIF).

An ontology for constitutions would allow the parties to propose and vote on the following:

1. How are people chosen for officer positions or to be a member of a named ORGANIZATION? I identified three of these: election, appointment and sortition.

   I deal with elections first; these are so much in the mind of the average person about the purpose of the typical constitution. Which ORGANIZATION if any can provide further clarification? Are there conditional rules if the above fail or have controversy? The United States Constitution specifies these three of these in its Article Two on choosing the President. We see that the legislature sets the rules for appointing electors. It provides that a majority vote is selecting. It also provides for a default ROLE for the House of Representatives and Senate if there is a controversy over the election of a member.

2. The classifications of permissible persons must be specified for both those doing the voting or electing. Usually a constitution will state the CLASSIFICATION. For example, the United States Constitution specifies the familiar (to Americans) requirement that president be thirty five years old and a natural-born citizen. It also specifies requirements for the "Electors:" they are not a Senator, Representative or a person holding"an office of trust or profit under the United States."

   Or it may delegate it as in Article 47, Third section of the Iraq Constitution It states, "A law shall regulate the requirement for the candidate [for Council of Representatives, the voter and all that is connected with elections."

   As mentioned earlier, representatives can be specify that other organizations are chosen randomly from certain groups. The only example of this in the United States Constitution is juries, and even here the choosing process is not specified. However, many have written about Sortition. Ernest Callenbach and Michael Phillips proposed that the United States House of Representatives be chosen randomly from the people. Brian Martin proposes a network of decision making groups, which he terms demarchy. He does not propose a specific "constitution" for this network or a method of developing one, mentioning "second order" bodies to "adjudicate on how demarchy is supposed to be work." Paul Woodruff discusses how the Greeks implemented this idea. They had several mechanisms include a "Council of 500," "judges" and the election of experts for particular purposes.

   Most constitutions also provide procedure for the appointment of specific officers. (See Section Two, Clause Two of the United States Constitution which provides for the appointment of officials such as ambassadors, judges and others with "advice and consent" of two thirds of the Senate.)

3. prohibitions or grants of specific powers. E. G. Congress can pass a law on any of the following subjects, as given in Section Eight of Article One.
4. Certain acts require certain percentages or other functions of one or more groups. An example from the United States Constitution are that 66% of the ORGANIZATION, Senate, must approve a treaty, a type of DOCUMENT.
5. Obviously, one needs the mechanics for A Constitutional PROHIBITION. The Constitutional Court could be a workflow as a step on a law before it is approved. Or it could be as part of a workflow for resolving "CASES AND CONTROVERSIE's."
6. I note that the Estrella project has put its ontology onto the World Wide Web under the GNU Open Source license. Thus, I will be able to build upon it.

References

1. Boer, A. Winkels, R., Hoekstra, R and Van Engles, “Knowledge management for Legislative Drafting in an International Setting” In Legal Knowledge and Information Systems. Jurix 2003: The Sixteenth Annual Conference (Amsterdam) IOS Press 91-100
2. Boer, A., Di Bello, M., van den Berg, K., Estrella, European Project for Standardised Transparent Representations in order to Extend Legal Accessability, Deliverable 1.1, Specificfication of the Legal Knowledge Interchange Format, IST 2004 027655
3. Harel, David, "StateCharts: A Visual Formalism for Complex Systems" Science of Computer Programming Volume Eight, 1987, 231 to 274. See http://www.wisdom.weizmann.ac.il/~dharel/SCANNED.PAPERS/Statecharts.pdf
4. Sanminiatelli, M. \fIItalians Vote in Massive Reform Referendum\fR Yahoo News, Associated Press can be found at http://abcnews.go.com/International/wireStory?id=2114939
5. Yunker, James, A New Vision of Federal World Government, University Press of America, 2007