Sunday, August 24, 2008

Getting What We Pay For

Is this really the best we have to offer?

BROKAW: The latest Gallup poll shows that, in the universe of American voters, 14 percent expressed their approval of Congress.

PELOSI: ... I think the main issue in the last election in November '06 was to end the war ... the president won't sign any bills that would allow that to happen. So from my standpoint, I disapprove of the way Congress functioned ...

BROKAW: ... Congress is bearing the responsibility in the eyes of the American public ... for not doing something about gasoline prices.

PELOSI: That's that poll, and--but the fact is, is that the, the, the oil companies, the, the administration, they all ranked higher than Congress in most of those polls. But the point is this. People--we have to look after the consumer, we have to increase the supply of energy. And the president, even as recently as yesterday, said if you drill offshore, you're going to bring down the price at the pump. It is simply not true ... this oil belongs to the American people. It has been--the big oil is making profits from it, they're not paying royalties to the taxpayer, and they're asking--and the taxpayer is subsidizing it.

Earth to Nancy: California may seem like it's part of socialist Mexico sometimes, but it's still part of the US, where oil is owned by whomever buys the rights to it.

Perhps Nanse should have also paid attention to my recent blog shout-out to professor Perry. I think she has it backwards ... the numbers show that "big oil" is "subsidizing" (just to re-use her inflamitory terminology) taxpayers to the tune of more than $150 billion this year alone. They're simultaneously enriching millions of middle-class taxpayers via their 401(k), pension, and/or mutual fund accounts. For example, funds such as these own well over half of Exxon. There are few industries more liberal than teachers and public sector workers. The pension fund managed by their union, TIAA-CREF, holds:

$3.3 billion in Exxon (it's largest single holding!)
$1.4 billion in Chevron
Another $1 billion each in Occidental Petroleum, Slumberger, and Conocophillips
That's only the beginning. They hold well over $30 billion (25% of their total fund) in commodity, energy, and utility companies.

But that's not what I came here to talk about today ;-)

Depending on your blind political allegiance, you can apply the rest of this blog to Nancy and the bed wetters or Bush and the blood suckers. In either case, what the poll REALLY shows is clear: we almost all agree that we're not getting satisfaction from our current gaggle of beloved leaders.

The current reality is that government officials wield over sized power over our daily lives. They're encroaching further by the second, and with ever-increasing velocity. If you don't believe that, read the chilling Analysis piece in last Friday's FT. Then read the Cliff's Notes of Atlas Shrugged. I guar-on-tee, suddenly Rand's dystopia will not seem so far-fetched.

Here's an idea that kills a whole flock with one stone: Quadruple their compensation. Sinful for a philosophical libertarian to say such a thing? Hey, if you want the best, you have to pay for it. Perhaps this will bring financial incentives more in-line with the value (in terms of impact) which the jobs currently carry.

But that's not all. These folks should work on commission. Give me a second to explain.

The governed should be able to put forth a public agenda at each level of government. No, silly, not Clinton-esque shucking and jiving with every poll. Think along the lines of a nonbinding "steering" version of the California proposition system, conducted online prediction-market-style. This is neither new nor novel ... Professor Robin Hanson at George Mason University has been questing after this grail for nearly a decade. Take a look at his prototypical Foresight Exchange. In a paper last year, he opened with the following hypothesis:
Democracies often ... adopt policies that in effect hurt most voters. If these policies would not have been adopted had all voters known they were bad policies, and if someone somewhere did know or could have known they were bad policies, we can say that such democracies failed because they did not induce people to acquire and share this information. If speculative markets do very well at inducing people to acquire and share information, but are little used in current governmental institutions, then we should consider changing our government institutions to rely more on speculative markets.

He explains the mechanics of his design as follows:

We might instead still have democracy say want we want, but let speculative markets say how to get what we want. That is, elected representatives might
define a formal measure of “national welfare” (analogous to GDP) and manage
its measurement after the fact. Market speculators would then say which
proposed policies they expected to raise national welfare as so defined.

To me, there seems a more direct way of integrating markets into democracy. Just like any prediction market, each voter would have an account. However, this account would contain not money but votes. In democracies, each voter is allocated one vote per issue or elected office. Mapping this model onto prediction markets would be simple. The government would deposit an allocation of votes into each account at the beginning of the year, following one of the following models:
  • The boring yet egalitarian way would be to give every eligible voter the same number of votes each year.
  • A more libertarian approach would be to allocate one vote per ten dollars paid in taxes the prior year.
  • More novel (trendy?) would be to base it on the success record of the voter's prior choices. This would have the nice side-effect of encouraging participation.
  • It's probably too soon to suggest such nuances as the giving people on guest-worker visas some fraction of the votes of a regular citizen.
Voters could then have the opportunity to allocate votes among the available proposals. Yes, this means I could throw my full allocation of votes at a single issue ... or I could spread them across several proposals I like.

What about these proposals? To be eligible, each would have to be backed by a full-term and detailed financing program, as well as solid success metrics. This makes the process objectively measurable, and thus not victim to the same ills as an opinion poll.

This, in turn, allows us to put in the lynch pin: Let us not forget about those elected officials. They still would have the job of legislating. The success ratio of public agenda items effected into law would determine the officials' compensation. If they accomplish 4 out of 10, they get 40% of their (potential, nominal) salary. To take the idea one step further, individual officials might draft or endorse the proposals. Those who back winning proposals would get a worthy financial reward.

Additional reading:

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