Sunday, January 4, 2009

Securitization of Voting Rights

An idea crossed my mind and I need to think about it. Let's say each state issued a citizenship share to every citizen who resided there for ten years. The share would be stock in the state. Upon moving from the state, the share could be sold or retained. Residents might also have the right to sell, although there are certain moral hazards, such as unemployment sales and also the likelihood that low-income citizens would tend to sell. On the other hand, voters who do not feel equipped to vote or interested in voting could delegate or sell their voting rights to others who feel better qualified. Individuals or corporations could purchase citizenship shares, so that economic interests could accumulate a large number of shares. It doesn't seem likely that firms would acquire large numbers of shares in order to extract rents because the market value of shares would likely reflect a bidding process whereby firms eager for economic rents bid against each other and also citizens might bid for shares for their own reasons. As a firm acquired a significant number of shares, the price would start to climb. A profit maximizing firm would need to consider potential losses from share speculation as well as gains from cornering the vote share market. Since competitive interests might also aim to acquire shares, the acquisition of a large number of shares would make the firm participate in the state's economic outcomes. This would encourage the accumulators of shares to think strategically about the state's economy, something that hasn't been done in New York in many generations. Although the result might be asymmetric benefits to some accumulators of shares, the net effect of concentration of voter power would be enhanced econommic rationality because the owners of large numbers of shares would have large sums at stake and so would be motivated to think rationally about the economy. Although there would be inequities and some firms or unions, such as utilities or the hospital workes union, might gain extra power, with a large investment of capital at stake the investors would be unlikely to harm the state economically.

There could be restrictions on share ownership, for instance that no shareholder could hold more than .5% of the outstanding shares.

Thus, tax and revenue policy for the state would be set by a profit maximizing shareholder body that aims to minimize the sum of the taxes each individual pays (or the most powerful individuals pay) plus the revenue per share received. Each shareholder would have a financial incentive to maximize share values. Therefore, voters would pay directly when special interests extract rents. They do so now through tax payments, but blocks of voters might be better motivated than presently to aim to maximize share values by investing in fighting against lobbies. In other words, the share value would offer an additional incentive to taxpayers to resist high taxes.

When a citizen moves they can still vote their shares. Former residents can vote against policies. It does not seem fair that individuals forced out of New York by extortionate tax and regulatory policies lose the power to vote against those policies even if they would like to move back. Moreover, non-residents who wish to move to the state but are inhibited by incompetently managed state government could have a voice in state management. Traditional state government silences those whom special interests have driven from the state via high taxes.

It is difficult to visualize what the share value would look like. The economic value would be increased by state budget surplus and also the value to special interests of being able to gain a vote. A lower bound is the state's budget surplus divided by the market rate of interest. Since surpluses do not currently exist, the shares would reflect the potential for a future surplus and also the value of voting rights to various special interests such as utilities, banks, insurance companies, unions and environmental lobbies.

State government shares would provide a logical means by which to evaluate state governance, much as stock prices provide a logical means by which to evaluate corporate management.

There are potential ethical problems, such as whether residents ought to be allowed to sell their right to vote. Given that about half the electorate does not vote anyway, I'm not sure how troubling that is.

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