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.
Sunday, January 4, 2009
Saturday, January 3, 2009
Universities Cause Reversion to Emphasis on Ascribed Status
American society has become increasingly stratified and the reason is increasing regulation, universities' domination of the labor market and the Federal Reserve Bank. Max von Weber argued that the Protestant ethic engendered capitalism. Talcott Parsons argued that social norms that are fundamental to economic development include universalistic versus particularistic; specificity versus diffuseness of role relations; achieved versus ascribed status; and collectivity versus self orientation.
The idea of universalistic versus particularistic social norms is that in order for a society to develop, laws must apply universally. Resources must be allocated on the basis of universal criteria that reflect objective achievement such as competence rather than by social class, race or other ascribed characteristics. Relations should not be based on general considerations such as family connections, but rather on specific achievements.
America has increasingly become a society where status counts more than achievement. We can see this in the recent proposal to appoint Caroline Kennedy to the US Senate. To see how far we have fallen from America's past achievement orientation, let us compare a Senator from the early 1820s, Andrew Jackson, with the proposed appointee from New York, Caroline Kennedy.
Andrew Jackson, assisted by Davy Crockett who was under Jackson's command, defeated the Red Stick Creek Indians at the Battle of Horseshoe Bend in 1814. In the Battle of New Orleans in the War of 1812, according to Wikipedia:
"on January 8, 1815, Jackson's 5,000 soldiers won a victory over 7,500 British. The British had more than 2,000 casualties to Jackson's 13 killed and 58 wounded or missing."
In 1817 Jackson led a campaign against the Seminole and Creek Indians. Having been ordered to prevent runaway slaves from going to Florida, Jackson invaded Florida, resulting in calls for his censure. Using the invasion as a pretext, Secretary of State John Quincy Adams negotiated the Adams-Onis treaty with Spain, whereby Spain ceded Florida to the US. Jackson served as the first US governor of Florida in 1821.
In 1822 the State of Tennessee elected Jackson to the US Senate. He ran for president in 1824, and although he won the most votes he did not win a majority, and John Quincy Adams was selected by special vote of Congress. Of course, Jackson was elected to the presidency in 1828, and in his second term abolished the then-central bank, the Second Bank of the United States.
Now, let's compare Caroline Kennedy's resume to Jackson's. Caroline Kennedy's grandfather was a wealthy bootlegger who managed to get himself appointed to several government sinecures, to include the first chairman of the Securities and Exchange Commission and Ambassador to Britain. Her father was president. Kennedy attended Harvard and Columbia. She is a mother and wife. She has coauthored and edited several books. She has no other important achievements.
Americans are increasingly insensitive to the lack of emphasis on achievement in their culture. The reason is that universities have intruded into the allocation of labor. Universities masquerade as a form of selection-by-achievement, but they are nothing of the sort. The reason people get into a selective college is a test score that is independent of achievement and/or family connections or other status criteria. Few if any college students can boast of important achievements, and the few who do achieve important things in college like Bill Gates or Michael Dell, do so in spite of the college curriculum, not because of it.
The emphasis on attending a selective college would not in itself render American society ascription as opposed to achievement-based without a second factor: the increasing dominance of Wall Street over American business life. In the nineteenth century Wall Street was a neutral actor that served to finance American business in light of small-scale banks and scarce credit (scarce because of the gold standard). However, that changed in 1913 when the Federal Reserve bank was established and given the power to expand and contract the money supply. In 1933 the gold standard was abolished, and in 1971 its final remnant was cleared away. Since 1971 Wall Street has expanded dramatically because of the massive support it has received from the Fed.
The beneficiaries of the massive expansion of credit have of course been Wall Street executives. They have benefited at the expense of the public and of other businesses, which have not had equal access to credit and to resources that they would have in the absence of the Fed's credit monopoly. This is because of the income tax, the inheritance tax and the inflation tax.
Given the allocation of the public's wealth into Wall Street's hands, the question needs to be asked: who gets to be the recipient of the Fed's beneficence? The answer, of course, is that selection is made on the basis of family background and academic credentials.
Thus, universities serve as the selection device by which a privileged aristocracy, handed wealth by the Fed, gains entry. Universities are the post-World War II form of primogeniture.
Achievement no longer matters for much in American culture. Rather, you get into a good school and then hope you get a job on Wall Street. You try your hand at the markets, and if you're lucky you become a billionaire. This trend of allocation of wealth on the basis of status rather than achievement has brought us Caroline Kennedy. What is new about Kennedy is the arrogance of our politicians. They are willing to put forward a candidate who lacks any competence whatsoever, and whose only claim to the post is aristocratic family background.
America is reverting to the 17th century before our eyes.
The idea of universalistic versus particularistic social norms is that in order for a society to develop, laws must apply universally. Resources must be allocated on the basis of universal criteria that reflect objective achievement such as competence rather than by social class, race or other ascribed characteristics. Relations should not be based on general considerations such as family connections, but rather on specific achievements.
America has increasingly become a society where status counts more than achievement. We can see this in the recent proposal to appoint Caroline Kennedy to the US Senate. To see how far we have fallen from America's past achievement orientation, let us compare a Senator from the early 1820s, Andrew Jackson, with the proposed appointee from New York, Caroline Kennedy.
Andrew Jackson, assisted by Davy Crockett who was under Jackson's command, defeated the Red Stick Creek Indians at the Battle of Horseshoe Bend in 1814. In the Battle of New Orleans in the War of 1812, according to Wikipedia:
"on January 8, 1815, Jackson's 5,000 soldiers won a victory over 7,500 British. The British had more than 2,000 casualties to Jackson's 13 killed and 58 wounded or missing."
In 1817 Jackson led a campaign against the Seminole and Creek Indians. Having been ordered to prevent runaway slaves from going to Florida, Jackson invaded Florida, resulting in calls for his censure. Using the invasion as a pretext, Secretary of State John Quincy Adams negotiated the Adams-Onis treaty with Spain, whereby Spain ceded Florida to the US. Jackson served as the first US governor of Florida in 1821.
In 1822 the State of Tennessee elected Jackson to the US Senate. He ran for president in 1824, and although he won the most votes he did not win a majority, and John Quincy Adams was selected by special vote of Congress. Of course, Jackson was elected to the presidency in 1828, and in his second term abolished the then-central bank, the Second Bank of the United States.
Now, let's compare Caroline Kennedy's resume to Jackson's. Caroline Kennedy's grandfather was a wealthy bootlegger who managed to get himself appointed to several government sinecures, to include the first chairman of the Securities and Exchange Commission and Ambassador to Britain. Her father was president. Kennedy attended Harvard and Columbia. She is a mother and wife. She has coauthored and edited several books. She has no other important achievements.
Americans are increasingly insensitive to the lack of emphasis on achievement in their culture. The reason is that universities have intruded into the allocation of labor. Universities masquerade as a form of selection-by-achievement, but they are nothing of the sort. The reason people get into a selective college is a test score that is independent of achievement and/or family connections or other status criteria. Few if any college students can boast of important achievements, and the few who do achieve important things in college like Bill Gates or Michael Dell, do so in spite of the college curriculum, not because of it.
The emphasis on attending a selective college would not in itself render American society ascription as opposed to achievement-based without a second factor: the increasing dominance of Wall Street over American business life. In the nineteenth century Wall Street was a neutral actor that served to finance American business in light of small-scale banks and scarce credit (scarce because of the gold standard). However, that changed in 1913 when the Federal Reserve bank was established and given the power to expand and contract the money supply. In 1933 the gold standard was abolished, and in 1971 its final remnant was cleared away. Since 1971 Wall Street has expanded dramatically because of the massive support it has received from the Fed.
The beneficiaries of the massive expansion of credit have of course been Wall Street executives. They have benefited at the expense of the public and of other businesses, which have not had equal access to credit and to resources that they would have in the absence of the Fed's credit monopoly. This is because of the income tax, the inheritance tax and the inflation tax.
Given the allocation of the public's wealth into Wall Street's hands, the question needs to be asked: who gets to be the recipient of the Fed's beneficence? The answer, of course, is that selection is made on the basis of family background and academic credentials.
Thus, universities serve as the selection device by which a privileged aristocracy, handed wealth by the Fed, gains entry. Universities are the post-World War II form of primogeniture.
Achievement no longer matters for much in American culture. Rather, you get into a good school and then hope you get a job on Wall Street. You try your hand at the markets, and if you're lucky you become a billionaire. This trend of allocation of wealth on the basis of status rather than achievement has brought us Caroline Kennedy. What is new about Kennedy is the arrogance of our politicians. They are willing to put forward a candidate who lacks any competence whatsoever, and whose only claim to the post is aristocratic family background.
America is reverting to the 17th century before our eyes.
Letter to Governor Paterson: Kennedy Appointment Turns My Stomach
PO Box 130
West Shokan, NY 12494
January 3, 2009
The Honorable David A. Paterson
State Capitol
Albany, NY 12224
Dear Governor Paterson:
I oppose the appointment of Caroline Kennedy to the Senate. Ms. Kennedy lacks meaningful political or business experience. Indeed, she lacks meaningful work experience of any kind. While experiences gained in motherhood can be transferable to work, a series of responsible but more limited posts leading to the Senate would be an appropriate career path.
Rather than basing your interest in Ms. Kennedy on her experiences, achievements or characteristics, you are basing it on her family name and background. Sociologists would call your fixation on her background ascription- as opposed to achievement-based. Ascription of status is characteristic of feudalism and aristocratic societies, not of growing or successful ones.
Retrogression to medieval aristocratic privilege has increasingly become characteristic of our society in general, and of New York State in particular. That is, the nation and the state have become increasingly fixated on privilege and status at the expense of achievement. This, in turn, is related to excessive power of Wall Street and big business reinforced by government whereby business success is no longer based on innovation but on political power and access to government, particularly to Federal Reserve Bank credit. Your appointment of Ms. Kennedy is symptomatic of New York's culture of privilege. It turns my stomach.
Sincerely,
Mitchell Langbert, Ph.D.
West Shokan, NY 12494
January 3, 2009
The Honorable David A. Paterson
State Capitol
Albany, NY 12224
Dear Governor Paterson:
I oppose the appointment of Caroline Kennedy to the Senate. Ms. Kennedy lacks meaningful political or business experience. Indeed, she lacks meaningful work experience of any kind. While experiences gained in motherhood can be transferable to work, a series of responsible but more limited posts leading to the Senate would be an appropriate career path.
Rather than basing your interest in Ms. Kennedy on her experiences, achievements or characteristics, you are basing it on her family name and background. Sociologists would call your fixation on her background ascription- as opposed to achievement-based. Ascription of status is characteristic of feudalism and aristocratic societies, not of growing or successful ones.
Retrogression to medieval aristocratic privilege has increasingly become characteristic of our society in general, and of New York State in particular. That is, the nation and the state have become increasingly fixated on privilege and status at the expense of achievement. This, in turn, is related to excessive power of Wall Street and big business reinforced by government whereby business success is no longer based on innovation but on political power and access to government, particularly to Federal Reserve Bank credit. Your appointment of Ms. Kennedy is symptomatic of New York's culture of privilege. It turns my stomach.
Sincerely,
Mitchell Langbert, Ph.D.
Friday, January 2, 2009
Car of the Future
There comes a time when the gears of the universe click into place and the automotive future revs into high gear. A few days ago the Foundation for Economic Education offered to donate a book I am using for my senior seminar to my students, Economics in One Lesson by Henry Hazlett. Around the same time, the Republican Liberty Caucus of New York chair, Carl Svensson, set up a meeting in New Paltz with Robin Yess. It is no small coincidence that Yess ran for Assembly in the 101st district in New York, which is where I happen to live. Today, Ms. Yess forwarded the following video link from the website of (can you believe it?) the Foundation for Economic Education! On top of which I was just thinking of doing a blog about the automotive bailout. Plus, I just bought a car.
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