Thought experiment with elections: My response to Robin Hanson's "National Juries"

Over at Overcoming Bias, Robin Hanson takes on the idea of National Juries (by which elections are decided by a small randomly-selected sample of citizens; in this proposal, 12 voters per district), and wonders why we don't do that.

My response: Wouldn't politicians make large promises to that select group of people? That seems like a recipe for vote-buying and corruption.

Hanson's response (to me): "Obviously we’d forbid new laws targeted specifically and obviously at these jurors."

Hmm. Who would forbid it? The same politicians writing our laws?

A more effective solution might be to expect these promises, and then create incentives for the jurors to avoid those politicians.

For example, if you multiplied the number of selected jurors by 4-5x, but had only 20-25% of the votes “count” (randomly), then each juror would expect to not be selected and therefor not a recipient of said “pork”.

The trick here is to make sure that the identities of the wider pool aren’t known to politicians and aren’t verifiable if they claim publicly to be in the pool; identities of the smaller amount of “chosen” jurors would be made public following the next election cycle.

In other words, by significantly increasing the odds that a juror’s vote could matter, but still keeping that probability well below 50%, you would create adequate incentives for participation while limiting incentives for gamesmanship.

There are would almost certainly be other side effects and unintended consequences from doing something like this, so don't take it as an endorsement. Just an idea.

Guantanamo Charter City Update

A quick update: Paul Romer does (still) support a charter city in Guantanamo, and thinks using the city a means to help Haiti is a good alternative to the goal of a charter city in Haiti itself, which we acknowledge isn't feasible right now.

He also said, in an email, that the largest hurdle to getting the project off the ground is the current lack of bi-partisan agreement about what to do with the prison at Guantanamo Bay.

Logically, since the prison takes up only a small part of the overall area that the US controls, closing the prison wouldn't necessarily be a pre-condition to starting a charter city. However, I do agree that they seem to be linked, and that broad support would likely require a change in rhetoric on the prision issue.

Sen. John McCain (R, AZ), a former POW and anti-torture advocate, is the most logical candidate for a GOP sponsor for this project. An aide in his DC office told me that the senator does support closing the prison, but there's no urgency - he is waiting for Pres. Obama to try (and fail).

Sens. Durbin (D), Graham (R), and Lieberman (D?) are also in favor of closing the prison.

My impression is that we need a narrative that will appeal to the Republican political machine - we need to make the "replace the Guantanamo prison with a charter city for Haitians" idea fit with Republican rhetoric.

Here are the things, as far as I can tell, that Republicans "care" about:

I need help brainstorming how the charter city project fits with these disputed values. For example:

• National pride - let America take pride in leading the global response to the Haiti crisis by giving them a city to use as an incubator for rebuilding their own country
  
• Work important / Hard work / Money- a charter city would spread the free market/capitalist ideal to the corner of the world that needs the positive effects from these values the most
• Family important / Child needs both parents - letting whole families emigrate would preserve family structure that might otherwise be destroyed in the aftermath of this disaster

Any other ideas?

It occurs to me that this exercise would work equally well the proposal to give large numbers of Haitians work visas, and other large scale policy responses.

Here is an explanation of the Key Disputed Values matrix.

Use Guantanamo as a Lever for Haiti

Paul Romer has good reasons for objecting to founding a charter city in Haiti, today.

I'm willing to agree that right now it is not feasible to create a charter city in Haiti due to the complexity in making it "optional" to the citizenry. However, if there isn't a level of order within 12-18 months that would allow a referendum on the issue, I'd call the global response a failure.

Putting that aside, let's assume that Professor Romer is right and that it would take a minimum 5-10 years before Haiti meets the preconditions for a successful charter city.

In that scenario, the best thing we can do, Romer argues, is let Haitians emigrate to other nations, or cities, to work and learn, creating wealth that can then (eventually) be brought back to Haiti, and then help make it a better place.

One problem with this scenario is the scale. It would take a global agreement, say among the G20, to accomodate the 500,000-1,000,000 people that have been displaced by the earthquake. It  is unlikely that any one city/nation either had the infrastructure or willingness to accept so many, even on a temporary basis. The United States could, and arguably should, grant temporary (2-5 year) work visas to as many Haitians as want to come here (for one thing, it would help boost demand for some of our excess housing supply!).

Whatever we do in allowing emigration, though, won't help Haiti itself from lifting itself out of failed-state status, unless Haitians return home with respect and desire for the types of governmental institutions that make other communities work (e.g. rule of law, political continuity, property rights, capital markets, well-planned infrastructure) - charter cities do this really well, by the way. This is one problem with Senegal's offer to allow Haitians to "return" to Senegal permanently - it helps Haitians in the short-run, but it doesn't help Haiti in the long-run.

So, we need to balance the humanitarian needs of the present with the long-term goals for the future (isn't this the dilemma with all large social decisions?).

One way to do both: Make Guantanamo Bay the charter city (Romer himself suggested this in his TED Talk). But, instead of a majority-Cuban population, the city should begin with a mix of 50-75% Haitians, with 5-10 year work visas. Get them there, learning, working, recovering, ASAP. Then, as their visas expire, those Haitian citizens could return home with the 1) wealth, 2) skills, and 3) respect for good institutions necessary to improve their own country. The singular advantage of Guantanamo as a location is critical:

• It is available - the US wants to shut down the prison, and Obama will want to do so in a way that doesn't look like he's giving in to Cuba;
• It is large enough - roughly 2x the size of Manhattan;
• It is close to Haiti - very close. Guantanamo is about 100 miles from Northern Haiti and less than 200 miles away from Port-au-Prince; emigrants would be able to return home when needed and work visas would be much easier to facilitate than with a developed nation with 200 years of arcane bureaucracy;
  

View Allianz Caribbean in a larger map

By the time the 5-10 year work visas are expiring, the rest of Haiti will have seen first-hand what a success Guantanamo-as-Charter-City has been, what a source for hope an opportunity it has given the people of Haiti. And then, perhaps, Haiti would be in a position to choose for itself to begin the process of bringing a charter city to that country. Even if they don't, they would still have likely benefitted enormously (both economically and socially) from the experience of building a functioning city elsewhere.

In Haiti, an Opportunity to Show the Rest of Us the Way

In the aftermath of the tragedy in Haiti, many are left with a sense of powerlessness, fearing an inevitible collapse of that nation.

Tyler Cowen, at Marginal Revolution, posited yesterday:

President Obama needs to come to terms with the idea that the country of Haiti, as we knew it, probably does not exist any more.

This is probably true. The government, already fragile, has been literally destroyed (the Presidential palace was leveled). All urban systems in the capital, Port Au Prince, have been compromised, including health, water, sanitation, and food supply.

So when Prof. Cowen asks this question, it is seemingly rhetorical:

Is there any scenario in which the survivors, twenty years from now, are better off, compared to the quake never having taken place?

 It is a long shot, but I believe there is a possibility that we can improve the standard of living for the country of Haiti, and the former citizens of Port Au Prince, by establishing a Charter City, as proposed by Paul Romer, professor of International Development at Stanford University.

Some of the expected outcomes from doing this could be:

• Substantial private investment in the local area, likely on a faster and larger scale than would be otherwise feasible;
• Immediate positive shock to labor demand, giving employment and purpose to vast numbers of currently purposeless workers;
• New infrastructure to replace the outmoded and inefficient systems that existed prior to the earthquake;
• Better education and healthcare opportunities for residents
• An opportunity to build a city "from scratch", using the best sustainable/safety-oriented practices that expert urban planners have to offer - the chance to build a city for the next 100 years

Skeptical? If this sounds like colonialism, that's understandable. Paul Romer addresses this issue in his TED Talk. Please watch it:

Simon Johnson vs. Tyler Cowen

Heroes collide!

Simon Johnson, MIT: "Use a powerful story to destroy evil"

Tyler Cowen, GMU: "Stories are dangerous; they cloud our judgement; we should avoid them"

Professors, do the ends (creating better public policy by breaking the banking oligopoly) justify the means (using simplistic narratives and playing to people's fear/emotions)? Can they be separated?

Unfairness Expectations: Will TARP Hurt Long-term Growth?

 

I've been thinking about a question that is related to the "zero structural budget deficit" policy goal and the principle of Fairness. It is also related to many of the world's key disputed values (see above):

What is the economic cost of the Main Street versus Wall Street story, whereby the "greedy incompetent bankers" benefitted disproportionately from the 2009 bailouts, at the cost of the "American taxpayer"?

An even more sinister version of the story has the bankers (e.g. Goldman Sachs) stealing the money by manipulating the Executive and Legislative branches of the US government. Regardless of which version, there are a lot of people who believe, rightly or wrongly, that something very large, very unfair, and very un-American happened last year. I am one of them.

But I'm also seeing it from the other side of the lens, since I work at a bulge-bracket, too-big-to-fail, bailed-out, bonus-giving (maybe?), investment bank. I know that the people I work with think they are doing "God's work", but I also know that the road to hell is paved with good intentions.

So I'm conflicted. I feel guilty. I gave more to charitable organizations in December. I'm thinking of donating blood for the first time.

 

However, that's not the problem. The problem is the millions of people who don't believe that their world is as fair as it used to be (Are you one, too?). We are tempted to become bitter, jaded, and to adopt a defeatist attitude towards the situation. We assume there's nothing we can do, because the forces that determine our fate are now outside of our control.

Economically, this could have some unfortunate implications:

1. We may no longer feel a social obligation to pay our debts - "the world turned against us", so there's no dishonor in filing for bankruptcy and/or walking away from an underwater mortgage. The very idea of this terrifies the investment community, as it should.

2. We might just give up - unfairness can have a huge impact on a person's work ethic. In fact, Robert Schiller and George Akerlof devote an entire chapter of their book, Animal Spirits, to examining the effect of perceived unfairness in African-American communities in this country. The idea is that simply the fact that the people in these communities believe, rightly or wrongly, that they don't have a chance to "make it" leads to terrible consequences: high underemployment, lower life expectancy, extreme income inequality.

These, by the way, are also some features of failed states around the world, where corruption and unfairness is expected.

The "expectation of unfairness" that causes these problems in many African-American communities is an example of the concept of tribal stigma, "or affiliation with a specific nationality, religion, or race that constitute a deviation from the normative" (e.g. women in sub-Saharan Africa, Japanese-Americans during WWII, slaves). 

Racism, sexism, religious persecution, xenophobia, genocide, and homophobia can all be attributed to tribal stigma, and there is significant evidence that being relegated to a stigmatized outgroup can have negative psychological implications (e.g. the perceived unfairness in the African-American example).

How is this related to economics? Fairness is the bedrock of American capitalism: the idea that if you work hard you can improve your lot in life, regardless of your origins. Breaking that contract, creating the expectation for unfairness, damages the credibility of the American ideal.

And yet, this is exactly what we've done with the 2009 bailouts. (I'm not saying, by the way, that we shouldn't have bailed out the banks. I'm among those who believe we would have had a second Great Depression if we'd let all the banks fail at once.) The way that the bailouts were done has created a lasting expectation of unfairness in this country, and I fear there will be lasting negative economic implications from that unless we remove the moral hazard doom loop that we created by giving the banks very favorable, unconditional bailouts.

The more I think about, the only way I see to fix the "expectation of unfairness" problem is to prove to the American public that it won't happen the next time around. I see two ways to do this:

1) Break up the largest banks into pieces that everyone believes are "small enough to fail", or

2) Successfully "unwind" a too-big-to-fail bank with the newfangled yet-to-be-explained "resolution authority" that is currently being proposed (Citigroup would be a great test)

Can you guess which one I think would be more effective? By the way, when I say "successfully" use resolution authority, I mean without a financial panic and with no liability to the taxpayer. Those should be preconditions to any fiscally-responsible regulatory package. The former looks far less risky to me.

World Values Survey & Cross-cultural Disputed Values Map

This framework is a product of the World Values Survey, which Wikipedia describes as: "an ongoing academic project by social scientists to assess the state of sociocultural, moral, religious, and political values of different cultures around the world".

Here is a good explanation by Robin Hanson, Economics professor at George Mason University.

I'm using this framework as a way of thinking rationally about important recurring social disputes, hopefully allowing us to expose some of our biases and have a more intelligent debate.

The four-quadrant graphic is from a 1997 paper by Ronald Englehart and Marita Carballo, which is available here. If the authors or their representatives come across this site and want more detailed attribution, just let me know.