Obviously my chances of becoming the monarch of the city of brotherly love are quite slim. So why do I write this lengthy essay? Three reasons:
a) it entertains me to draw castles in the sky
b) I make a lot of criticisms of the current state of affairs, so it behooves me to spell out my own positive vision. This vision can be used as a foil to judge current policy.
c) I make many controversial and reactionary statements. People often respond to those statements with some variation of, “I don’t like where you are going with this…” Thus I thought it would be useful to spell out the conclusions that my controversial beliefs lead me to.
I chose Philadelphia as my example city because I’ve spent a lot of time in the city and the city desperately needs better government.
I would not consider this essay realistic. But when you have eliminated the impossible, all that’s left is the highly improbable. If the results of the Reagan Revolution, Contract with America, or “Yes we can!” movement prove anything, it’s that the American political system is unreformable. The political system has a terminal case of entropy decay. When termites have bored through the structural beams on your house, incremental improvements are impossible. When real change comes it will be sudden, discontinuous, and system-wide. This is not a vision for incremental improvement, but rather a vision for a brand new, brick house that we can all move to once we wake up and realize that our current house has rotted through. When the Chinese leaders realized that Maoism was a dead end, they created Special Economic Zones where they could experiment with free markets. Consider this essay as an example of turning Philadelphia into a Special Governance Zone with a shiny new form of government and complete autonomy to try new policies.
In part one, I will describe the government structure that I think would work best. In a follow up, I’ll describe the policies that I would enact if I was personally anointed king.
The New Government Structure of Greater Philadelphia
The following is the government structure of the greater Philadelphia Special Governance Zone (aka, the Kingdom of Philadelphia). This structure is to be defined in a written charter:
Every government has a set of beneficiaries – ie – a set of people who receive the profits of taxation. The Kingdom of Philadelphia formalizes this flow of funds by issuing shares of stock.
75% of the city stock is owned by the citizens. Upon birth or obtaining citizenship, a citizen receives his allotment. The stock is non-transferable. At death, the stock is ceded back to the Kingdom. [what if people move out??]
15% of the stock is owned by major city institutions (charities, hospitals, universities, and museums). [does this discourage newinstitutions b/c it would diminish the value of the stock?]
5% is owned by employees. Employee owned stock is non-transferable and expires 30 years after the employee retires.
5% of the stock is publicly traded.
The city has a board of trustees (called the Senate) that represents the shareholders.
Four Senate seats are held by the institutions. A lottery is used to select the particular institutions that hold the seat for a ten year period.
Four seats are held by the owners of publicly purchased shares. A lottery selects a particular shareholder to actually sit on the seat (with the chance of winning the lottery weighted by the number of shares held). Transfer of shares is somewhat restricted. Large new owners must be evaluated for character and approved by the Senate. Shares must be held for at least 20 years before being sold. Large shareholders and Senate members must keep all their other assets in a blind trust to prevent conflict of interests.
Four seats are held by retired executives (including at least two seats held by top officials in the security or military agency). These seats are voted on by retired employees.
Four seats are held by city residents, appointed by a lottery-election process.
The Senate appoints a CEO (and the natural title for the CEO of a country is “King”) who rules with the power of a real executive. He can hire and fire any subordinate, reorganize divisions, set policy, etc. Major outlays – purchases and contacts above a certain amount – must be approved by the Senate. The Senate can fire the CEO at any time via a majority vote.
The charter of the kingdom states that the primary goals of the government are to:
a) Establish justice, preserve liberty and to promote prosperity, welfare, and prestige of Philadelphia.
b) Provide an ample and prosperous return for the government shareholders.
The corporate charter bonds the Senate and government officers to a fiduciary duty to the overall benefit of the city. Senators and employees should place justice and morality ahead of profits. But officers and board members can be sued or even jailed for putting their own personal gain ahead of the shareholders.
Residents and property holders of the city are contractually guaranteed their traditional Anglo-American liberties (due process, trial by jury, guarantees against unreasonable search and seizure, freedom of conscience, etc.) Property owners are mostly free to use their property as they please. But if an owner wishes to alter their property in a way that impacts their neighbors (by building a factory, opening a noisy bar, selling drugs out of a storefront, etc), then the owner must seek the approval of the city government.
The city has an independent court system to try cases between citizens and the government. Justices of the court are selected with the joint approval of both the Senate and a jury of citizens (or perhaps via a merit selection scheme). Justices are appointed for 18 year terms and are guaranteed a lifetime pension (they receive the pension even if they are not reappointed). The court is funded by a fixed head tax. It has its own set of bailiffs that can make arrests and enforce decisions. The king and the senators are not above the law. If the king murders a political enemy, he can be tried in court and put in prison. Nor are the police above the law – the police possess the same powers that private citizens possess.
The city has a few other permanent independent agencies: an election monitoring agency, an auditing agency, and a journalistic agency. Each agency has its own board of trustees that oversees the agency’s operations. The agencies have the power of subpoena and a duty to report their findings. But they have no power of enforcement. If they find illegalities, it is up to individuals and organizations to bring a suit in the court system. The agency trustees are appointed for 15 year terms by joint approval of the Senate and a jury of citizens (similar to how judges are approved). There is also an independent “blind charitable trust agency”. The charity trust receives all revenues from police fines, prison labor, taxes on vice, lottery revenues, etc. The purpose of this trust is to ensure that the government does not have a monetary incentive to lock people up or to promote vice.
All property owners have a tax rate that is contractually fixed. The tax can only be raised by a vote of all property owners, weighted by taxes paid. The valuation of a parcel of property is based on the old divide and choose method – the government proposes a valuation, the property owner can either accept the valuation, set a higher valuation, or sell the house back to the government at the government’s proposed valuation. The government has the powers of eminent domain, but it must pay a 50% premium over the set valuation.
The city government is not allowed to unilaterally institute any other revenue raising taxes besides the property tax. The city government cannot charge an extortionate rate for a vital service (such as road or water access) as a backdoor tax.
However, a tax can be instituted in the city or in a neighborhood with the consent of the taxed. The senate must approve the tax, and then a vote must be held with the votes weighted by the amount of tax the person or institution will be paying.
The government has powers to create laws and to define punishments concerning trespasses, vice, public health, public safety, and intellectual property.
Any laws that impose a punishment of greater than 1 day in jail or $1,000, must be approved by a majority vote of the citizens. For instance, if the Senate wants to declare a $10k fine for selling heroin it must get the law approved by referendum. (Ideally the city charter should restrict the referendum vote to citizens who meet the threshold on some metric of responsibility. For instance, the franchise might be restricted to citizens who are married with children and who donated at least $1k to charity in the last year). However, punishments encoded in a contract need only approval from the parties to the contract. Imagine a corporation wants to build a nuclear power plant. The Senate can approve on the plant on the condition that all plant employees sign a contract that the employee will spend ten years in prison if convicted of negligence. That contract would not need approval from all citizens, since the parties it affects have personally agreed to it.
The immigration and naturalization rules for the kingdom are as follows. Any foreigner who resides in the kingdom for more than two years must be either given a green card or denied further stay in the city. The foreigner cannot be given another temporary visa. The green card must lead to citizenship within 10 years. Receiving citizenship entails a full share of the city dividend. The purpose of this rule is to prevent the growth of a permanent under-caste that does the labor but does not have full equality with the citizens. Any laws relating to immigration that a) fix the quota of green cards b) set the quota of temporary visas c) define the process for deciding who gets the green cards, or d) authorize enforcement mechanisms, must be approved by both the Senate and a vote of franchised citizens.
The tax rate of Philadelphia is constitutionally fixed. As a formalist, I believe in the principle that “promises should be kept”. The tax rate should thus be set at a level to create roughly the same amount of purchasing power that the current federal, state, and city government now hold. If the tax rate is lower, the city will not be able to fulfill its mission as a trust that pays out benefits to the residents. A higher tax rate is confiscatory, and thus breaks promises to property owners that their property will not be stolen.
Total current U.S. federal, state and city government purchasing power is about 45% of total national purchasing power (calculated as total government spending divided by total national income). Philadelphia would thus set a property tax rate high enough to take in about 45% of total income (yes, I’m mixing types of taxes, it would indeed be tricky to figure out what property tax rate would be equivalent of a 45% income tax). Of that intake, probably about 5% would need to be given as tribute to some national defense force, and another 5% would be spent on essential city services – police, roads, trains, parks, etc (not including schools, health care, etc). That would leave about 35% of total city income to be paid out as dividends (or spent on additional services – we’ll discuss this later). Of that dividend, ~75% goes to the citizens. At current levels of total income, this would amount to $11.5k per person. The dividend might be distributed evenly per citizen, or perhaps the constitution would change the payout by age (to reflect the fact that older people cannot earn income by working). A reasonable payout would be that people under 55 get a $6k a year dividend and people older than 55 receive a $28k dividend.
The constitution can only be changed if the Senate, the property owners, and the franchised citizens all vote with a 60% super majority to approve an amendment.
The Goals of the Government Structure
Goal 1: Eliminate Party Spirit and Factional Infighting
Noah Webster can more eloquently describe the evils of a party system than I can. Back in 1794 he wrote: (ht moldbug).
“…nothing is more dangerous to the cause of truth and liberty than a party spirit. When men are once united, in whatever form, or upon whatever occasion, the union creates a partiality or friendship for each member of the party or society. A coalition for any purpose creates an attachment, and inspires a confidence in the individuals of the party, which does not die with the cause which united them; but continues, and extends to every other object of social intercourse.”
“Thus we see men first united in some system of religious faith, generally agree in their political opinions. Natives of the same country, even in a foreign country, unite and form a separate private society. The Masons feel attached to each other, though in distant parts of the world.”
“The same may be said of Episcopalians, Quakers, Presbyterians, Roman Catholics, Federalists, and Anti-federalists, mechanic societies, chambers of commerce, Jacobin and Democratic societies. It is altogether immaterial what circumstance first unites a number of men into a society; whether they first rally round the church, a square and compass, a cross, or a cap; the general effect is always the same; while the union continues, the members of the association feel a particular confidence in each other, which leads them to believe each others opinions, to catch each others passions, and to act in concert on every question in which they are interested.”
“Hence arises what is called bigotry or illiberality. Persons who are united on any occasion, are more apt to believe the prevailing opinions of their society, than the prevailing opinions of another society. They examine their own creeds more fully, (and perhaps with a mind predisposed to believe them), than they do the creeds of other societies. Hence the full persuasion in every society that theirs is right; and if I am right, others of course are wrong.” http://books.google.com/books?id=89QDAAAAQAAJ&pg=PA1&…
I think most of American societal problems – urban decay, the busted health care system, financial crises, the forever wars in the mid-east – can be traced to party spirit and factional interest. Party group think results in each side smacking down the opinions of the other party – even if that idea is sensible or if the idea was previously supported by that party. The result is that both parties end up with half a brain. Furthermore, the successful execution of any policy requires tweaks and quick iteration. But the interest of the party (whether conscious or unconscious) is to sabotage and obstruct. Thus even when party A succeeds at pushing a policy, the implementation almost always fails. Bush got his war, but the left-wing saddled the military with rules of engagement that make victory impossible (not that the rules of engagement are the only things preventing victory). The Democrats got a health care plan, but it ends up being an unholy mix of capitalist cartelization and bureaucratic interference. When the plan fails, the public does not know who to hold accountable – those who pushed the policy, or those who sabotaged it? Members of each party, though, have no such doubt – it’s the others party’s fault. Thus the cycle of vitriol continues.
Outside of the great contest between the two major parties, thousands of smaller factions leach off of the public. As Mancur Olson and Jonathan Rauch have described, in the American political system it is the determined faction that always wins when pitted against the unorganized public. Doctors pass laws to fix the entrance of new doctors, thus propping up their salaries at great cost to the public. Bankers convince Congressmen that bailouts are essential for the survival of the economy. Iowa farmers make corn subsidies a litmus test. Defense contractors lobby to sell their wares to every tin pot tyrant.
Politicians do not win elections by appealing to the median voter. Politicians win elections by assembling a coalition of small factions comprising fanatical single issue voters. Thus the politician will make a promise to a faction that will give that faction $1 at expense of $5 to the whole.
My proposed government for Philadelphia uses a shareholder system. The idea is to align the interests of the major power centers in Philadelphia (capitalists, institutions, the city employees, and the general population). By giving each group fixed, dividend paying shares, the hope is that the Senators representing the various factions will all align with the same goal of increasing the dividend. They won’t instictively reject the ideas of the other Senators, but rather give them the benefit of the doubt. If one Senator loses some argument, he’ll still try to make the policy work, because doing so will help his dividend.
That said, we don’t want the government to be mindlessly profit-maximizing to the exclusion of all other goals. Thus we structure the Senate in a way that gives more votes to the representatives of the citizens and to the institutions, rather than making it a purely capitalist, one share-one vote system.
The Senator does not need to gather coalitions of factions to gain power. The Senators do not need to promise doctors to preserve the arbitrary limit on medical school seats. The incentive is to maximize the general dividend, even if that means rejecting the pleadings of one particular faction.
Goal 2: Put authority in the hands of people capable of wielding authority
American politicians are essentially actors. They spend their career shaking hands and building up a media persona. They attend scripted events where they read scripted speeches. Few politicians have ever demonstrated a track record of success in managing a large organization.
Because politicians are mainly actors, they have little ability to do the tough work of ruling. So instead the bulk of Congressional legislation gets written by lobbyists or bureaucrats. The bureaucrats are neither rewarded for serving the public interest, nor are they fired for failing to serve the public interest. Thus the bureaucrats end up following the path of least resistance. Usually this involves some combination of pandering to the industries they regulate, theatrics to make it look like they’re being useful, and inefficient plodding towards the actual stated goals of the organization. Unfortunately, the bureaucracies that do the worst job end up creating crisis’s. Since bureaucrats do not get fired, and crises demand response, the bureaucracy responsible for the crisis ends up getting even more funding. Thus has a whole, the entire government selects for incompetence. Pournelle’s Law rules.
And so we end up with our current state of affairs. Our actor president signs orders put on his desk by incompetent bureaucrats. These orders call for the groping of all traveling Americans, the bombing Libya to support a rebellion by gangs of human traffickers in Benghazi, or the bail out of failed Wall St. bankers.
My proposed Senate of Philadelphia comprises people with an actual history of wielding authority – executives of major institutions, corporate moguls, and former officers of the government. Their incentives are setup so that they want to maximize the government dividend. These Senators do not have to spend all their time campaigning and fund raising. The King is hired by the Senate like a normal corporate CEO (and not through a ridiculous process of giving the same canned speech five hundred times in a row and getting in public mudslinging competitions with fellow job applicants). Thus the King is likely to have far more executive talent than a Bush or an Obama, and he will have the time to actual rule. And most importantly, the King will have the actual power to fire civil servants or even cut entire divisions of the government that underperform.
Goal 3: Place authority in the sober-minded and responsible leaders, not messianic speech makers
The average person is not swayed by the calm evaluation of facts, evidence and logic. The average person desires a Hollywood movie. He is attracted and moved by eloquent speeches, lofty rhetoric, cutting sound bites, and patriotic pageantry. The age of democracy has been the age jingoism, fox news, yellow journalism, and war propaganda.
The populist, nationalist, and sentimentalist way of looking at the world has been almost entirely destructive. In the best case, democratic politicians restrict themselves to sentimental meddling. The meddling is done without any understanding of the forces in contention and that is executed half-heartedly and with no clear plan to actual ensure a better government in the end. Examples in American history range from Wilson’s insistence on destroying the European monarchies to Obama’s latest intervention in Libya.
In the worst case, governments born of mass elections have embarked on wars of almost pure jingoism. Examples include: the Wars of the French Revolution, World War I, the annexation of Mexican states, Mr. Hearst’s war, the election of the National Socialists in Germany, all the way to the invasion of Iraq.
In my proposed system, speech making, pageantry, TV ads, debates, campaigning, etc, play no part in choosing the rulers. There is only a very small elective element, and it uses resume and televised job interviews only. In almost all cases lotteries and/or direct appointment is preferred to election. For sane government to win out, the demagogic element must be eliminated entirely.
Goal 4: Preserve America’s egalitarian structure
The status quo is that the U.S. has always had a fairly equal/egalitarian social structure due its vast quantity of land and resources. The status quo is also that the government taxes more from the wealthy and generally distributes to middle class interests (medicare, medicaid, housing, government employment). However, it does this redistribution with extreme inefficiency, and with a lot of spillage to particular wealthy factions (financiers, contractors).
My proposed political structure attempts to preserve this egalitarian aspect of America. While there is little idle land to homestead and generate equality, it is perfectly fair that the existing endowment of land can be taxed at the status quo levels (rent) and the revenues paid out to the descendants of the settlers of America (American citizens).
However, it is important that the amount of the redistribution remain fixed. If it is changeable, then factions will politically agitate to change the distribution. Each faction will be willing to destroy $2 of wealth if it distributes $1 to their faction.
Thus my design includes a fixed amount of redistribution, that is roughly equivalent to current levels, but it contains no mechanism by which factions can agitate to change this distribution.
Goal 5: Preserve the Parts of America’s Government that actually work
The legal system of the U.S. is not perfect, but overall it remains better than most alternatives in history. Rules about due process, trial by jury, protections against unreasonable search, etc, have more or less held strong and have protected against tyranny.
The proposed judicial system is similar to existing court systems, although it uses a “merit selection” system rather than the elected judges system that some states use.
While I despise the post-progressive system of having “independent” (i.e. unaccountable) agencies wield authority, independent agencies can play a role in auditing and transparency. Even generally hierarchical corporations will have their CFO report directly to the shareholders and not to the CEO. The design of PBS and BBC is actually quite smart. By being a part of the government, but independent of the main power structure, the news agencies can be critical of the main rulers without feeling tempted to promote the violent overthrow the entire governmental system.
Goal 6: Give government more authority and more efficient governance mechanisms with regards to the property and political rights it owns. Give the government no authority to revoke the rights it has granted.
If the government thinks that building a subway system would be economically a great idea, than the government just does it. It buys the land and hires the contractors to build it. The government doesn’t need hearings and committees. It doesn’t need partisan battles. It doesn’t need to bribe the Senator from Iowa with farm subsidies. It does not need the “consent of the governed”.
If the government thinks crime is too high, it hires more police and orders them to walk beats. If the government finds a homeless person sleeping on the street, the government can arrest him. The government can even deputize private citizens and have them help in the policing effort. If a police officer gets bad reviews from neighborhood citizens, the government can fire the police officer at will. The government does not need a formal review and approval by a civil service protection agency.
The government does have the authority to create its own “medical certification agency”, grant doctors certification, and then advertise in the subways that people should only go to doctors with the “King’s Seal of Approval” in the window. The government can create this agency directly, without any red tape, fuss, committee hearings, or votes. The King orders it, and it is done. But the government has no legal authority to stop people from going to a doctor who doesn’t have the king’s approval.
If I want to start a small home business I am free to do so. But if I want to turn my home into a bar, or a high rise, or a factory, or something else that impacts fellow city residents, then I need the approval of the city government. The city government collects taxes both from me and from my neighbors, so it has every incentive to balance the benefit to the property owner (as measured by increased property value and taxes) with the detriment to the neighbors (as measured by harm to property values). The city government has a much better incentive to come up with a fair decision than a jury of peers or a zoning board (both which have an incentive to be too conservative, since they won’t be reaping any rewards of the change). The city government has every incentive to make its decision quickly, and not require ten years of petitions and lawyer bills, since that process is pure waste that benefits no one. The city government has every incentive to make smart use of land. Land is the city’s capital. Allowing the city to get paved over with parking lots or restricting construction to single family homes is wasting capital. This will hurt total land value, and thus decrease the dividend.
As is usually the case with my writing, my description of the governmental structure became more complex than I originally intended. The reader might view the structure as too complex and fragile. But keep in mind that much of the complexity is due to me adding double, triple, and quadruple checks. Engineering a political system is like engineering a rocket ship, you can’t make many changes once the thing is launched, so you have to triple down on every safety measure.
Even if most of the mechanisms of my design fail, if only four key pillars stand, the system will still be better than the vast majority of governments ever tried. Those pillars are:
1) The Senate must contain members who have at least some selective filter for governing ability
2) The factions comprising the board must remain focused on growing the dividend (as opposed to focused on factional interests, or not being focused at all).
3) The pressure to grow the dividend must not be so great that the board breaks the law or harms the general good.
4) The dividend must not stolen from the people.
As long as the Senate is willing and able to grow the dividend (pillars 1 and 2), then the Senate will encourage economic growth and protect people against violence and crime. As long as the dividend remains shared and the Senate uses lawful and constitutional means to grow the dividend, then the growth of the dividend will result in a benefit and prosperity shared by all. Thus if these four pillars stand, we can expect very good government.
Of these four pillars, all are strong, but the weakest is #2.
Pillar #1 – selecing for governing ability – is easy. Americans generally demonstrate remarkable character and ability. It’s possible that even a random lottery would probably be sufficient to generate a board smart enough to hire a competent executive and hold that executive accountable. If you created a pool of the top 5% of population by some metric of ability (and I mean any metric of ability – SAT scores, flying a plane, income, coaching a winning high school football team, etc.) and then used a lottery to select a Senate from that pool, I think would end with a very adequate board to manage a city. Heck, even if you took our existing Congress and selected them by lottery instead of election, they might make a decent city Senate. They would actually have time to govern. They would not face the pressure to demagogue issues in support of the party, rather than actual fix problems for the general interest.
Pillar #3 – the government must not break the law – is also quite safe. There are three very strong checks. First, breaking promises or harming the general good will not be profitable for the rulers. If the Senate pollutes the air, property values will go down and the Senate will lose tax revenue. If the Senate arbitrarily confiscates land instead of paying for it, business investment will suffer greatly in the long run. Second, elite Americans are generally not in the game of outright oppression. Imagine a Senate comprising the richest capitalists, the most prestigious university chancellors, and the most decorated former employees – Buffet, Gates, Ellison, Koch, Larry Summers, Samantha Powers, Richard Levin, Colin Powell, and Patraeus. Will this Senate sometimes err on the side of business interests against the common interests? For sure. But they will also sometimes err in the reverse direction. Overall though, even given absolute directorial authority, it’s impossible to imagine this Senate enacting large scale property confiscations or turning the U.S. into some Dickensian nightmare. The third check is the independent court system. If the Senate did try to enact illegal confiscations, the Senators could face an injunction and even arrest by the court bailiffs.
Pillar #4 – no stealing the dividend – is also strong. The dividend is a very clear thing. If the Senate simply said, “Hey, this year we’re giving the people 50% of the dividend instead of 75%”, the thievery would be so blatant and indefensible that the Senate would never be able to pull it off. Mobs would rise up, and the police would refuse to disperse them. A much more plausible avenue of thievery is that funds would be siphoned off to the side and the dividend would slowly shrink. That brings us to pillar #2.
The most plausible route of decay is that the Senate loses its focus on growing the dividend. Perhaps Senators develop a conflict of interest. The Senators representing the institutions might ally with the citizen-juror Senators and the former employee Senators, and agree to dedicate an abnormally large amount of money to the institutions (in the name of “growing the economy” of course). The employee and citizen Senators would get secret kick backs in return for their support.
Or perhaps the Senators would grow so aloof that they vote for feel-good projects and grandiose monuments rather than paying dividends to the shareholders. Or perhaps the Senate gradually loses control of the bureaucracy, and bureaucracy grows large and unaccountable, and devours ever more revenue. All of these possible routes have checks against them. The combination of the independent courts and independent auditing agencies would make explicit corruption very difficult. The fact that the Senators for the most part are themselves shareholders, or are direct agents of shareholders, would hopefully ensure that they have a strong inventive to return money to the shareholders, rather than allow it to be wasted.
When combined with my previous essay on a revamped federal system, we now have a complete blueprint for a rebooted American government. In a future essay, I will describe what kind of policies to expect from a government designed along these lines.
UPDATE: I have updated the post to fix grammar mistakes and make a few points more clear.