Why We Need to Put the Elite in Power

Related anti democracy part 1, part 2, The Pursuit of Equality,

There’s a lot of hype over quadratic voting. From ericposner.com:

Quadratic voting is a procedure that a group of people can use to jointly choose a collective good for themselves. Each person can buy votes for or against a proposal by paying into a fund the square of the number of votes that he or she buys. The money is then returned to voters on a per capita basis. Weyl and Lalley prove that the collective decision rapidly approximates efficiency as the number of voters increases. By contrast, no extant voting procedure is efficient. Majority rule based on one-person-one-vote notoriously results in tyranny of the majority–a large number of people who care only a little about an outcome prevail over a minority that cares passionately, resulting in a reduction of aggregate welfare.

This sounds similar the idea of selling votes electronically that I outlined here: We Need More Money in Politics and Less Voting. Wish I had thought of the quadratic part. It need not be a quadratic, but can be an exponential or any function that has a positive second derivative. Intuitively, quadratics and exponentials make it hard to game a system because each successive level requires exponentially greater effort. This is how Google’s pagerank works; the difference between a pagerank of x and x-1 is a magnitude of 10.

The best idea is to have voters choose between elites, guaranteeing that regardless of who wins, the best policy is implemented. Putting the richest and most successful in power (a plutocracy) is the best form of governance because they have the most to lose if things so wrong, so in an act of selfish self-preservation to save their own interests, the nation benefits as a whole.

A counterargument is that the poor have the most to lose because the only place below dirt poor is starving. The marginal utility from going from one unit of money to two is greater than from one billion to one billion and one.

The poor may have more marginal utility of increasing wealth – but as anyone can tell you, it’s easier to be poor than rich. And, like the second law of thermodynamics, it’s easier to go from a state of wealth to a state of poverty than the reverse. Going from 1 unit of wealth to 2 units is effortless. our hypothetical penurious leader upon choosing, in response to national crisis, to let things go to pot in exchange for populist support versus taking unpopular but necessary action to preserve the status quo, it would be in his best interest (cost/benefit analysis) to choose the former since if things were to get worse, going from zero wealth before the crisis to zero wealth afterwards entails no consequence on his part, while the payoff, as measured by a gain in popularity from choosing the first option, is potentially considerable. Many rich people equate money with status and freedom; understandably they would hate to lose it. Having a rich person in power would at least force him to choose between popularity and pragmatism. Consider the financial crisis; our populist leader, in courting public opinion against Wall St. elite, would choose let the banks fail, making the economy and everyone else worse-off. Unemployment would skyrocket. Post 911, the elite and the public were rightfully aligned in favor of intervention against Islamic terrorism, but the public cannot always be counted on know what is in the best interest of the economy and nation.

Noah, in a good post about the leftist politicization of economics, writes:

But damn, I’m just really annoyed by the idea that we’ve got to use This Method over That Method, because if we use That Method we won’t help The Poors as much, or whatever. First of all it’s not even right. Second of all I think society needs a bunch of smart people who just concentrate on figuring out what is going on, as best they can, without worrying about what to do about it all. I think that having that bunch of people has served us well in the past and will continue to serve us well in the future, and that replacing it with a bunch of political activists who see every positive result through a normative lens would represent humanity shooting itself in the foot.

Agree; this is why I’m in favor of a technocracy. The data and optimal utilization based on this data is what matters, not being married to some ideology. As we saw in 2008 with the financial problem, the best and the brightest – when they pool together thier congnitive resources – can solve problems that otherwise appear insurmountable. ‘Optimal utilization’ and ‘utilitarianism’ doesn’t mean wealth redistribution, as some on the right wrongfully assume; supply side economics and bank bailouts can be justified under a utilitarian framework if it represents an optimal allocation of resources. The 2008 bailouts, a cost $700 billion but re-payed its self multiple times over indirectly in the form of the stock market rally and economic expansion that soon followed. The treasury was repaid in full by 2011. Reaganomics and the Bush tax cuts are other examples of successful policy that increased deficits, were unpopular with large portions of electorate, but benefited the economy in the long run.

Bush tax cuts boosted federal revenue

But the real jolt for tax-cutting opponents was that the 03 Bush tax cuts also generated a massive increase in federal tax receipts. From 2004 to 2007, federal tax revenues increased by $785 billion, the largest four-year increase in American history. According to the Treasury Department, individual and corporate income tax receipts were up 40 percent in the three years following the Bush tax cuts. And (bonus) the rich paid an even higher percentage of the total tax burden than they had at any time in at least the previous 40 years. This was news to theNew York Times, whose astonished editorial board could only describe the gains as a “surprise windfall.”

Related: Reaganomics, a Success Story