Thomas Hobbes pointed out to the western world that government's raison d'etre is to suppress the prisoner's dilemma.  Solitary, poor, nasty, brutish and short is the life of man when he cannot trust others to fulfill a covenant.  Security and the fruits of conquest appear to be the only public goods considered by Hobbes.  But surely there was a king who wished to beautify the town square and who raised taxes for that purpose.   Government became a general purpose instrument for suppressing the prisoner's dilemma.

  • A New Way to Resolve the Prisoner's Dilemma

Truly large scale conditional contracts can be used to replace government for just about everything.  It is ridiculous that we haven't all gotten together and pledged 25 cents per year for the rest of our lives in order to fund Wikipedia.

Floating Contracts               ( Crowdfunding )

Practical Philosophy

A governing body became the mechanism by which a solitary man could agree to pay what the beautification project was worth to him and, at the same time, have monies assembled from a multitude to cover the costs of the project.

No noticeable improvements have been made to the system since 1651.

The square became beautiful.  Soldiers were called out to suppress free ridership.  There were people, scoundrels really, who loved the new square but who refused to pay the cost.  Their sheep were taken by force.

The Problem

The Old Way

You see it in the jargon of every college economics book.  Kids are told there are private goods and there are public goods. Government buys public goods.  Sheep are confiscated!  The world is binary.  A legislative body is wise or it is not.    It is simple.

But it is not simple.  Why?  Because there are no public goods.

The question is now before us:   are there any objects or events whose effect across all humanity is completely uniform?   The obvious answer is no. 

What shall we call the important and ubiquitous functions in the middle, the ones that are neither spikes nor uniformly flat? Group goods ... is what I call them.  A benefit function lurches up and down across humanity.  There are a few people, you see, who do not like the new square.  But there are people who love it   And there are people who don't care much.

This is the reality.  Not the bizarre fiction of public goods.  There are group goods, and there are private goods.  Our governments buy us group goods.  Many people benefit greatly.  There are scoundrels who benefit and who try not to pay.  They are forced to pay.  So far, so good.

These are group goods, however.  So, there are often people who are not benefiting as much as they are being charged.  And there are people who are not benefitting at all.  It is a problem.

The political system has its voting scheme.  Its votes cannot be weighted across society in the same way that the value of the group good is weighted across society.  There is a mismatch.  So politics unfolds, as it is wont to do.  Along one outcome, people are forced to pay for a thing they don't want.  Along another outcome, a few people veto the project, and it does not happen.

It is a problem.

Technology has changed.  A multitude of wills can make a concerted effort.  Agreement can be achieved, and the effort can flow forth.  (The Leviathan still enforces the covenant.)  We no longer have the practical accumulation of a horrible impediment.  The economic barrier has changed.  We may talk easily amongst ourselves, think about what to do, volunteer money (on the condition that everybody else does), and organize the whole thing into a binding contract.

We can organize a million people for a few dollars.  We can organize ten million people to pay a dollar per year (across fifty years) so they can all enjoy a wonderful service.  It would cost us a thousand dollars to set up.  It would take several months for it all to happen.  The costs of organization are negligible compared to the amount generated.  This could not happen in 1651.

And the amount generated is tiny compared to the value achieved.

Technology has changed.  Government is no longer the only way to buy group goods.

Once people realize this, they will set up floating contracts to buy for themselves what they might have hoped their government, local or state or otherwise, would buy for them.  They will not wait.  They will fund a dilapidated park.  They will buy some lovely lamps for downtown.

There will be no altruism involved.  You will pay less than what these lamps are worth to you.  You will agree to part with an amount of money that is less than your love for these trees.  You are a rational agent.

I am not saying there will be no altruism.  I have heard that humans genuinely desire the well being of other humans.  So, if you want to create a drug addiction clinic in rural Tennessee or if you want to hire more math teachers in Macon, Georgia, you may do so.  If you value teaching other people's children, knock yourself out.

All I am saying is, whatever value you put on this sort of thing, it will be greater than what you wind up spending. You are a rational agent, and you are buying peace of mind.  Altruistic people are peculiar in this respect.

People will compare notes at cocktail parties.  I am funding our town beautification and a new library!  I am funding Wikipedia and a buyout of Norwegian whaling!  I hope to get a neighborhood pool, and I am buying prosthetics for elephants maimed by land mines in Thailand!

It's all good.

Once people purchase the things government is not buying, they'll turn their efforts to the things government is buying. Perhaps an effort is underfunded.  Perhaps there is too much red tape.  Perhaps certain people are simply not doing a very good job for the price.  Perhaps the endeavor is politicaly unstable, and it is under threat.

Gradually, many things done by our governments today will be replaced by floating contracts.  And, of course, any floating contract can be replaced by a better one, one which accomplishes all the same tasks, identically, but which is supported by a ten-fold increase in the number of people who are sharing the burden.  The cost for those who initially shouldered the burden will decline.

Why would those extra people agree to it?  Altruism, I suppose.

There you have it.  It is simple.  Let's get to work.  Think of a project.

Floating contracts.  Crowdfunding, as they are calling it now.  A new way to resolve the prisoner's dilemma and to achieve social change.  So it's not nearly as important to our parks, to our schools, to our subways and to the whales who live in our oceans just who wins the next presidential election.

There are private goods.  When you graph the love of an object or an event across all of humanity,  it might be a spike. The event has value to me, but the rest of the world is not concerned.  The rest of the world does not care.  This must happen all the time - to a good approximation, anyway.  Every time I take a sip of milk.

The New Way

You see, each person is giving less than the benefit she expects to receive.  Often far less.  The prisoner's dilemma has been suppressed.  Each person is now buying the individual good of having the service fully funded.  Each person's payment is necessary for the service to come about.  Each person's binding pledge is now a self-interested individual benefit.

Paper presented in 2006 at the Georgia Graduate Student Interdisciplinary Conference:

  • I will give $1 each year to Wikipedia, if 75 million people do, too.
  • I will give 25 cents each year to Wikipedia, if  300 million people do, too.
  • I will give 10 cents each year to Wikipedia, if 750 million people do, too

    Don't check one.  It is not live.

Coming Soon ...       
Bottom Heavy Companies

A Top Heavy Company

We all know what a top heavy company is.  Its stated purpose is to make money for its share holders.  Within the corporation, people at the top make the most money.  They hold the power, too.  So, the unstated purpose of the company is for these people to pay themselves as much as they can possibly can.  The two purposes, stated and unstated, obviously conflict.  Also, there are mangagers managing.  And directors directing.  And vice presidents in charge of other vice presidents who are in charge of directing the directors who are managing the managers.  At the tip of the spear, someone is working.

But he is not being paid much.

It is always good to fire someone who is not working.  It is also superb to slash the salaries of people who are being paid more than their value.  Over the last hundred years, our companies have a done a pretty good job of cutting employment and wages at the low end.  So, let's turn to the high end.

But it is a matter of power.  The people at the high end are not going to do it, are they?  No.  Instead, they'll tell you (quite falsely) why all the recent growth in the company was due their unbelievable skill.  And why they need to be compensated more, rather then less.

It is all quite silly.  Nothing of rational substance, of course.  Yet they have gotten a lot of people to buy into it so far!

The Solution

Deep down, a company needs to break even.  The rest is a matter  of motivation.  The principal stockholder might desire a five figure income, enough to live in a modest house and to send her children to the best of schools.  So, it is not particularly important for a company to make anything more than a piddling profit.  It is only important that the owner be motivated.  (And more on that, later.)

--- What do you do, dear?

--- I give hard woking people good jobs.

--- Why do you drive a Volvo?

--- It's good enough for me.

It is certainly not important that the CEO be compensated extravagantly.  I know plenty of talented people who would be a CEO for $59,000 a year.  And I dare you to find any statistical meaningful relationship between their tenure and company performance which could, unequivocably and rationally, be viewed as causal.  A little McDonalds stlye turnover at the top should be tested to see if it increases profits!  An experiment, you know.  How little can we pay them?  How much turnover can we sustain?

Managers should be purged.  Bureaucrats should be eliminated.  The great promise of the computer revolution is that the corporate structure itself, and its rules, which are hard-coded into the minds of hundreds of paper pushing bureaucrats, can be subsumed into an alogrithm and executed by a computer.  Let's put these people out of work.

The bottom is fed.  The extra money is used to give the people doing the real work at the tip of the spear a significant stake. It is their company, after all.  They are its essence. 

A lot of money is being saved, though.  So, a goodly portion can go to lowering prices.  More people can partake in what is being provided.  A good thing, right?  Think of what it does to market share!

Light at the top.  Heavy at the bottom.  Light  on  profits.  Light on nonsense.  Heavy on workers.  Heavy on the conumers who benefit.  It is straightforward.  One part of the programme is simply corporate cost cuttting aimed at the most expensive components

The Motivation

Money.  It is the way of keeping score.  That's what the truly rich say about their millions and billions.  How do you know you are a winner if you don't know the score?  A billion is a good score!  Ten billion is better.  At the end of the day, you are investing in Manhattan real estate simply because you do not know where to put all your money.  Cash itself begins to look like a volatile asset.

But none of my friends would be impressed if I were to make a billion dollars.  Who are my friends?  Chemists, mathematicians, not-quite-hipsters, and band geeks.   They are hard to impress.  It is not going to help matters if I buy a golden toupee and strut around like Donald Trump.  So how can I climb my social ladder?  How might I impress my friends?   Perhaps I could help the poor.  Perhaps I could broaden the properity to those who, by dint of work, have every right to it.  As a clever plan to become popular, it just might work.

Or I could do it because it is the right thing to do.

Whatever.  It seems pretty clear we could have a lot of potential entrepreneurs, a lot of movers and shakers, who could be happy with living modestly and with doing good by the world.  Happy with being ruthless toward worthless, overpaid employees.  Happy with being the rock of support under hard working people who are the tip of the spear.  Happy with being a benefactor to those people who cannot pay much for the item to begin with.

You can help a lot of people.  You can give people more than a living wage.  Not because someone forced you.  But because it was the raison d'etre of your business.   It was why you started in the first place.  Naturally, you can tell your friends at parties.  Boy, will they be impressed!

If you have a specific idea, you should try it.  You don't need to  invent a new widget.  It is quite likely the severe cost cutting inherent in the new way will be sufficient to give you a competitive advantage.  You don't have to invent a new washing machine.  You just need to produce a washer for $200.  You can do that, right? 

Goodness.  It is motivation enough.  Isn't it?

Goodness.  If more companies were bottom heavy, the world would be a better place.  If all companies were bottom heavy, the world would be a truly good place.

Don't you think?

Check One! ...       
2 + 2 = Vikings

 A New Type of Corporate Raiding

Putting the two ideas together, we get a curious result.   A lot of major companies are traded publicly.  A lot of people are altruistic.  Therefore, we could  collecttively purchase a corporation and turn it into a bottom heavy company.

I could go on, but it is really quite simple.  The best ideas are simple, eh?  

Once a group of altruistic people have control of a company, they can hire a person - a viking - whose job is to fire all sorts of people and generally lay waste to high paid employees.  Slash and burn.  A lot of salaries are going to be slashed.  A lot of positions  are going to be burned.  We need a man of ruthless temperment.

I'm thinking Bernie Sanders.

Business schools of the future will give classes on viking style corporate  raiding.  You will study how to off-load the corporate knowledge of a company so that it can be maintained in midst of  high turnover.  You will study which layers of management have been found, by empirical  research, to be generally useless.  Programmers will learn how to computerize the underlying information flow of corporate bureaucrats. 

Let's buy AT&T and turn it into a bottom heavy company.

Seriously.  I don't see any way they can stop us.  Let's get our pitchforks and get to work.  We need to start a website (or put a separate page on this one).  We need to state our mission.  We need to choose a viking.  I  don't think Bernie will be getting a job in the Trump administration.   We will pay him $99,000 a year.

Once we surrender enough money to buy the majority of voting shares in AT&T, we'll put our viking in charge.  I don't think the stock will rise in anticipation of our takeover.  Once we have control, the rest of the stock will be worthless. We won't pay dividends.  We are in this for altruistic reasons.

The viking will have a mandate to slash AT&T's rates precipitously.  AT&T is an odd company.  The social benefit to cutting prices is huge.  It might be a higher priority than raising wages, although explotation will always feel the wrath of a true viking.  But low prices in one telecommunications company would put pressure on all the others.  The effect might be so great that I might have to retract my claim about altruistic motivations.  You might lower your own phone bill, and you should be willing to pay such an amount.  If you are not into social revolution and stamping out cold hearted explotation, you certainly might like a lower phone bill.

How did self-interest kick in?  You could view it as a bunch of consumers getting together and buying a company so they could run it for their own best interests.   Interesting.

But there is still altruism for altruism's sake.  After AT&T, we can buy up one company after another.  I have a friend, Mike, who would make a good viking for a major corporation.  An M.I.T. pedigree, a fierce sense of social justice.  You don't want to mess with Mike.  I am sure he would work for $99,000 a year.

We all would.  Don't you think?  After that, you are just keeping score.  Let's put him in charge of General Electric.  There is nothing they can do to stop us.  It is a publicly traded company.

This is a serious proposal.  I am by nature quite skeptical.  But I honestly cannot see any reason why we cannot  purchase AT&T within a four year time frame.  Before the next election.  It would be the shot heard 'round the world.

We can just keep going.  Buy up some companies.  Outcompete the others.  I don't think we need more than forty years for the entire revolution.  Being a gold plated billionaire with a bizarre sun tan is such an outdated way to impress people.  I am sure people will be more impressed when they find out you own AT&T stock and were part of the original buyout of 2020. 

--- You own AT&T stock?

--- Why yes, I do.  I bought it back in the day.

--- Oooh.  Would you like to help my elephants?

--- I would love to help your elephants.