Will American voters fire George Bush and hire John Kerry?
paradoxes in Efficient Markets Hypothesis

How to ensure good public policy

The Catallarchy says, the reason why 'bad' policy gets enacted by politicans has to do a lot with structure of liberal democracy. The solution,
the only solution I can see is creating a structure of government in which Exit plays a much greater role and people who create and advocate public policy pay for nearly the entire costs of ‘bad’ public policy and reap nearly the entire benefits of ‘good’ public policy.

In other words, change public policy from a public good into a nearly private good. When this doesn’t happen, programs like Social Security and Medicare are created and instead of taking responsibility for cleaning up the mess, politicians simply pass the buck to the next guy.

How about giving our representatives a stake in our welfare? If our representatives are given a deferred compensation based on some measure of National Income then they will have to pay (by reducing their pay) for 'bad' public policies and they will reap benefits of 'good' public policies.

Why deferred compensation? Because, whether public policy is 'good' or 'bad' will be known after many years have passed. Using National Income (or any other broad based measure of national well-being) means representatives cannot increase their income without being fair to all of us. Redistributing wealth from rich to poor, for example, will result in lower National Income than what would have been possible in absense of such re-distributive taxes.

I had alluded to this theme earlier, suggesting that the above kind of scheme can even take care of financing electoral expenses.


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