Weekend Musing: Direct Democracy and Economics

Guest blogger Steven Spadijer presents a multi-part series on Direct Democracy to start off the Weekend Musing articles for 2012.

In this first post he examines the empirical evidence, speficially the economic impact versus a “representative” democracy. The second post will confront the questions regarding the intelligence of voters, particularly the information-rich environment effect on voter knowledge and interest in politics. In the final post Steven will question if Australia should abolish the states and create something more akin to highly decentralised Swiss cantons.

What is Direct Democracy?
Direct Democracy allows a prescribed number of citizens’ to veto an existing law or enact a constitutional amendment or statute independent of the legislature at a referendum. Today, these procedures complement the day-to-day representative government found in Switzerland and its 26 cantons, 7 German Länder, Liechtenstein, 24 American states and parts of Latin America.

Readers might notice that these regions are some of the wealthiest, well-governed and most stable countries in their region today. But do constitutions matter for economic performance? In particular, does the use of direct democracy matter from an economic perspective?

Given the interest emanating from Deus Forex Machina’s recent post “Is Australia the new Switzerland?”, I thought an examination of the Swiss experience with Direct Democracy would be a great starting point.

The Swiss Experience
Authors Feld and Savioz (see references below) found that per capita GDP in cantons which use Direct Democracy more frequently, and have easy access to these rights, are some 5 percent higher than in cantons which have infrequent use (even when controlling for income and other demographic variables). Feld also shows that direct democracy is associated with sounder public finances, lower levels of public debt, better economic performance and higher satisfaction of citizens.

Schaltegger with Feld then reveal centralization of public resources is more likely to occur under representative government while direct democracy is more likely to decentralize the provision of public resources, concluding that :

the empirical analysis provides evidence that referendums induce less centralization of fiscal activities.

In turn, such decentralization prompts vigorous tax competition between the cantons of Switzerland attracting capital from aboard as well as better education outcomes for all.

More recently, Funk and Gathmann find using Swiss data from 1890 to 2000 that a mandatory budget referendum reduces canton expenditures by 12 percent while lowering signature requirements for the voter initiatives by 1 percent reduces canton spending by 0.6 percent.

Pommerehne then examines the effects of direct democracy on the efficiency with which government services are provided. He finds that waste collection in Swiss towns having both a private contractor for the service and direct democratic elements is provided at lowest cost. Additional efficiency losses materialize if waste collection is provided in towns without direct democratic elements.

So far as its economic impact in Switzerland, direct democracy has brought with it unparalleled economic prosperity, despite the country being far from resource-rich.

Progressivism and Direct Democracy

It is important to note that Direct Democracy per se does not lead to lower spending. Rather, it accords with what citizens require given the context. If your infrastructure is state-of-the-art, then there is no need for lavish expenditure. Conversely, if it is dwindling (try taking a train from Western Sydney to the city), then it is a gun behind the door.

In Uruguay, for example, voters repealed privatization of the countries water supply and oil companies, “Norwegian-izing” their natural resources via the initiative process. Matsusaka noted that during the first half of the twentieth century in the United States, which was characterised by massive urbanisation and movement of people from rural to urban areas all of which required railways, roads and schools to be built), initiative states spent more — both statewide and locally, but lower state and higher local expenditure after controlling for income and other demographics.

This was used to bypass the legislature dominated by farmers and allowed the US to urbanise itself. Together with existing evidence from later in the century which shows its ‘libertarian’ streaks, suggests that the voter initiative does not have a consistent effect on the overall size of state and local government.

However, in all cases Direct Democracy systematically leads to more decentralized expenditure. Indeed, Blume and Voigt note in Germany that the introduction of direct democratic elements in local constitutions led to higher rates of expenditures on local infrastructure. For example, Bavaria – one of the most efficient, well governed parts of Germany – has had over 1500 referendums locally from 1995 to 2005.

Reasons?

But why does direct democracy deliver results far superior to that of representative government? There are 3 broad reasons:

1. In a principal-agent framework, citizens are the principals and can only very imperfectly control their agent — the government.

In this situation, direct democratic institutions can have two effects, namely a direct effect, which enables the principals to override the decisions of an unfaithful agent, and an indirect effect, where simply the threat of override is sufficient to compel the agent to behave according to the principal’s preferences.

Potentially, reducing the principal-agent problem by way of direct democratic institutions could affect all of the economic variables discussed in this paper: if citizens prefer an expenditure level that is higher/lower than that preferred by the government, they should be able to achieve it via direct democratic institutions.

2. James Buchannan attributes the poor performance of representative government due to the theory of “adverse selection”:

[S]uppose that a monopoly right is to be auctioned; whom will we predict to be the highest bidder? Surely we can presume that the person who intends to exploit the monopoly power most fully, the one for whom the expected profit is highest, will be among the highest bidders for the franchise.

In the same way, positions of political power will tend to attract those persons who place higher values on the possession of such power. Is there any presumption that political rent seeking will ultimately allocate offices to the ‘best’ persons?

Genuine public-interest motivations may exist and may even be widespread, but are these motivations sufficiently passionate to stimulate people to fight for political office, to compete with those whose passions include the desire to wield power over others?

Under these monopolistic conditions it is entirely predictable that the system will adversely select odious politicians who act in their own interests, with secondary regard for the subjects they rule or that of the opposition. It is inevitable that the dishonest politicians will deliberately misrepresent the state of affairs to the public in their desperate attempts to secure votes, buying off special interest groups and powerful lobbies piecemeal with gifts from the public purse.

And it is only a matter of time before the megalomaniacs pursue some expensive, harebrained, self-serving scheme (like the EU, the Euro debacle, or a war – all of which were rejected by the people) that brings down disaster on their subjects. Does anyone, for example, believe Ireland would be in the position it is today if it had the Swiss system of government, handing over your own sovereignty to the EU? I doubt it.

3. By contrast, direct democracy allows one to serve no one but their own community and families. Buchannan further notes:

…direct democracy [acts as] an add-on or addendum to existing decision rules and procedures, as carried out through legislative bodies or through executive-administrative agencies, provisions for popular initiatives and referenda can operate so as to forestall collective actions that might otherwise be implemented.

And such provisions may exert an influence as a potential check even if no popular efforts toward actual organization of an electoral test are made. Legislators, executives, bureaucrats, and judges will keep arbitrary actions within tighter boundaries when they are subjected to potential reversals through popular referenda.

In sum, the effects of direct democracy add-ons to existing decision rules surely work toward reducing the range and scope for politicization, a result supported by classical liberals.

Conclusion
We can see there is a powerful case for direct democracy from an economic perspective. We can also see that direct democracy, like Switzerland, is a “neutral” force: when governments go too far toward the right, the initiative reverts government back to the left forcing them to spend on infrastructure to avoid unnecessary and crippling bottlenecks.

When the government goes too far left, direct democracy reverts the government to the right, decentralizing expenditure. Presumably, in Australia direct democracy would decentralize taxation and result in competitive federalism (note most centralized power proceeds undemocratically) – perhaps giving us a fighting chance to compete with Singapore!

References

Lars P. Feld and John G. Matsusaka, ‘Budget Referendums and Government Spending: Evidence From Swiss Cantons’
Lars P. Feld and Marcel Savioz, ‘Direct Democracy Matters for Economic Performance: An Empirical Investigation’
John G. Matsusaka, ‘Fiscal Effects of the Voter Initiative in the First Half of the Twentieth Century’
Lorenz Blume and Stefan Voigt, ‘Fiscal Effects of Reforming Local Constitutions: Recent German Experiences’
Christoph A. Schaltegger, ‘Tax Competition and Income Sorting: Evidence from the Zurich metropolitan area’
Patricia Funk and Christina Gathmann, ‘Does Direct Democracy Reduce the Size of Government?’

Comments

  1. Implementing direct democracy should be easy with the technology we now possess.

    It is even possible that every single decision on spending or law enactment be directly made by the electorate.

    The only thing that stops us having such a system is those who would lose power as a consequence – the major political parties who do not serve the people but instead serve themselves and whoever supports them.

    Oh that electoral commissions had only the job of ensuring eligible voters get to vote and facilitating referendums.

    We can but dream

    pop

    • Agreed.

      This would be a change and a system worth fighting for compared to the current one.

      Gets rid of lobbyists influence and allows those who want to join in the decsion making process to do so.

      Technologically simple with internet, cards and codes, So Why Not?

      Somebody start a movement for tis.

      • Hi there,

        I am a member of Beyond Federation. This movement has been in existence for some 10 years and can be accessed at the following URL http://www.beyondfederation.org.au.

        Switzerland is of course also a federation but it has much more flexible constitution and the popular initiative system allowing the people to initiate constitutional referendums. We don’t really want another type federation as it continue to have similar problems as now unless the constitution would be revamped substantially. do have a look at the various proposals that have been circulated. Dr. Mark Drummond whose Ph. D thesis is on the cost of federation is also an important piece of work that should be consulted.

        I am also convenor of a small group by the name of Republic Now Association. We favour a maximalist Republican Constitution without a federal structure which has become dysfunctional in Australia. We favour a decentralised unitary state with a national government, stronger local government and regions that are based on clusters of local government and responsible to them. The URL here is http://www.republicnow.org

  2. Bit of American-style libertarianism thrown in there, and lots of opinion rather than fully qualified research…

    Are the EU and the euro of necessity bad things? The euro doesn’t seem to be a problem so much as certain countries and banks lending way too much to certain other countries who couldn’t repay.

    Are the 24 states of the US with ‘more’ direct democracies better off than other US states? Are there other reasons for that we could postulate for those states assuming it was even the case? e.g. do affluent states with a well-educated populace end up gravitating to more direct systems of political engagement?

    And exactly why is Switzerland pretty well off per capita given its low base of natural resources? Is it that it relies on banking the wealth of others?

    You need to account for confounding factors rather than running away with libertarian assumptions and wish lists. Good heavens, we’ll be directly quoting Ron Paul and Wendell Cox next…

    But this is not to say that we shouldn’t have direct vote referenda on a large number of national, state and local issues of concern, and that direct democracy would not achieve better results than our current top-dowon so-called representative democracy over which we really have no say in the detail of policy — e.g. should we have mining billionaires making off with our national resources and not paying a steep resource tax to the community? Should we go on wars of adventure with ‘alliance partners’ with no referendum or worthwhile explanation? Should we allow mining coal seam gas under farmland or our cities? How much should we be spending on education and aged care vs defence and armaments? etc etc.

    • Steven Spadijer

      Dear Sean,

      Firstly, Greece, Ireland[1], Spain and other countries should (probably) never have joined the Euro given their a) propensity for asymmetrical shocks (real estate busts) and b) the fact their books were cooked to allow them to enter the Euro. Of course, there is a simple litmus test to all this: let us see if any of these countries leave the Euro over the coming year or two. That would be an admission of failure. It should be noted there is a long discussion elsewhere on why operating in a fiat currency (flexible exchange rates, interest rates set nationally, debts denominated in the local currency etc) preserve the solvency of a nation.

      Secondly, on whether the states with direct democracy are “better”, it would seem to be a “yes”:

      1. Initiative states have significantly lower levels of perceived corruption than non-initiative states, as they install new filters and checks and balances (sunshine laws and more recently independent commission on gerrymandering to name just a few reforms): James Alt and David Lassen, ‘The political economy of institutions and corruption in American States’ (2003) 5(3) Journal of Theoretical Politics 341–365

      2. The effects of the initiative on voter turnout rates, civic engagement, human capital, and confidence in government has positive effects on all four aspects (more on this in the next post): Caroline J. Tolbert and Ramona S. McNeal. ‘Enhancing Civic Engagement: The Effect of Direct Democracy on Political Participation and Knowledge’ (2003) State Politics & Policy Quarterly 3(1) 23-41; Daniel A. Smith and Caroline J. Tolbert, ‘The Instrumental and Educative Effects of Ballot Measures: Research on Direct Democracy in the American States’ (2007) State Politics and Policy Quarterly 7(4) 417-446.

      3. In their paper on the effects of direct democratic institutions on total factor productivity in Switzerland, Feld and Savioz (1997: 515) argue that due to the lack of theoretically isolating all the possible transmission channels direct democracy would have (such as direct democracy creating civic engagement, providing a process to address bottlenecks and grievances and y decentralizing expenditure), it makes sense to look at the big picture, namely, to inquire whether the presence of direct democratic institutions leads to higher total factor productivity, which it does.

      4. States with initiative systems waste between 20 percent and 30 percent fewer resources than non-initiative states resulting in better economic performance in terms of higher GDP growth and faster convergence between 1969 and 1986: Brock Bloomberg and Gregory D. Hess, ‘The Impact of Voter Initiatives on Economic Activity’ (2004) 20 European Journal of Political Economy 207-226.

      5. Regions which use and practice direct democracy have higher land values (a proxy for prosperity and the extent of infrastructure of the region), which naturally would attract the best and brightest (generally, these people do not live in ghettos, but places where they have input): Representative versus direct democracy: A Tiebout test of relative performance; Representative versus direct democracy: the role of public bureaucrats

      Thirdly, the discussion of early twentieth century usage of the initiative process and the German expenditure are far from “libertarian” in nature. As noted, the institution seems to be fairly “neutral” ideologically: sometimes it supports the “socialisation of investment”. Sometimes it is libertarian in its outlook.

      Fourthly, on the issue of “wealth of others” – one, Switzerland does not speculate in real estate in the way the west does (they have, remarkably, had flat real estate prices). Two, there manufacturing sector is high value add, as well as being the most innovative country in Europe. Three, direct democracy causes decentralization of expenditure which in turn causes competition amongst the cantons as they set the “most attractive” tax rates (thus, attracting capital from neighbouring countries and cantons).

      Fourth, Swiss (and Liechtenstein’s) “stability” means it makes it an attractive place to invest and direct democracy makes it stable as ordinarily people do not like to go to war (and ideally, probably prefer a policy of neutrality). As Buchannan notes, direct democracy greatest effect is its indirect effect: if the government knows the people are not keen to go to war(i.e. they are pro-peace), then they will not go to war to begin with as they know what is waiting for them. I always wondered how Germany would have looked like if it had the Swiss system post-1918.

      I’m not sure how there is “lots of opinion rather than fully qualified research” given I cited “fully qualified research” for most of the article and yes, we might very well need to have referendums on the issues you listed – many places do. And the issues are a matter of preference.

      [1] It’s 1922 Irish Free State Constitution contained provisions for Swiss-style democracy. That provision was repealed via a loophole which said the constitution could only be amended by a simple majority of the legislature for the first 8 years of the free state. So the career politicians’ used the loophole and removed it ASAP.

      • Fourthly, on the issue of “wealth of others” – one, Switzerland does not speculate in real estate in the way the west does (they have, remarkably, had flat real estate prices).

        On this topic, it’s worth noting that there are several factor contributing to Switzerland’s stable real estate values:
        * 20% deposit requirement for owner-occupiers, more for investment or holiday homes
        * mortgage and other costs for owning the property usually cannot be more than 33% of your income
        * high capital gains taxes and surcharges on properties sold after short ownership periods (<5 years)
        * properties are subject to both a wealth tax and an imputed rent tax

  3. “…..should we have mining billionaires making off with our national resources and not paying a steep resource tax to the community?….”

    Or, from a WA perspective, the citizens of WA could possibly rescind the confiscation of their income by Victorians and others, who, using their numbers in the Commonwealth Parliament, have corrupted the Constitution to the detriment of the less populous States.

    • That line alone serves to nullify and reduce any other possibly cogent argument in the piece.

      For a start the major resources companies are publicly listed thereby enabling any citizen to hold a stake in the enterprise. Holdings of these resources companies are included in the superannuation portfolios of nearly every Australian and also in the private share trading portfolios of many Australians. There may be a few ‘mining billionaires’, just as there are property, finance and retail billionaires. So what. A crude descent into class warfare/envy territory.

      “Making off with our national resources” WTF? A ludicrous and puerile statement expected of an undergraduate twitterer on Q&A.

      “Paying a steep resources tax to the community” Mmmmm. MRRT in the process of being legislated. Royalties paid to State Governments. Resources companies comply with all legal taxation requirements and obligations to State and Federal Governments. What more do people want? This nation has always had a resources sector that has just gone along and done it’s business. Now that commodity prices are relatively attractive everyone wants a piece of the action, without any prior interest or effort.

      Simple can’t take seriously a position that includes such superficial endeavour – which as I said at the outset, undermines my view of the rest of the piece. I don’t have the time to check all that is stated but on the basis of the above, I suspect more hyperbole and innuendo. Sorry.

      • SS, on reflection my comments were expressed a little harshly, apologies.

        A few general thoughts: I don’t see a direct link between direct democracy and economic prosperity – suggest the need for a little more evidence from variety of sources to support such a claim. Indeed, this article from The Economist is contrary:
        ww.economist.com/node/18586520?story_id=18586520&fsrc=rss

        In recent times our own economic performance has been solid enough, even when compared to the Swiss. If Europe implode the Swiss may face real challenges to their own economy with its reliance on the financial sector and major trade to Euro neighbours – direct democracy will no longer be viewed in such a rosy light in economic terms.

        The possibility for systems like direct democracy to descend into some form of mob rule are not unreasonable and a threat to social and racial stability. In addition, the propensity for voters to cast ballots in favour of their own hip-pocket perhaps more easily manipulated. Not all citizens have an interest in political affair, is direct democracy compulsory or optional?

        Frankly I’m not so sure that our own system has served us badly (apart from the current government arrangement!). I don’t really have too many complaints. Australia does not always need to follow others. We are not Swiss. I do have lots of small niggling doubts about a system direct democracy – doesn’t leave me feeling Big Love. In fact, rather in favour of the Athenian democracy model!

        • Steven Spadijer

          Commentator 3d1k provides a fascinating insight into the way The Paternalist mind operates. Let us examine it in more detail.

          First, he says he does not see a direct link between DD and economic prosperity. Really? One could easily see that Ireland – if it still had DD (see its 1922 Constitution which had DD) – would have refused to join the EU, or the Euro (indeed, it did before they had to keep on voting till they got it right), and instead sought to preserve its much-loved democracy like Liechtenstein and Switzerland (i.e. by staying outside the economic debacle due to faceless men in Brussels). If it did, it would not be facing insolvency at this very moment (which it would not face under a fiat currency regime where debts are denominated locally). One could equally imagine given DD decentralizes decision making and thus increases competition amongst internal jurisdiction, whether this would attract capital resources. One wonders whether a more informed populace who votes regularly (discussed next week) has more mobility and intellectual capital than countries without debates and ideas being discussed. Nor is any mention made to the fact (1) Swiss National Bank (after it was mooted an initiative could be run to lower the Swiss franc) – and unlike our National Bank – acted to save the countries manufacturing sector; (2) that companies (financial, IT and manufacturing) are leaving EU countries (in London, Munich, Helsinki) and setting up shop in Zurich (Google being one, but many examples); (3) Switzerland has prepared and factored in the collapse of the EU (it projects a budget surplus) and has now looked to third world markets (Brazil), China, South Korea, Japan and the like. So we can see The Paternalist mind lacks any understanding of recent news and has refused to ignore the empirical data cited in the blog above (Buchanan notes DD reduces rent-seeking activities e.g. “jobs for the boys” – classic example being California where the house speaker had written a piece of legislation on a napkin giving insurance industry and their trial lawyers to charge hidden and unlimited fees to all people who were insured – naturally, voters rebelled, as lead by Ralph Nader).

          Secondly, we are given an article to The Paternalist magazine – yet reading through the comments of the article (especially those of commentator Stephen Morris) exposes the lies, misrepresentations made. For example, we are told voters limit taxes, while supporting increased spending. Yet no mention is made that initiatives take up 3% of the budget (see below). No mention is made that when Californian voters twice rejected caps on property taxes, and only supported Proposition 13 as a result of the Serrano decision. No mention is made that actually even in the US voters from 1898-1998 were almost as likely to approve a tax increase as a tax decrease (and have placed no limit on major resources of state revenue – income, tobacco taxes). But why let the facts get in the way of your elitists prejudices?

          Thirdly, we are also given” tyranny of the majority” argument – but 3d1k can scream “tyranny of the majority! Tyranny of the majority! Tyranny of the majority!” all day long it does not tell us why tyranny of the minority is any better. Nor does it tells us whether the actions of these minorities should be given greater weight than the majority (largely, a majority is a group of minorities coming together). Nor does it tell us which minorities: are pedophiles (numerical) minorities and thus should be protected for raping children when the father of a raped child wants justice? Is that tyranny?Are people aged 99 minorities and thus should be protected from legislation which limits state-funding of life support machines if they fall into a coma? Is that tyranny? Are sociopaths minorities? Likewise, simply telling us a “racial” group might be disadvantaged tells us nothing as to why. For example, were Californian voters all racists because they refused to extend welfare benefits to illegal immigrants? Or were they simply defending their liberties and common sense – be a US citizen if you want those benefits. Were the Swiss “racist” because they automatically deport foreign criminal, who commit rape, murder or welfare fraud? They might be, but it tells us nothing about the merits of an argument. Thus, we see another characteristic of paternalist thought: they assume their preferences are the universal and sole source of all authority in the world, and pretend this the only objective measure by which all views should be judged.

          Equally, we are given the argument of “mob rule” – yet I would like to see an example of this from any of the 7 German Lander, Switzerland, Lichtenstein, Uruguay, or from 23 US states. Who got shot? Whose house was burnt down? Are these laws actually enforced, or are they purely symbolic? And what evidence is there that mob rule is more likely under DD than representative government which have us concentration camps, two world wars (and many small wars since) or attempts to ban the communist party?

          Furthermore, one could look at the data such as although 1 direct citizen statute limited marriage to a man and a women, so did 44 US legislature; or representative democracies in the US execute 0.073 people per 10 000 people while for direct democracies that figure is 0.034; or the fact Denmark passed a Swiss initiative mandating automatic deportation of foreign criminals (once again absolute “racial” issues – but it is far from self-evident why this is “wrong” – and I would have thought it increased social stability by kicking out rubbish).

          Fourthly, we are told “the propensity for voters to cast ballots in favour of their own hip-pocket perhaps more easily manipulated” What evidence is there of this and so what if people vote with their hop-pocket? Presumably, manufacturers want a lower dollar because they believe manufacturing will ensure our future, not just current, prosperity. They are voting for their hip-pocket. So what? What is wrong with self-interest? Politicians do not vote with self-interest? One could argue, equally, “self-interest” sacrifices the “public good” – but then one would need to define the public good. Tax crusaders think their actions are in the public good; animal rights activists think their actions are in the public good and so on.

          As for compulsory or optional – that is up to the people. DD operates in both forms – compulsory (Uruguay and the Swiss canton of Schaffhausen) and optional (US). I will note, as we will see next week, states with DD have higher voter turnout, as the issues on the ballot stimulate greater interest in politics and make people less cynical toward their state government (you overlook the endogenous effects of DD i.e. its information-rich environment which gets people interested and thinking).

          Finally, of course, we are told what we all knew would happen: 3d1k he thinks the system has served us “well” (well, relative to what? Switzerland? Singapore? Liechtenstein? Colorado? Massachusetts? Washington state?) . We are also told we are not the Switzerland – indeed we are not and we would pass policies based on our cultural values – just as different legislatures produce different laws, so too do different countries with DD. But is 3d1k willing to accept the challenge and put his views of government by career politician to public scrutiny (i.e. a referendum)? Is he willing to let the Australian people be free to choose which system of government they want for their country – without it being pre-vetted by 3d1k (or career politicians’)? And perhaps he could nominate a pillar of our current constitutional arrangements which can decentralize decision making along the Athenian model?

          • Alter commentators will be aware that 3d1k merely responded with ad hominem attacks and personal opinions (“fails to persuade”, “lacks cogency” along with factually incorrect statements about my qualifications etc), whilst addressing none of the substantive issues raised.

            Firstly, Ireland was not addressed (does 3d1k believe on the balance of probabilities Ireland would have joined the EU if it had the Swiss system? We know they rejected it outright as did the peoples’ right across Europe…); the papers cited (which control for culture, capital and demographics); the examples from California (does 3d1k disagree with the figures presented and if so why?) ; the inflow of capital into Switzerland due to its decentralized policies which are enforced by the presence of direct democracy. Apparently, Switzerland isn’t centralized…because, er, they have a Charter From Heaven in their constitution (as opposed to DD which likes to keep issues local? See Vaubel, R. (1996). Constitutional safeguards against centralization in federal states: an independent crosssection analysis. Constitutional Political Economy, 7(2), 79–102 (finding direct democracy to be a potent force in decentralization and t he competitive advantages thereof).

            Secondly, we are simply told that DD paves the way for “mob rule” – yet 3d1k provided no evidence of violence or examples of “mob rule” (where the issue at stack is nothing more than pure symbolism – such as the Minarets example, which continue to be erected throughout Switzerland). He also pretends that minorities operate asymmetrically (failing to deal with the writings of Ronald Coase – all laws produce an externality on someone else – such as limiting welfare payments which hurts taxpaying minorities), or to explain how they were materially worse off (for example, did limiting affirmative action result in lower racial admissions?) Once again a simple challenge: show your EVIDENCE that it lead to tyranny or mob rule
            [the concept of “tyranny” is difficult to talk objectively. Some reasonable people think capital punishment is tyrannical; other reasonable people think it is not. Some reasonable people think marriage should only involve one man and one woman and it would be tyrannical to deny a child a right to a mother or a father; other reasonable people think it is tyrannical not to allow same-sex couples to marry. And so on. In order to talk “scientifically” about the connection between direct democracy and majority tyranny, one has to begin by defining majority tyranny. Without a defensible definition, such assessments can end up shedding more light on what laws the author likes and dislikes than about whether direct democracy they “tyrannizes”. Here, I have defined it as (1) systematic, material and repetitive losses – often by large margins (i.e. “discreet and insular minorities”) and (2) violence or violations of jus cogens. What evidence is there DD satisfies this definition? Indeed, in Australia – 70 percent support gay marriage, or prefer onshore processing – and one could this we conclude DD here would help minorities – indeed, in Uruguay a petition was started up to introduce gay marriage via DD – the Parliament is now taking the issue seriously, and the first US state to have it was a DD]

            Thirdly, we are told that representative democracy “works well” (notwithstanding in the previous sentence it actually fails to help “minorities”) and “we are not Switzerland”. Indeed we are not, and as a result reaching our full potential: does out federal system work well? (cf. Swiss attempts to change their federal structure where it becomes too inefficient). What about our manufacturing sector (cf. union attempts to lower our dollar, like they did in CH via the threat of an initiative)? Our rail system? The Swiss did address that and we are indeed “not the Swiss” – we are not as wealthy (despite our natural resources), nor as efficient [granted, we are bigger – precisely why we need the decentralized power DD brings!] etc. Nor are we told why the people could not supplement the Parliament from time to time (with Parliament having the power to issue a “counterproposal” to any “tyrannical initiative”).

            Btw, what I mean by Paternalist is thus: people who believe their views are somehow self-evidentially the correct one [To avoid being accused of this myself – as I said – I am happy to put the issue to a referendum and compare both of your views – note 3d1k has not been man enough to take up the challenge so that neither of our views are privileged, but so that all views can be ascertained. As I noted below, I said I am happy to accept the outcome of any referendum where all systems of government put forward – thus making myself a logically consistent Democrat].

            Finally, I have no been able to “see events which have not yet occurred”. But analyse events which HAVE taken place – everywhere where the system of DD has been applied; and everywhere where it has not (Ireland, the EU more generally, Swiss cantons which do not practice DD as much etc). From those we observe the facts, and interpretations of the facts. Likewise in Australia: the Australian people said ‘no’ in three referendums since Federation to allow Parliament to empower corporations to negotiate working conditions. They judiciary and Parliament ignored it. The people said ‘no’ to create fiscal control in Canberra. The Parliament ignored it and so on. Put simply, there is empirical support for the proposition that “the effects of direct democracy add-ons to existing decision rules surely work toward reducing the range and scope for politicization, a result supported by classical liberals”

            But not it appears to the grand defender of minorities – 3d1k.

          • so because SS takes the time completely rebut your arguments at every turn, you accuse him of being a zealot and overreacting defensively?

            How about playing the issue and not the man?

          • Final point. The piece is entitled “Direct Democracy and Economics” wherein an attempt is made to correlate DD with ‘unparalleled economic prosperity’ using the Swiss experience as example.

            It fails on that account. DD may provide a range of other benefits but guaranteed ‘unparalleled economic prosperity’ is unlikely to be one of them.

            The Swiss economy has had a mixed recent history, like most others, rising to a position of consistently strong GDP growth simultaneous with the commencement and duration of the genuinely unparalleled credit growth in recent decades. Little wonder the Swiss economy performed so well – financial services being an important component of the Swiss economy along with high-end manufactures traded predominantly with Eurozone neighbours.

            Switzerland was not the only economy doing well – most western economies were also growing strongly, together with those of emerging nations. The unprecedented growth in credit and sophisticated financial instruments ensured growth (or the illusion of growth) in many nations. Most of which do not have Direct Democracy. Direct Democracy is not a causal agent.
            Direct Democracy does not guarantee ‘unparalleled economic activity’.

            Cheers.

          • Dr Bob – he does not rebut my points, he misrepresents by extravagant extension the relatively modest comments I made.

            SS takes one sentence of my and virtually rewrites its to suit his interpretation – where I use 10 words he’ll use 150. I do not think DD equates with significant economic prosperity.

            And yes. Where did my comments go???

            TP: I accidentally trashed a view comments trying to clean up the discourse…..

          • Steven Spadijer

            Alert observers will note that commentator 3d1k is full of delicious irony. He accuses me of talking “one sentence of [his] and virtually rewrie[ing] it to suit [my] interpretation”* – only to do exactly that to my piece. We are told, for example, I made an attempt to correlate DD with ‘unparalleled economic prosperity’ – of course, semantics aside, the point being made is that regions that use DD more frequently are more conducive to long-term economic growth and stability. The claim is made in the context of the peer-reviewed studies cited.
            Now:

            Firstly, notice how3d1k’s tone has changed. He has gone from an outright rejection of DD (accusing it of “mob rule”, having not even modest effects and accusing me of all its possible horrors) to suggesting that DD “may provide a range of other benefits” and “I do not think DD equates with *significant* economic prosperity” (as opposed to modest or discernible effects on economic prosperity). But it does raise the question: if 3d1k is correct that DD “may” have many of these effects (which the entire literature suggests it does), could any of these other benefits (such as competitive federalism, decentralization, and addressing local infrastructure bottlenecks and general citizen responsiveness to such bottlenecks) plausibly have robust, long-term economic impact? Surely as a better informed, watchful and vigilant citizenry loving its democracy would not join the Euro and have its solvency questioned every second day (presumably, a prerequisite to unparalleled economic prosperity)? If DD encourages decentralisation and lower taxes, then surely that is why we are seeing Google and London traders setting up shop in Switzerland (not for years, but decades), and not say the government-by-career-politician that is the EU? Of course, these indirect of DDs which allow for unparalleled economic prosperity are ignored by 3d1k.

            Secondly, we are told the Swiss experience can be accounted by massive credit growth – largely from other countries (note, though, Germany, Liechtenstein and Austria have not had that of a credit binge compared to other countries which are secondary in the Swiss export market). But 3d1k does not tell us why the studies cited are flawed: why do Swiss cantons and US states with DD do better than those without, given BOTH jurisdictions are exposed to the massive credit growth 3d1k speaks of and even after controlling for economic variables? (Note the controlled laboratory federalism provides and which allows for comparisons; also note the sample group of the study cited occurred just before the massive world-wide credit binge for this argument of 3d1k’s to have any validity i.e. in “normal” times). What impact might federalism and robust decentralization (so local land and property taxes are likely to fund local infrastructure) have on halting a housing bubble, or alternatively, given the existence of credit growth, how might this be turned into an advantage? Why do Swiss exports continue to remain strong, even with the bursting of the bubble? (hint: they make Veblen goods and their central banks ****responsive to the people***, which in turn caused them to intervene with the high franc to salvage their manufacturing sector)? Compared to our manufacturing sector (and our high dollar), one could just as well conclude that this is an example of ‘unparalleled economic prosperity’. Indeed, it appears 3d1k is also opposed to the views of Prince Hans Adams II of Liechtenstein who accredited DD (and its decentralizing effects) on his countries prosperity i.e. having the highest or second highest – depending on your source – GDP per capita in the world (half the economy is manufacturing).

            One could go on: he has not address my points on California (btw, the parts of California which use DD the most often happen to be now being leading in wealth); we are told 3d1k makes “modest comments” (such as his outlandish claim DD leads to abusive “mob rule”) – only not to provide empirical evidence (and indeed the latter issue is a side-issue that has nothing to do with economic prosperity per se). Modest, eh?

            So, when will we see 3d1k provide answer to the questions I have asked, rather than secondary factors which naturally might contribute to prosperity – but we are talking about ‘unparalleled economic prosperity’ i.e. more from a period of a decade, but for many decades IN THE ABSENCE OF NATURAL RESOURCES (after all, Switzerland was one of the poorest countries in Europe, and now is one of the richest).

            * Sometimes the 3d1k is unclear: forgive me if I do, do this.

  4. “Are the EU and the euro of necessity bad things? The euro doesn’t seem to be a problem….”

    The euro system is profoundly misconceived. As they like to say, a country doesn’t necessarily have to have its own currency, but a currency must have a country. In Europe, they have the worst of all worlds: countries with no currency of their own (meaning they all have to try to accumulate foreign currency in order to stay solvent) and a currency that is not anchored by the Treasuries of its component countries – that is, they have a Central Bank that is nominally independent, but which has no certain access to capital. It is basically an almost-fraudulent system.

    Had the citizens of Europe been informed about this and given the opportunity to vote on it, they would almost certainly have rejected it. If they were now asked to choose between structural, endemic and recurrent economic instability and local sovereignty, there is no doubt at all they would reject the Euro.

  5. I recommend the writings of Fred Foldvary on Localised Democracy and Land Taxes.

    http://www.foldvary.net/works/auspc.pdf

    There are definitely economic benefits from having both democracy and the taxation-public spending relationship as localised as possible.

    I think the “direct democracy” element in Switzerland is not as important as their highly LOCALISED system of democracy.

    I am trying to find “It’s a Small World – or it Should Be” by Owen McShane, with a Google Search. I am sorry I can’t find it, but I have this article as text and will now copy and paste it here.

  6. “It’s a Small World – or it Should Be”
    By Owen McShane

    Thursday, 08 April 2010

    First Published in the “National Business Review”

    Recently, John Banks, Mayor of Auckland, prefaced his opposition to mining on Great Barrier Island by declaring himself Mayor of the island.

    And he is.

    Great Barrier Island is part of Auckland City and consequently Mr Banks is Mayor of its 700 residents.

    On the other hand, the Chatham Islands, with about the same population, is a Unitary Authority, with its own Mayor and Councilors.

    One must wonder why the Chatham Islanders are deemed capable of self-government while the people of the Great Barrier Island are governed by Aucklanders.

    Have they ever had a choice?

    Mayor Banks was announcing that Great Barrier Island should remain as a pristine playground for urban Aucklanders. Nikki Kaye, MP for Auckland Central, agreed. Then we heard more hostile responses on Television from Forest and Bird and other national environmental groups. When we finally heard from people who actually live on the island, many seemed quite keen on the idea of having local jobs, given the Island’s falling population as young people leave to find jobs elsewhere.

    This news coverage demonstrated the extent to which we generally accept that politicians and special interest groups should have the first right to speak for others, including those who are quite capable of speaking for themselves.

    With other cities now rushing to amalgamate this will become even more common as Mayors of larger territorial authorities pontificate on the interests of people in distant areas. City based Mayors will continue to deny economic development to the outer pastures.

    Elsewhere, People Govern Themselves

    By contrast, in Switzerland or France, the Mayor of a commune of 700 people would be the first to be asked for an opinion, and few politicians would dream of invading the political territory.

    France has about 37,000 communes.

    Their median population is only 380 inhabitants – about half the population of Great Barrier Island.

    Each of these communes has its own Mayor and Council.

    Switzerland has 2,636 Communes.

    These Swiss communes exercise real power, even though most of them are tiny by New Zealand standards. Only 30 have more than 20,000 people while 860 have fewer than 500. Most have populations between 1,000 and 5,000. The largest municipal commune is Zurich with a population of 377,000. The smallest is Steinhaus with a population of 41.

    So there are 2,636 Swiss Mayors for their 7.8 million people.

    New Zealand has 73 Mayors for our 4.4 million people. Yet we are convinced we have too many.

    • Continued…….

      The Swiss communes, with a typical population of only a few thousand people, deal with education, medical and social services, and public transport. The communes collect the taxes and hand on the surplus to the Cantons, which keep most of what they get, and hand on what’s left to the Federal Government. The 26 Cantons have different rates of personal and company tax and even negotiate special rates with wealthy people to stop them migrating to another Canton.

      If you want to emigrate to Switzerland, you have to decide where you want to live and then apply to the relevant commune. The commune Council processes the application and issues the papers.

      The Swiss citizen’s first loyalty is to the Commune, then to the Canton and finally to the Nation. Hardly anyone thinks seriously about amalgamating into larger units because they believe in local democracy. However, the smallest ones frequently combine voluntarily with larger neighbours to form special purpose districts.

      There are only seven Ministers in the Swiss Federal Council. The two chamber Parliament has 200 members who are part-timers and need real jobs to earn a decent income. The chambers meet for three weeks at a time, four times a year.

      After Parliament passes legislation the cantons and communes have 100 days to organise a referendum, and the resulting referendum can veto the Act. Any constitutional change must be endorsed by a referendum. Sometimes it only takes a few days to organise a demand for a referendum because with such small units of government it is easy to get the people together for a town meeting.

      Many outsiders have criticized Switzerland for not giving women the right to vote until 1971. Their defence is that the women could not see the point because at the town hall meetings they voted as a family. And the women had a firm grip on all the right things.

      Many commentators, including the Centre, have observed that Rousseau’s Romantic “naturism” all too easily sows the seeds of fascism. However, Rousseau also had a hatred of taxation (and tax collectors) and was a staunch advocate of direct representation through town meetings – which still operate in the Swiss communes.

      Rousseau signed the flyleaf of The Social Contract “Citizen Rousseau of Geneva” – and so described himself throughout his life.

      The highly decentralised Government of Switzerland, with its tradition of direct representation and binding referenda, has provided a strong counter to the fascism that flourished in Germany, Italy and France.

      Unfortunately, these dimensions of Rousseau’s arguments failed to travel well.

      Switzerland is one of the world’s most stable nations. Its PPP per capita GDP of $US43,000 ranks 7th in the world, just behind the US. New Zealand’s per capita GDP of $US26,625 ranks 34th in the world, just behind the Bahamas.

      Maybe small really is beautiful.

      • Last bit:

        Top-down vs Bottom Up

        The main reason for telling these Swiss stories is to demonstrate that there are other models of the political world beyond the “left/right” dichotomy that dominates our political debate.

        We seem trapped in the top-down side of the top-down/bottom-up debate and assume that wealth, tax re-distribution, and political and administrative power must trickle down from the top to the people below. The Swiss have turned that world-view on its head. They assume everything trickles up.

        Furthermore whenever anyone suggests reform of our local government we instinctively grasp hold of amalgamation as the sole route to change.

        We seem incapable of imagining the benefits of being small, and of keeping power in local hands.

        Just imagine a New Zealand where the Mayor of Great Barrier Island spoke for the residents of that island, but called town meetings of all residents to make any important decisions on the Island’s budgets, taxes, migration, roads and schooling.

        And where no one could challenge their right to do so.

        Just imagine.

  7. Steven Spadijer

    @ Phil.

    Agreed on land taxes, Rousseau and your analysis of voting rights for women. But as will be discussed in the third edition, alot of centralized power proceeds undemocratically. Judicial interpretations inevitably lead to centralized power. This raises the question: it’s all well and good to talk about “localism”, but you need the constitutional tools and mechanisms for the people to actually enforce a highly decentralized system. Direct democracy is that mechanism (by limiting the power of the federal government and using direct democracy to create new communes / canton / regions).

    Btw, I doubt the US GDP per capita will last long given its level of private debt (and most of its GDP seems to me to be rent-seeking and keep in mind the saving rate in Switzerland is very high, so there is all this idle cash that isn’t being spent). In per capita terms (PPP), Switzerland is only beaten by oil rich countries (Qatar, Kuwait, Norway, whose GDP per capita would be around 36 000 without the oil and the secondary industries thereof) and city-states (Luxembourg, Singapore), or other states which use direct democracy (Andorra, Liechtenstein). In the latter case we cannot compare a population 35 000 people with 9 million people.

    When “wealth” is measured by financial and non-financial assets (time deposits, savings, physical assets), Switzerland is the wealthiest country in the world per capita beating Singapore, Australia and Norway:

    http://www.digitaljournal.com/article/298716
    https://publications.credit-suisse.com/app/shop/index.cfm?fuseaction=OpenShopDetail&aoid=291481

    Likewise, Switzerland also has the lowest inflation rate in the world, since 1880s:

    http://www.ecb.int/press/key/date/2007/html/sp070622.en.html

    • Of course Switzerland has both Direct democracy and the highly decentralised model. You are right that they need to go together. I think that direct democracy alone is only part of the story behind Switzerland’s success.

      Of course economically intelligent policies such as staying on the gold standard for so long, had to be accepted by the voters. I suspect that a high level of democratic involvement at the local level has made the Swiss better informed. I doubt that direct democracy alone would have had the same effect.

      I very much doubt that direct democracy is a panacea where the prevailing culture in a country, is one of ignorance and envy rather than ethics of work, thrift, responsibility, etc. Switzerland’s Calvinism has helped it.

      • Steven Spadijer

        A few observations:

        1. As you yourself concede, DD allows citizens to enforce a robust federal structure. As such, localism and its benefits are a natural outcome of DD (people like to keep power and those exercising state power close to themselves as possible). You describe the benefits from localism (and indeed I am unsure any other constitutional mechanism which preserves this trait, given federations are increasing centralized);

        2. it would be interesting to see whether the people would have supported leaving a gold standard – that said, the Swiss inflation rate has remained low even without it so I am not sure the “gold standard” explains its prosperity (and as noted cantons which use mandatory referendums spending 19% less per capita than those which do not – so bad news from insolvency are not an issue);

        3. The Calvinism you describe does not explain why Catholic cantons who use DD more often than those who do not perform better. Nor does it explain why neighboring countries which stem from Calvinism do not perform as well. Nor does it note make clear that having Calvinist population under representative government who ignores these peoples and having a Calvinist population being able to transmit those policies via DD are two very different things.

        4. “Ignorance” and “envy” are more likely to be mitigated if people are forced to work together (shared common ground, education etc) – indeed next weeks musings deals with the endogenous educative effects of DD! Panacea, no, profound effect yes.

        5. The Swiss experience is only one. We have the Liechtenstein experience, the US experience (although not really a democracy) and the German experience.

        • I am agreeing with you on most of this.

          Yes, Switzerland has successfully maintained responsible monetary policies that replicate being on a gold standard, and this too is a laudable achievement.

          Yes, of course any canton of any cultural majority will do better with Swiss democracy – I just suggest that Switzerland’s majority culture has helped them in the way they approach every issue. Minority cultures can often be brought along for the ride. But had the minority culture (Roman Catholicism, Islam, whatever) been a majority, of course the Swiss people would have thought differently about EVERYTHING.

    • Re US private debt, note that this varies widely from State to State.

      The States with the biggest public debt also tend to have the biggest private debt too. Both are consequences of “big government”. The States that are closest to economically “libertarian” have the lowest private debt as well as the lowest public debt. This is especially the case with mortgage debt, which is very much a legacy of the presence or absence of certain types of restrictions on housing development.

  8. With so much stuffed at the moment I like this style of thinking. For me it points out the difference between being ruled and being governed.

    One concern I have though is the research has not included a discussion of the heard instinct and social control prevelent with the socialisation of the internett. Decisions and discussions taken face to face at town meetings fix this.

  9. Being able to spend almost nothing on defense must be a boon to the Swiss.

    One thing has always puzzled me about the recorded inflation in Switzerland, though. If inflation is so low, how come it is such an expensive place? This must reflect the strength of its currency, which tends to prove that you don’t have to have a cheap currency to be a successful manufacturing exporter. Switzerland has built its economy around external demand and runs a substantial trade surplus – around 12% of GDP in 2009.

    The Swiss show that it pays to specialize in supplying external markets with high-quality, high-margin products, and that geography confers its own advantages: the best markets for Swiss goods are in neighbouring economies – Germany, France, Italy, Netherlands, UK and Spain accounting for more thank half of Swiss exports.

  10. Direct democracy seems to be a very good system of risk management. In a way it acts like the Law of Large Numbers in Statistics i.e. the final average outcome smooths out individual extreme idiosyncrasies. There have been a lot of research in the area of Psychology on certain type of psychopaths and their propensity to power. Such people have better chances of abusing a representative system than a direct one. A good popularised synopsis of recent results on psychopathic characters and how they operate in corporations and governments can be found in this article http://www.zerohedge.com/contributed/psychopaths-caused-financial-crisis-%E2%80%A6-and-they-will-do-it-again-and-again-unless-they-ar

  11. Hi Steven,

    Just a few comments on the foregoing, and I’m sure you welcome even semi-academic challenges and devil’s advocacy for academic assertions made in print. Let me say first I would love to see much more DD in govts around the world, although I suspect it works best in late industrial countries with a fairly pacified populace, a la the Marxian set of pre-conditions for the Communist ideal of the state withering away — and of course an anarcho-communist state to some extent as it’s imagined resembles the DD model somewhat — hence references to libertarianism.

    For instance, the Swiss until the late middle ages were also well known for forming mercenary brigades which travelled through Europe seeking fame and fortune and wearing colourful outfits — hence the reason the Vatican still has its traditional Swiss Guard today. After a couple of significant defeats in Italy however the Swiss stopped briganding so much and turned their thoughts to peace.

    We also have to avoid the ‘tyranny of the majority’ in DD processes — for instance, does a majority decision of necessity equal an ethical or enlightened one? Of course not, the majority could vote to shut down or disallow the local mosque as happened in Switzerland recently. Or you could vote to invade the next door country. One of the arguments for representative democracy is that supposedly ‘more enlightened’ people who specialise in matters of govt are making superior decisions on your behalf, without the confusion and buzzing of hearing the opinions of ordinary halfwits at every turn — it’s more efficient! — of course, this may well be an argument of convenience that justifies continuing the status quo of what is really a post- and neo-feudal system of rampant inequality of power and wealth dressed up as a democracy — for instance, centralised govts even in this day and age would probably start more wars than comparable DD govts (if they commonly existed, which they don’t). However, WWI was started almost by the popular demand of the French people due to the slight from the German emperor concerning whether he would take the throne of Spain or not, something that concerned the French people very much at a time of constant European warfare and conquest.

    Rebuttals and counter-rebuttals could go on forever at ever greater length, so I won’t say much more after this post or possibly series of posts space permitting.

    It’s nice to deflect accusations of opinion by referencing other scholarly works, but the James Buchannan references in particular seem to be largely opinion in turn.

    I actually agree with much of the sentiment of the piece, and the economic benefits of DD are interesting, apart from DD being intrinsically a better and more just form of democracy which should require no economic sales pitch, but still query some of the details, opinions and causal reasoning.

    Statements I hold to be of opinion, or not fully or clearly explained in the exposition, or suffering from possible confounding effects:
    ———————
    In turn, such decentralization prompts vigorous tax competition between the cantons of Switzerland attracting capital from aboard as well as better education outcomes for all. [Why better education outcomes off a lower tax base? Honey pot effect of a brighter populace being drawn to these cantons?]

    So far as its economic impact in Switzerland, direct democracy has brought with it unparalleled economic prosperity, despite the country being far from resource-rich. [Has it though? There are just too many confounders for this — Switzerland being the banker of the world, declaring neutrality in European wars due to holding and investing the wealth of the protagonists (!), not to mention its mountainous and defensible terrain and national service where people take their guns home. How do you take out the confounders of banking profits? They also make expensive watches — where does DD figure there? — and are a part of the ‘blue banana’, a crescent of industrialism in the EU that is doing better than any other part. How do we know it’s not the classic Weberian Protestant work ethic at work here with its concomitant of thrift and saving?]

    Conversely, if it is dwindling (try taking a train from Western Sydney to the city), then it is a gun behind the door. [I didn’t actually understand this sentence.]

    It is inevitable that the dishonest politicians will deliberately misrepresent the state of affairs to the public in their desperate attempts to secure votes, buying off special interest groups and powerful lobbies piecemeal with gifts from the public purse. [You tend to find that it is in fact the lobbies that buy off the pollies and senior public servants with actual bribes, promises of future jobs on leaving politics, or benefits for family members. But I absolutely agree, as per Lindsay Tanner’s recent work ‘Sideshow’, that in politics it is paramount you don’t upset anybody important, and politicians are more likely to reward the squatocrats or the big developer or big business lobbies as part of the circle of influence of itself as well as the belief that these people are engineering economic growth — which is of course the perfect Fascist model of govt as it was originally conceived, in contrast to the libertarian or anarcho-communist or what have you.]
    ———————
    Having said that, the condition in Australia has traditionally been to accept large, centralised govt, as an extension of the nature of the British form of govt that formed the first colonies. Because all nation-building support came from this form of govt, citizens tend to ‘believe’ in large govt as being concerned for their welfare or perhaps at least as a necessary evil to ‘get things done’. This may be somewhat contra-indicated lately in NSW where tens or hundreds of millions of tax money is spent on projects that are subsequently cancelled. While the money does flow back munificently into public servants and engineering firms’ hands to presumably be spent back in the local economy (or trips overseas, who knows), there is certainly no final public work to show for the money being passed around.

    There are a great deal many more comments I could make on the assertions here which are more of a matter of emphasis, nuance, or a different take on the social history of Europe over the last few centuries — I don’t know if I have the patience to list them all.

    Re the person who think I have ‘billionaire envy’, it’s worth reflecting that apparently 70% of Australia’s mining concerns are overseas owned, that *maybe* your super is invested in a couple of miners who *maybe* are doing OK, that BHP shares are also being traded on at least two other foreign exchanges, that the returns to the public via super are way down the line in time, that the returns from super are inequitable between persons based on their earning ability and therefore not being spent on public goods to be used by everyone equally, and that state duties on minerals are often laughably low. I would refer you to Paul Cleary’s new book ‘Too Much Luck’ on that entire question.

    • Steven Spadijer

      Commentator Sean makes a number of claims which deserve to be addressed.

      ———————————

      Firstly, he argues that “the majority could vote to shut down or disallow the local mosque as happened in Switzerland recently” . Having consulted every referendum that has occurred in Switzerland since 1891, I was not able to find any referendum involving the shutting down of a Mosque. Not one. Could you please name the date in which the referendum took place and provide the text of that initiative. I was, however, able to find a referendum in 1866 which gave Jews the same rights as all Swiss citizen as part of a broader refugee effort that was only emulated after WWII. I did find an initiative that wanted to outlaw Freemasonry, and was overwhelming defeated by a 2:1 margin. I did find a legislative referral that attempted to ban Monasteries and Jesuit priests, which was also defeated by a 2:1 margin.
      Presumably, Sean is referring to the ban on Minarets, which was popular among the atheists, feminists, secularists and conservatives in the country. If so, one may observe:

      1. Sean seems to cite this (by confusing a Minaret with a Mosque) as if somehow it is self-evident that banning Minarets is “bad”. But it remains unclear what self-evident epistemological criteria allows one to conclude that the views of atheists, feminists and conservatives is to be given less weight over that of the Muslim community It seems he is merely citing his preferences, which he represents as the absolute source of all wisdom in the universe. If not, then to quote Locke, “show us this Charter From Heaven, and let us see” that banning Minarets is ‘wrong’ to that of the aggregation of all preferences in a specified community.

      2. In fact, Switzerland has over 436 Mosques or places of worship for Islam. Furthermore, Minarets have nothing to do with religion, unlike Mosques. Please cite with part of the Koran Minarets are referred to. If you are implicitly arguing Minarets infringed the ‘freedom of religion’, then my conception of this ‘right’ is different to yours.

      3. Minarets continue to be erected throughout Switzerland, simply by redefining the definition of a Minaret!
      http://www.20min.ch/news/kreuz_und_quer/story/13517103
      http://www.blick.ch/news/schweiz/das-ist-gar-kein-minarett-134719
      http://www.20min.ch/news/ostschweiz/story/11984803

      No one has sought to enforce the ban; it was purely symbolic. Hardly a sign of ‘tyranny’ (on that note, did France, the German state of Hesse, Belgium, Spain and Italy violate ‘freedom of religion’ by banning the hijab? Is this not more an example of ‘tyranny’ as now Muslim women are less likely to walk out in public for cultural reasons, unlike a Minaret which is merely bans an inanimate object?)

      4. Sean seems to ignore “Coasian symmetry”. As Coase observed in ‘A Problem of Social Cost’, rights do not operate asymmetrically: a putative right to erect Minarets cannot exist without denying the putative right of locals the power to prohibit the building of Minarets (do symbols matter? Should the phallocentric elements of Islam be ignored or tackled head on, as they were in Switzerland?); a putative right not to invade a country denies others the right to invade that country (was the act self-defence illegal? Is there a squabble over resources?). Which couplet is the ‘correct’ one? That is a matter of preference.

      5. Parliament can invalidate an initiative if it violates jus cogens and there is nothing to say that cantons which vote no to a nationwide initiative should not be bound by its result (i.e. federalism would be the check to constrain tyranny of the majority, whatever that means).

      6. I’d like to see evidence of discrete and insular minorities i.e. where the minority group loses every time – by definition democracy involves winners and losers. But are there persists losers, or just the odd lost here and there, which is the nature of the game.

      Secondly, Sean raises the issue of ‘right’ and ‘wrong’. But if rights did not involve tradeoffs, if the “right” answers were objectively determinable, we would have no need for Parliaments, 5:4 splits on courts or even referendums. Yet the reason these issues cannot be delegated to a panel of logic professors who could work out the correct answers from first principles is because these issues are not objective: democracy is not about implementing self-evident answers which are “right” or “wrong”, but about aggregating over time what members of society individually regard as “right” or “wrong” given the facts. Moreover, given the lack of any neutral, reliable or uncontested epistemic procedure to resolve disagreements—even among the experts—individual preferences are just that: individual preferences. The logical proposition underpinning democracy is not the majority is “right”, but there does not appear to be any self-evident principle (or even a universally agreed principle) by which the preferences of certain individuals can be given greater weight than the preferences of others, i.e. in a world where everyone thinks their preferences should be privileged over the preferences of others, direct democracy relies on the logical proposition that by aggregating all individual preferences, no preference is privileged a priori above or before-any-other preference (at least those who choose to vote).

      Thirdly, we are offered a discussion on monarchs and dictators – while at the same time Sean raises the issue of how the views of Buchanan are “opinion”. Yet the very existence of dictators and opinions proves his precise point: these people are “adversely selected” (or do not face the add-ons of DD) and hence, engage in actions totally anathema to that of the populace – wars, grand schemes of centralization and the like (hearing voices, anyone?), which ordinarily (except in extreme hypotheticals you listed) are not supported by the voters. Likewise, with its government actions during WW2 (actions of representatives, not the people themselves).
      —————————————–

      The issue of “opinion” appear to stem from the fact I have to work in word limits and/or some misunderstandings:

      1. The variable that creates better education outcomes is not lower tax base, but decentralization. Re-reading it I can see how one might mis-read that sentence. In any event, decentralization creates BOTH competitive federalism and better education outcomes. Thank you for letting me clarify that (btw, I assume the reason for this is due to parental oversight, specific-tailored curriculums, competition and the like)

      2. On the issue of banking, as I have explained the fact the people are part of the decision-making process makes the place a magnet for investment due to its stable – as neutrality and peace is a first-order preference of the Swiss people. If the country had to take sides (probably severing the population between “French and German speaking”), it would be embroiled in wars. So this allows the will of the people to be transmitted to higher levels of government. Not all of Switzerland is mountain-ladden and I did not advance a mono-casual theory, simply a strong variable.

      3. The other variables (the Weberian ethic) should show up when comparing cantons who use DD and those who do not, controlling for the very demographics you cited. Similar results are found for the US. Furthermore, DD might simply allow the people to transmit those positive ethics into government itself (also note that Catholic cantons do very well, especially those that use DD). The papers I cite deal with these issues in more detail. Endogenity is admittedly hard to control in the econometrics of “constitutional economics”: Acemoglu, D. (2005). Constitutions, politics and economics: a review essay on Persson and Tabellini’s the economic effects of constitutions. Journal of Economic Literature, 43(4), 1025–1048/

      4. ‘The gun behind the door’ (quoting Roosevelt here) being you can start up an initiative to hire experts to fix our screwed up transport system.

      —————————————–

      Finally, I was concerned by this statement: “citizens tend to believe in large govt as being concerned for their welfare or perhaps at least as a necessary evil to get things done”.
      Really? A new prize for journalism is called for: you have interviewed all 5 million people in NSW and thus can speak one there behalf. And what is to say that that government has to be state or federal, as opposed to local? Why don’t you ask the people of NSW what their preference ACTUALLY is, rather than assuming what it might be? I could just as well point out that since 1901, only 8 referendums have succeed in be passing, with virtually every single attempt to centralize power in Canberra being overwhelming rejected by the voters. I could conclude that Australian’s far from being “big government lovers” do like issues to be kept local.

      In fact, the real issue to me seems to be this (and this might be a logical reason for DD, not an economic one):

      The people have never been a chance to tell us what they want, without the outcomes being pre-vetted by elites. No system of government is a priori superior to any other (some favour monarchy; others direct democracy; others dictatorship), which leads to the question of how a set of individuals may go about choosing a form of government, or – more precisely – an “aggregation device” (the mechanism by which they aggregate conflicting preferences) without an agreed device with which to aggregate their preferences.

      Paradoxically, it is precisely because no one preference is a priori correct that we may determine a “logical” means of choosing.

      It may be observed that, for an arbitrary set of individuals choosing an aggregation device:

      a) there is no known principle by which to identify individuals whose preferences are to be privileged a priori over those of others in the set. (Although many people believe that their own preferences ought to be privileged, such a belief is itself a matter of preference which invites the recursive problem of how to aggregate it with those of other people who believe that their own preferences are the ones to be privileged); and
      b) the only means of aggregating preferences without privileging some of them is to privilege none of them.
      We could say that non-privileging devices are the eigenfunctions for preference aggregation in the absence of (logically indefensible) a priori privileging: they are the only solutions which do not require the doing of something that is logically impossible to do (i.e. identifying a priori privileged individuals).

      What do such devices look like? We can identify some necessary characteristics:

      a) the votes for and against any option must be weighted equally (to avoid privileging some individuals by giving their votes greater weight);
      b) the options to be voted upon must not be pre- or post-vetted by some privileged group (to prevent a privileged group vetoing viable options); and
      c) the order in which options are eliminated must not be controllable by a privileged group (which in turn requires an indefinite-pass system, because any definite-pass system either could be manipulated in the final pass by those who control the order of elimination, or would collapse into a de facto lottery – which would privilege a priori those who prefer the choice to be made by lottery over those who do not).

      We can see that these conditions describe an initiative-and-referendum system: the eigenfunction is itself one of the possible systems of government.

      What form of government might such a device choose? It’s not for me to say. God hasn’t granted me a Monopoly on Wisdom in this matter. It might very well choose to prohibit or restrict initiative-and-referendum. It might choose a dictator, or a oligarchy, or a (so-called) “representative” system. It might choose a lottery. More plausibly it might choose some hybrid combining elements of each of these.

      What we do know as a matter of historical record is that:

      a) in most jurisdictions people have never been permitted to choose their preferred form of government in such a process (i.e. in which the options have not been pre-vetted by self-serving politicians organised into powerful parties – like in the 1890 Convention Debates – determined at all costs to maintain their collective monopoly on power by preferring “responsible government”);

      b) where people have been permitted to choose (most famously in Switzerland, but to a limited extent in Liechtenstein, Uruguay, the US and German Lander) they have almost invariably chosen to adopt the initiative-and-referendum process as an ongoing part of their government; and

      c) where people enjoy the right of initiative-and-referendum, they do not vote to abolish it, even though it is a straightforward exercise to call a referendum for that purpose.

      That is not to suggest that such an outcome is the “right” or “best” one. That is all a matter of individual preference. It is, however, the outcome that arises in the absence of logically indefensible a priori privileging.
      So why have the people of numerous countries never been given the right to choose which system of government they want for their country? It is… their country…isn’t it?
      I should now briefly deal with the notion that the people “implicitly consented” (acquiesced) to the status quo. For starters saying “yes” to one system of government does not mean one does not prefer another system. Even if many (or most) voters preferred no representation, or a form of representation more limited than that currently in operation, they might be operating under conditions of Prisoners’ Dilemma:
      a) each individual correctly reasons that if he tries to take on the well-funded and well-organised cartel of political agents (the parties) – and if insufficient others join him – he will simply waste his time and money . . . and his rational strategy is therefore to do nothing;
      b) each individual correctly reasons that if sufficient others do join in, then his own contribution will be both negligible and unnecessary . . . and his rational strategy is still to do nothing; and
      c) each individual correctly reasons that every other will have reached conclusions (a) and (b) . . . and will rationally adopt a “dominant strategy” of acquiescence . . . . irrespective of his or her individual preference.

      Conversely, no preference for representation may be inferred from an observation of acquiescence.

      Unsurprisingly, most polls show support for direct democracy worldwide: http://www.jkarp.com/pdf/prq_2007a.pdf

  12. Having lived in Switzerland, I have to admit I find the idea of trying to implement their system here (or, indeed, any Anglo country), rather scary.

    The Swiss have an overwhelming sense of community ethic, and are always prepared to put the needs of the group before the needs of the individual. This sense of community has been on sharp decline in Australia, the US and the UK (and probably Canada, too, but I have no personal experience so I won’t comment) since the late ’70s, going hand in hand with a shift (accelerating over the last decade or so) of politics to the right, fundamentally driven (IMHO) by the faux sense of prosperity from the credit boom and the widening wealth gap.

    Or, to put it more simply, the Anglosphere is driven by the wants of individualistic, I’m-all-right-screw-the-rest-of-you, rich arseholes and Switzerland is driven by close-knit, watch-out-for-your-neighbour, average, *communities*. This is why centralised regulations are still in place for things that are important to society as a whole, like healthcare, welfare, their equivalent of superannuation, immigration controls, etc.

    No-one should go to Switzerland expecting to find Libertarian paradise – which is the vibe I’m getting from the post and the comments – because it’s not even playing the same game. You’ll still have to pay taxes to a Federal Government. You’ll still have to buy health insurance (regardless of whether or not you think you need it). You’ll still have to contribute to preventing those freeloaders who are too lazy to find jobs from starving. It’s relatively difficult to legally work and settle in (especially if you don’t have EU citizenship). You have to inform the local authorities when you move house. Military service is compulsory. Etc.

    Switzerland is a great place, and my wife and I loved living there so much we’re trying to set ourselves up to return permanently within ten years. However, the success of their system is in no small part due to the Swiss culture, and I am highly sceptical it – or anything similar – would be anywhere near as successful if implemented by us.

    • Steven Spadijer

      If there is a reason the Swiss culture is like it is (mind you, DD seems to be doing fine in Latin America, parts of Africa, parts of the US, Liechtenstein and Germany), then it it because of DD. W can make it ‘work’ (really, all that is required is for people to have a preference and to be able to vote after a robust debate). In fact, I believe an endogenous effect of DD (at least as we can see from Uruguay and Bavaria) is you do develop a “town hall” localised democracy. At present, our politicians’ are ruthlessly paternalist so I am not surprised you get that vibe about Australia.

      • I think it really MATTERS whether a country has had centuries of Calvinism, Lutheranism, Dissenting Protestantism, Roman Catholicism, Orthodoxy, Islam, Hinduism, Paganism, secularism, or multiculturalism.

  13. The budget mess in California has perhaps been exacerbated by Direct Democracy initiatives like Proposition 13. In general, it is very difficult for mountainous regions to become prosperous. Switzerland is an exception because of its very particular circumstances. Far too many Western leaders (and voters) have falsely believed that other mountainous regions like Afghanistan, Waziristan, Tibet, New Guinea, Chechen–Ingushetia, etc. would magically become prosperous if we just give them more democracy … “just like Switzerland”.

    • Steven Spadijer

      An oft-cited criticism of direct democracy is that there are so many initiatives locking in funding for specific programs and preventing tax increases that the legislature does not have enough flexibility to budget responsibly, i.e. the “Californication” of the budget process. If only this was empirically true. Matsusaka (2005, 2010) shows that at most 32 percent of the state budget is tied up by initiatives, with 30 of that 32 percent being due to one initiative: Proposition 98 (which mandates a bare minimum that must be spent on education). But, Matsusaka points out, that is money that would have been spent anyways: school buses, desks, teachers and the like are axiomatic to state government expenditure and in any event, education on average took up 40 percent of the state budget even before Proposition 38. Matsusaka (2005, 2011) concludes “only about 2-3 percent is dedicated to programs that would not otherwise be funded by the legislature”.

      In other words, 98 percent of the Californian budget would probably be spent by the legislature, with 68% of the budget being at the total and absolute discretion of the legislature. Initiatives have not prevented tax increases to any significant degree, except for property taxes, which are a secondary revenue source for state governments and Proposition 13 itself was a response to the Serrano decision which held local property taxes could not be used to fund local schools as it was anti-“equality”(NOTE: voters twice rejected 2:1 caps on property taxes which sought to attack this connection). With the connection between local property taxes and local schools gone (and thus increase in house prices due to “better” local schools), Serrano caused a widespread backlash. Prop 98 was decided to halt the collapse in funding as a result of Prop 13.

      If California could therefore be criticised, it is because it lacks democracy: judicial oligarchy destroyed its education system by centralizing property taxes, and by equating corporations “with people” (as discussed above).

      Yogiman might be right it has been “exacerbated” – but by the most smallest of margins (to fund things like environmental programs and enforcement of animal rights). This exacerbation is largely because of judicial oligarchy which gave us Proposition 13 (and thus I believe it could be overruled if one returned to the pre-Serrano decision).

      References

      John G. Matsusaka, ‘Direct Democracy and Fiscal Gridlock: Have Voter Initiatives Paralyzed the California Budget?’ (2005) 5 State Politics and Policy Quarterly 248-264 (updated: http://www-bcf.usc.edu/~matsusak/Papers/Matsusaka_BOS_2010.pdf );

      Serrano and Proposition 13: http://taxprof.typepad.com/taxprof_blog/files/49ST0535.pdf

      • The Matsusaka article is interesting, but I am not convinced that he really takes into account the full cost of these measures, including so-called “externalities”. Take for example Proposition 184 (Three Strikes and You’re Out) which caused the prisons to be overcrowded, and constrained prison officials from making rational decisions about which prisoners should be released to alleviate the overcrowding. Let’s suppose that Person A – who should be released – is kept in prison, while Person B – who should be kept in prison – is released. The State misses out on the positive contribution that Person A could be making in the workforce, and is exposed to the additional danger posed by Person B back on the streets. Matsusaka does not take account of this, but simply measures the direct cost of keeping a person in prison (which would be the same for Person A or Person B).

        • Steven Spadijer

          I sought advice on your comment and was given thus:

          “I am not an expert in prisons or sentencing. However, what I have done is gone by the various Rand Corporation studies — which do involve experts and are widely regarded as authoritative — and they conclude that the cost from three-strikes has been minimal. The main reason, as I recall, is that judges have tended not to enforce the law and (I believe) courts have held that trial judges do not have to follow it. So the comment below sounds theoretical to me — I am not sure it is based on actual facts of how criminal sentencing has worked under the law”.

          Indeed, the comment (1) ignores the large peer-reviewed literature showing three-strikes deters; (2) the problem with three-strikes (according to liberals) is that it is too harsh so no one is let you early (so scenario B is extremely unlikely to happen – they ain’t gonna be let out baby!); (3) hardly proves that three-strikes is costly – given 8800 of the people in prison are in there because Three Strikes (out of a Californian prison population of 200 000 – so approximately 4.4% due to three strikes), even if we consider the indirect cost of the “positive contribution that Person A could be making in the workforce [would a prisoner though find work in the present environment? How many of the 8800 prisoners would find work? Or would they simply go on welfare?], and is exposed to the additional danger posed by Person B” – it would be very small indeed.

  14. Finally, I was concerned by this statement: “citizens tend to believe in large govt as being concerned for their welfare or perhaps at least as a necessary evil to get things done”.
    Really? A new prize for journalism is called for: you have interviewed all 5 million people in NSW and thus can speak one there behalf. And what is to say that that government has to be state or federal, as opposed to local? Why don’t you ask the people of NSW what their preference ACTUALLY is, rather than assuming what it might be? I could just as well point out that since 1901, only 8 referendums have succeed in be passing, with virtually every single attempt to centralize power in Canberra being overwhelming rejected by the voters. I could conclude that Australian’s far from being “big government lovers” do like issues to be kept local.

    No, not interviewed 5 million people, it’s more an observation I’m repeating from social historians and political scientists about the popular view of the role of govt between, say, Aust and the US. In other words, people in Australia tend to be less ‘libertarian’ than in the US and tend to look towards govt to provide solutions rather than the market, private sector, or the individual — witness the recent floods in Qld when private insurance cos refuse to pay and the govt is called upon to adjudicate or provide alternative funding for rebuilding. It’s just the way things are. The federal govt in Australia, as a ‘new’ country, has the luxury of providing a single, unified face to the public, unlike, for instance, the rather disjointed systems in the UK that make appeal to royal sources where the monarch is also the leader of the local religion, rather than a (nominally) benevolent secular govt. Beyond that, I don’t have much more to say about the phenomenon. It’s not to say people wouldn’t appreciate a little more DD in the system, it certainly has its flaws in the present incarnation — while we vote for the govt through a nominally democratic process (where whoever has been preselected in a safe seat automatically gets in), we also see govt then turning around and ‘doing’ things to us for the rest of their term. However, I believe people are conditioned to take it without considering DD options too much, assuming their only real protest or input is at the ballot box every 3 or 4 years — it’s a challenge to yourself to change that perception perhaps in promoting the benefits of DD in electoral reform.

    • Steven Spadijer

      I’m not persuaded that they are – as we need to ask the people. Of course, Australians are going to support ‘government’ solutions given big government is the only thing given to us i.e. that is on the agenda, as set by career politicians’.

    • It’s not to say people wouldn’t appreciate a little more DD in the system, it certainly has its flaws in the present incarnation — while we vote for the govt through a nominally democratic process (where whoever has been preselected in a safe seat automatically gets in), we also see govt then turning around and ‘doing’ things to us for the rest of their term.

      My gut feeling is that a lot of the problems in the current system (and benefits from DD) would be realised if we were simply able to somehow eliminate political party affiliations from politics. LOTS (I would say an easy majority) of people only vote for a candidate because they belong to party X or party Y. A system where every representative was required to act like an independent would be a quite positive change, I think.

  15. A fine post and discussion Steven. Thank you.

    I’m looking forward to reading the next installment.

  16. SS – I have moved here as the thread was so very narrow.

    You cannot realistically expect me to provide a detailed response to your every minor point. I do not have the resources of a University Department to hand nor have I dedicated my professional career to lofty subjects such as Direct Democracy (DD). I am a mining/resources operative with an opinion!

    As my previous posts have disappeared I reiterate my main, very modest, points.

    1. The article fails to persuade of a correlation between DD and as you term it in the case of the Swiss, ‘unparalleled economic prosperity’. I maintain that Swiss GDP performance in recent decades is inextricably linked to the growth in global credit markets and corresponding exponential growth in sophisticated financial instruments. DD would appear almost an irrelevancy in this respect. Other economies also achieved strong growth pre-GFC, more modest growth post. These countries had representative democracies and one shining example, was indeed Communist!

    2. Mob Rule is I suppose a colloquial term for tyranny of the majority. I consider this a prospective problem for DD. In the Australian context one may wonder how the refugee dilemma would be resolved utilising DD…it may not be edifying.

    3. Representative democracy operated in this nation since Federation – generally quite well.

    As you will no doubt agree, mine is a very modest dissenting view from your ardent support of DD. I feel you have adopted a strident defensive mode and strongly over-reacted to my rather innocuous views.

    For the record and as one of the numerous examples of misrepresentation of my comments, I did not use the word ‘abusive’ when referring to mob rule. Ownership of that is all yours. Unfortunately your responses are littered with florid language and personal interpretation, devoid of any similarity to what I have actually said. This is not a redeeming quality.

    As I said earlier, if this style of ‘persuasion’ is the modus operandi of supporters of DD, count me out. Actively misrepresenting the views of others is surely a very real concern more broadly in communities that embrace DD. In this world of constant media spin and very often deliberate misinformation, proponents of DD should restrict themselves to moderate and accurate statements.

    “It follows from what I have argued that the general will is always rightful and always tends to the public good; but it does not follow that the decisions of the people are always equally right…. The people are never corrupted, but it is [are] often misled; and only then does it seem to will what is bad.” Rousseau, with doubts.

    Just about over commenting on this topic.

    ‘Frankly my dear, I don’t give a damn.’

    🙂

    • “It has long been the lament of academics that their self-evidently brilliant ideas and advice are seldom heeded in the ‘real’ world. Nowhere is this disappointment more evident than in the field of social sciences, particularly political science and public policy.”

      James Paterson, The Spectator 7 January 2012. Read it. Adios.

  17. Commentator 3d1k continues to entertain us all with his delicious irony, whilst at the same time simply giving opinions and assertions rather than any actual arguments. Indeed, he concedes as much: “you cannot realistically expect me to provide a detailed response to your every minor point. I do not have the resources of a University Department to hand!” Not only does he discuss my minor points, but fails to touch my major points.

    [of course, one wonders whether given he works in the mining industry whether he fears DD might result in “Norwegianizing” our resources…but we will give him the benefit of the doubt].

    So let us go through it once more (repetition seems to be something 3d1k ejoys given he was repeated his preferences on numerous occasions):

    Firstly, 3d1k gives no evidence – despite now of making FOUR requests to do – whereby “mob rule” (as defined above) has occurred (in numerous other jurisdictions to chose from, of course!). He has no challenge the claim that rights do not operate asymmetrical; he has not even one example has been given and no doubt if it is given it will simply reflect the personal preferences of 3d1k where reasonable people can simply disagree – including the asylum seeker issue [though one would assume that if a model is put up and accept, it would silence the issue at least in the short-run]. By the logic deployed 3d1k any decision making process which allows the numbers to count (judicial review, representative government) would suffer the same limitation. In short, arguments against DD are arguments against democracy itself.

    Secondly, after telling us he “is just over commenting on this topic” (no doubt he will reply to this post), he then precedes go go back a minute later and post a quote by James Paterson. If he had bothered to read the article, it seems Paterson – who is a member of the Young Liberals – is speaking of mundane, uninspiring left-wing academics. Fortunately, people on the right like Hayek (who admired the Swiss system and had many meetings with tank driving Maggie) or James Buchannan (an avid supporter of DD) are widely read by people in the ‘real’ world: in government (several developing countries are adopting DD), in business (such as the people on this blog), in the constitutions of developing countries and the several other German states which are adopting direct democracy. It would seem his remarks do not apply in this context…but well are, well, ‘right’, not left.

    Thirdly, we see another deployed logical fallacy: argumentum ad verecundiam. What evidence do you (or Rousseau – interestingly a supporter of DD) have there that the people have been “mislead” as opposed to merely having a different interpretation or opinion to you? And what prevents you from setting the record straight, given the record is in print above? Why are your communication skills so dodgy that you are allowed to be misrepresented? [next week we look at how competent voters are so be warned – the empirical data might shock you, although no doubt you will simply dismiss it]

    Fourthly, if 3d1k is correct (as noted conceded earlier) that DD “may” have many of these effects (which the entire literature suggests it does), could any of these other benefits (such as competitive federalism, decentralization, and addressing local infrastructure bottlenecks and general citizen responsiveness to such bottlenecks) plausibly have robust, long-term economic impact? Surely as a better informed, watchful and vigilant citizenry loving its democracy would not join the Euro and have its solvency questioned every second day (presumably, a prerequisite to unparalleled economic prosperity)? If DD encourages decentralisation and lower taxes, then surely that is why we are seeing Google and London traders setting up shop in Switzerland (not for years, but decades), and not say the government-by-career-politician that is the EU? Of course, these indirect of DDs which allow for unparalleled economic prosperity are ignored by 3d1k. Certainly,at no point has he suggested that DD does not have a modest or generally positive effect on DD.

    Fifthly, he repeats the claim the Swiss economy has grew due to massive credit growth – largely from other countries (note, though, Germany, Liechtenstein and Austria – the main exports Switzerland has – have not had that of a credit binge, unlike other countries which are secondary in the Swiss export market). But 3d1k does not tell us is this: why do Swiss cantons and US states with DD do better than those without, given BOTH jurisdictions are exposed to the massive credit growth 3d1k speaks of and even after controlling for economic variables? Why for example is the grand user of DD – Zurich, Zug, Schaffhausen – doing better than Geneva or other German cantons which do not use DD? (Note the controlled laboratory federalism provides and which allows for comparisons; also note the sample group of the study cited occurred just before the massive world-wide credit binge for this argument of 3d1k’s to have any validity i.e. in “normal” times – he ignores the dataset from the papers cited). Why do Swiss exports continue to remain strong, even with the bursting of the bubble? (hint: they make Veblen goods so their demand is steady as at any given time only super-rich consume those goods anyways [Rolexes, physics equipment, niche medicines] and furthermore, their central banks ****responsive to the people***, which in turn caused them to intervene with the high franc to salvage their manufacturing sector)? Compared to our manufacturing sector (and our high dollar), one could just as well conclude that this is an example of ‘unparalleled economic prosperity’. Indeed, it appears 3d1k is also opposed to the views of Prince Hans Adams II of Liechtenstein who accredited DD (and its decentralizing effects) on his countries prosperity i.e. having the highest or second highest – depending on your source – GDP per capita in the world (half the economy is manufacturing).

    Sixthly 3d1k tells us he favours representative government. But what self-evident principle allows the views of 3d1k to be privileged over the views of anyone else? Why do we care what 3d1k thinks? One could, for example, look at the record and say:

    *my* criteria is that Australia should be more decentralized and as such DD provides that mechanism to achieve this. Relative to Switzerland, it has failed to achieve this. As such I support DD;

    *my criteria* is that DD makes Parliament more responsive to the will of the people. Our infrastructure has many bottlenecks while DD makes the government more responsive (the mere threat of a referendum forces the government to take note). Relative to Bavaria or Switzerland, it has failed to hear us on the issue. As such, I support DD;

    *my criteria* is that the Parliament should do more to encourage gays rights. Public support on this matter is large. As such, I support DD;

    All you have expressed is your preference. Of course, we do not need “florid language” or “my personal opinion”, we simply need to ask the people what THEY think, so that neither of my preference or that of 3d1k can be privileged above those of any other. As I noted earlier:

    No system of government is a priori superior to any other (some favour monarchy; others direct democracy; others dictatorship, others a purely representative government), which leads to the question of how a set of individuals may go about choosing a form of government, or – more precisely – an “aggregation device” (the mechanism by which they aggregate conflicting preferences) without an agreed device with which to aggregate their preferences. Paradoxically, it is precisely because no one preference is a priori correct that we may determine a “logical” means of choosing.

    It may be observed that, for an arbitrary set of individuals choosing an aggregation device:

    a) there is no known principle by which to identify individuals whose preferences are to be privileged a priori over those of others in the set. (Although many people believe that their own preferences ought to be privileged, such a belief is itself a matter of preference which invites the recursive problem of how to aggregate it with those of other people who believe that their own preferences are the ones to be privileged); and

    b) the only means of aggregating preferences without privileging some of
    them is to privilege none of them.

    We could say that non-privileging devices are the eigenfunctions for preference aggregation in the absence of (logically indefensible) a priori privileging: they are the only solutions which do not require the doing of something that is logically impossible to do (i.e. identifying a priori privileged individuals).

    What do such devices look like? We can identify some necessary characteristics:
    a) the votes for and against any option must be weighted equally (to avoid privileging some individuals by giving their votes greater weight);
    b) the options to be voted upon must not be pre- or post-vetted by some privileged group (to prevent a privileged group vetoing viable options); and
    c) the order in which options are eliminated must not be controllable by a privileged group (which in turn requires an indefinite-pass system, because any definite-pass system either could be manipulated in the final pass by those who control the order of elimination, or would collapse into a de facto lottery – which would privilege a priori those who prefer the choice to be made by lottery over those who do not).

    We can see that these conditions describe an initiative-and-referendum system: the eigenfunction is itself one of the possible systems of government.
    What form of government might such a device choose? It’s not for me to say. God hasn’t granted me a Monopoly on Wisdom in this matter. It might very well choose to prohibit or restrict initiative-and-referendum. It might choose a dictator, or a oligarchy, or a (so-called) “representative” system. It might choose a lottery. More plausibly it might choose some hybrid combining elements of each of these.

    What we do know as a matter of historical record is that:
    a) in most jurisdictions people have never been permitted to choose their preferred form of government in such a process (i.e. in which the options have not been pre-vetted by self-serving politicians organised into powerful parties – like in the 1890 Convention Debates – determined at all costs to maintain their collective monopoly on power by preferring “responsible government”);
    b) where people have been permitted to choose (most famously in Switzerland, but to a limited extent in Liechtenstein, Uruguay, the US and German Lander) they have almost invariably chosen to adopt the initiative-and-referendum process as an ongoing part of their government; and
    c) where people enjoy the right of initiative-and-referendum, they do not vote to abolish it, even though it is a straightforward exercise to call a referendum for that purpose.

    That is not to suggest that such an outcome is the “right” or “best” one. That is all a matter of individual preference. It is, however, the outcome that arises in the absence of logically indefensible a priori privileging.
    So why have the Australian people never been given the right to choose which system of government they want for their country without a priori privileging? It is… their country…isn’t it, 3d1k?

    Seventhly, 3d1k claims he has been misrepresented. For example, I made up the claim 3d1k told us DD would lead to “abuse” (uh, chances are if you use the phrase “mob rule” or “tyranny of the majority” it presupposes that DD is abusive – not very much of a stretch now is it especially given the term is used in Federalist No. 10 in the context of physical violence!). But we can make other observations: fortunately, 3d1k can voice his grievance on here and people can judge for themselves whether this is the case. Of course, I note you have misrepresented me* but I know people can read what I said and come to their own conclusion and if I had misrepresented you it is because as you concede early on “SS, on reflection my comments were expressed a little harshly, apologies”. Apparently, your previous comments (which actually did have an argument!) were “harsh” while your current comments (failing to address the issues, or failing to provide evidence, or accusing me of everything you do) are “modest!”
    In short, to quote “so because SS takes the time completely rebut your arguments at every turn, you accuse him of being a zealot and overreacting defensively? How about playing the issue and not the man?”

    —–
    * For example, he emphasizes the phrase ‘unparalleled economic prosperity’ i.e. given the context of the papers, I am presumably alluding to a nation which has experienced many decades of economic growth and affluence, and not just the cringe binge in the last few years (after all, Switzerland was one of the poorest countries in Europe, and now is one of the richest). Of course, give your love of semantics, we would not like to – in the words of 3d1k – take once part of a sentence, and ignore the other part! Of course, if it makes 3d1k ‘unparalleled economic prosperity’ to ‘robust and sustained economic prosperity’.

          • Steven Spadijer

            Of course, as noted above, you can always ask the people of the nation themselves whether they regard the central theme of this post as important – indeed, at a referendum 3d1k can simply reassert his preferences without providing any arguments whatsoever … and through his unyielding eloquence in defense of self-serving megalomaniacs…. he might actually persuade the people to vote to reject DD.

            On that note, I still have more questions:

            – does 3d1k believe the government should be unresponsiveness to infrastructure bottlenecks? And if so, why?

            – How does 3d1k deal with a recent book by Tracy M Gordon “The Local Initiative in California” which found “no evidence… of tyranny of the majority”? (indeed, minorities are a non-issue)

            – Does 3d1k believe in a poorly structure mining tax? (I note most people opposed it because the way it was planned or implemented – at the very least the issue would be taken to a Parliamentary committee, as after signatures are gathered an issue goes to Parliament in the first instance, then to the people if Parliament does nothing).

          • SS, thank you for the compliment, deserved as it is, may I humbly say.

            To address your points:

            1. No

            2. LOL. Not a book I am likely to read. A cursory Google check and it appears mainly to address issues voters feel not dealt with by State and Local authorities (zoning etc). Nothing to get excited about. But sure as hell creates a lot of additional red tape and paperwork – and the requirement for yet another government authority.

            3. No. Don’t particularly believe in the mining tax at all. A surprise for you – I participated in a form of direct democracy (albeit small scale) via my involvement in the initial campaign to scrap the original RSPT – and very successful it was. The current form of the MRRT has the government well pleased. I need say no more.

            Don’t think DD is something this country needs. The referendum question is a bit of a joke. Seriously. Who is going to put it to the nation? Will it have bipartisan support? Doubt even the Greens at their most delusional will run with it. Referenda in Australia (national) have about a 10% success rate (carried).

            Your dream is another’s nightmare!

            http://www.sos.ca.gov/elections/ballot-measures/initiative-guide.htm
            http://www.law.berkeley.edu/library/dynamic/guide.php?id=29

          • 31k tells us he will not spend any more time on this post (“Just about over commenting on this topic”), only to actually bother offering a reply! Or are we misrepresenting you? YOu did say “just about”.

            Furthermore:

            1. he tells us he does NOT believe the government should be unresponsive to infrastructure (but provided no mechanism to make the government – from both sides of politics – responsive, while a vast empirical literature exists showing DD DOES make the government responsive: http://www.mehr-demokratie.de/fileadmin/md/pdf/buergerentscheid/bayern/direct-democracy-bavaria.pdf )

            2. The book also deals with zoning, yes, as well as roads, schools, traffic, congestation and the like. And, of course, some of the rules are against zoning and more paper work! Of course, our income tax is far worse (20 000 pages?) while in some Swiss cantons – thanks to DD which decentralizes financial decisions – there is no income tax!

            3. 3d1k concedes the flaws of the (original) mining tax and still views the current one. But makes no mention of putting the issue to a vote.

            Moreover:

            3d1k simply reasserts his personal preference;

            Ignores the possibility that post-1986 the legal Sovereign is now the Australian people, and thus the constitution cannot bind the people but rather the people bind the Constitution and as such it could be an implied right in the Australian Constitution (to argue otherwise is to argue the Australian people are operating under a prisoners’ dilemma);

            The Swiss model is the only Republic model that I have seen gathers 66% support – there are ways to make it bipartisan (look at the Swiss constitution – the political parties DO have a role, counterproposals are put forward, detailed Parliamentary committees) but no one said that government by self-serving megalomaniacs won’t make it difficult to implement – but, hey, they did in Germany by the support of just one party;

            The fact both sides of politics are against it (assuming they are – although there are MPs on both sides who support DD) just provides evidence of the political classes unyielding commitment to have a monopoly on power;

            The fact that referenda nationally have a 10% success rate is because of s128, a Swiss import btw. However, the Commonwealth uses it to centralize power (which the voters say NO) and often for mundane issues (often do with parts of the government – grants powers, corporations powers and the like). Yawn. Measures decentralizing power may have fared differently;

            The utility of DD are not its direct effects (i.e. actual policy votes), but its indirect effects (i.e. how Parliament responds to the people and consults more widely)

            California is one of the most prosperous, innovative states in the last 100 years. However, DD in California is useless as any law can be invalidated by the courts (and a lot are:, especially in relation to reforming government), a lot of initiatives are a response to courts (Proposition 13) and there is no “indirect initiative” (described in the link you provided – the indirect initiative operated in California until 1966 where all petitions goes to the legislature in the first instance – when the legislature removed – it but the indirect initiative is the model practiced in Bavaria, Hamburg, Switzerland, Massachusetts, Washington and Liechtenstein).

            Btw, some of your fears may be quenched if you check out the Swiss Constitution:

            Article 139 Formulated Popular Initiative for Partial Revision of the Constitution
            (1) 100 000 citizens entitled to vote may within 18 months of the official publication of their formulated initiative demand a partial revision of the Constitution.
            (2) A popular initiative for the partial revision of the Constitution may take the form of a general proposal or of a specific draft of the provisions proposed.
            (3) If the initiative violates the principle of unity of form, the principle of unity of subject matter, or mandatory rules of international law (jus cogens), the Federal Parliament declares it invalid, in whole or in part.
            (4) If the Federal Assembly is in agreement with an initiative in the form of a general proposal, it drafts the partial revision on the basis of the initiative and submits it to the vote of the People and the Cantons. If the Federal Assembly rejects the initiative, it submits it to a vote of the People; the People decide whether the initiative is adopted. If they vote in favour, the Federal Assembly drafts the corresponding bill.
            (5) The initiative in the form of a specific draft is submitted to the vote of the people and the Cantons. The Federal Parliament recommends the initiative for adoption or rejection. It may contrast the initiative with a counterproposal.

            Article 139b Procedure for Inititive With Counterproposal
            (1) The voters cast their ballot at the same time for initiative and counterproposal.
            (2) They may vote in favor of both proposals. Regarding the priority question, they may select which proposal they prefer if both are accepted.
            (3) If the priority question results in one proposal to receive more votes of the people and the other more votes of the Cantons, that proposal is set into force that has the highest sum of voter’s percentage points in popular vote plus cantonal vote.

            Article 142 Required Majorities
            (1) Proposals submitted to vote of the People are accepted if the majority of those voting approves of them.
            (2) Proposals submitted to the vote of the People and the Cantons are accepted if the majority of those voting and the majority of the Cantons approve of them.
            (3) The result of the popular vote in the Canton counts as the vote of that Canton.
            (4) The Cantons of Obwald, Nidwald, Basle-City, Basle-Land, Appenzell Outer-Rhodes and Appenzell Inner-Rhodes have each one half of a cantonal vote.

            Plenty of involvement of the states (federalism) and Parliament itself in case of any “tyrannical” excesses.

      • Ps “Don’t think DD is something this country needs”

        Why, why don’t you ask the people what THEY think? It is…their country, isn’t it? (as discussed above – different people wil lhave different opinions on this matter)

  18. SS, my response here as similar to above, your response was getting so very narrow…

    In fairness, I said ‘just about’ but then the discussion became amusing. Your detailed responses are brimming with zealous enthusiasm. Passionate, alas mistaken.

    Back to the points:

    1. You didn’t ask.

    2. As I said, nothing to get excited about – although you are doing a fine job of that!

    3. I did not just concede the flaws within the RSPT, I actively campaigned for its demise. Not too sure what you mean in regard to the MRRT – I simply state that the government appears satisfied with it’s negotiations with the miners and well pleased with the outcome. As are the major miners, given the alternative.

    Your addendum: awaiting your explanation (in plain English without reference to obscure cantons in the remote Alps or tiny principalities like Liechtenstein) as to how you envision a Referendum on dd being introduced and indeed carried – in Australia.

    I suspect the movement is destined to obscurity, confined to the corridors of academia where there is time a plenty to ponder matters of such limited interest.

  19. Steven Spadijer

    3d1k,

    You aren’t producing arguments. Just ad hominem attacks – and we have gone from every argument you can imagine: “tyranny of the majority” (which you are now silent about and provided no evidence – and if you did it will be nothing but your personal preferences), the economic impacts of DD (which as we see it does have a pronounced impact, in addition to many indirect effects which are discussed) ; stylistic complaints (which as noted I was merely pointing you into possible models – after you were the one that got excited and started citing links to California!) and now “how to introduce it” (as opposed to the independent merits of the proposal). Anyways:

    1. I did ask and you answered. Well done. I like a straight forward reply.

    2. You are an exciting person. What can I say.

    3. I actually spoke to a few people in that campaign – curiously most of the fans of DD! [Abbott’s staffers mentioned to me how many people they met supporting the Swiss system – as I said, put it to the people]

    In addition to my legal argument (that the Australian people as the Sovereign mean they can amend the constitution through a simple procedure), I mentioned it will be raised as one of the models in the Republic discussion – Switzerland being one model (just as Singapore, Finland, Austria, Ireland or Germany may be).

    Of course, the “movement” has many supporters (it was in the ALP party platform for 65 years; plus there is Peter Reith, to Gary Humphrey to our darling Pauline). It does involve a classically liberal minded Parliament, but my hunch is you need to look at the way they got the German states to do the same – or for those matter countries like Uruguay. The time comes (I don’t like “grand design”) – that time, naturally, is when Australia becomes a democracy.

    I discussed above (search “prisoner’s dilemma”) about the need to have the right conditions.