Category Archives: World domination

Dividend paying sovereign wealth funds and decoupling effects

Epistemic status: Politics and economics are very far from being my area of expertise, and even to the extent that I understand them I suspect this post to be an over simplification. I think it contains the core of a good idea, but I have little to no hope of it being politically feasible.

I’ve been thinking a bunch about sovereign wealth funds recently (for values of recently that go back about three months).

The core idea of a sovereign wealth fund is that you create a state owned investment fund and fill it with tax money. Often (Usually? Always?) they are required to only invest in things outside the country,

Normally the sovereign wealth fund seems to just sit there as basically a war chest for emergencies. It was considered big news when Norway actually spent some money from their sovereign wealth fund earlier this year.

I’ve been thinking about a different use case though, which is that of the dividend paying sovereign wealth fund – one where every resident of the country receives a monthly payment out of the fund. This isn’t without precedent – the Alaska Permanent Fund more or less works like this (it pays annually rather than monthly. I’m not wed to it being monthly but I think it’s a better idea for the benefit of poorer people with less reliable income sources).

Obviously doing this significantly reduces the existing benefits of the sovereign wealth fund – if you’re spending money from it on an ongoing basis then there will be less money in it for emergencies – but I think the benefit of paying everyone a monthly dividend significantly outweighs that.

The primary reason I’ve been thinking about this is as a transitional demand towards universal basic income. Over time as the size of the wealth fund increases (due to a mix of interest, a long history of paying in and possibly/probably increased taxation) the size of the dividends will go up and the monthly payment might start to look a lot like a basic income.

This might even remove the need for a defined universal income altogether, but I’m less sure of that – a friend made the valid point that it’s a significantly less rights based approach, which has its downsides. On the other hand I suspect you’re much more easily able to argue for the rights based approach when you’re already effectively paying it out.

But I’ve been thinking about another possible benefit of the sovereign wealth fund, which is that with an additional bit of legislation it could potentially be used to smooth out some aspects of politics a lot.

The prompting thought for this is this Vox article about a carbon tax initiative opposed by the left. I don’t know to what extend the article is true, but it certainly sounds plausible: Essentially the initiative is being opposed because it is revenue neutral (it slashes an existing highly regressive tax and replaces it with a carbon tax) rather than putting the extra money into more progressive policies.

Based purely on this oversimplified description, I’m reasonably strongly on the side of the initiative, and probably would be even if my politics didn’t include a “Carbon Tax By Any Means Necessary” clause.

But in general this sort of coupling seems guaranteed to lead to a political deadlock: If you attach all your politics to all your other politics in an inseparable way, then you will be opposed by people who disagree with any of your politics. If you can decouple those somewhat then you potentially have the opportunity to find common ground that benefits everyone.

(In practice what seems to happen instead is some combination of horse trading and producing incredibly complicated bills that contain things that have nothing to do with each other as a way of striking compromises. This seems less than optimal to me, but maybe it’s secretly optimal in some way that totally makes sense if you’re a politics expert)

It occurred to me though that dividend paying sovereign wealth funds create an interesting way of achieving that decoupling.

What if you instituted a rule that any bill that gets passed must have at most one of the following three things:

A change to the dividend rate of the sovereign wealth fund
Changes (any combination of increases and decreases) to the tax that goes in to the sovereign wealth fund
Additional expenditure that comes out of the dividends for the sovereign wealth fund

No additional expenditures or revenue sources that do not go via the sovereign wealth fund are now permitted.

The result is that all coupling between taxation and expenditure now goes through the sovereign wealth fund – they’re not decoupled per se, because they’re somewhat intrinsically coupled by constraints on government revenue – but their coupling is inherently buffered and reduced.

I think doing it this way has a number of significant advantages beyond that decoupling:

Almost all increases of taxation are now significantly more progressive, and unless they would have already been incredibly regressive (e.g. taxes on public transportation, tax increases on small homes, etc) are actively progressive: Consumption is pretty correlated with wealth, so most tax increases on sale of goods will benefit the poor more. So e.g. a carbon tax is now automatically highly progressive because it just goes out to everyone and poorer people will gain more than they spend out of it.
Increases in taxation should become more politically acceptable because they will generally result in you getting some or most of the money back – the richer you are the less acceptable this will be because the numbers won’t work in your favour, but it will still be more acceptable. Additionally because they won’t be coupled to increases in expenditure, they’ll be more appealing to the small government folks.
Increases in expenditure now have a very simple and direct point of comparison: Is the benefit of this program greater than just giving people the money? I suspect in many cases this will decrease expenditure (if you don’t count dividend payouts as part of expenditure, which is arguable), but I also think that’s OK – it will only decrease expenditure in cases where people are significantly benefiting from the extra cash.
Increases in expenditure may become more politically acceptable because they are not tied to increases in taxation (although they are tied to decreases in your dividend, which may be only slightly more acceptable, or possibly even less acceptable).

There are a whole bunch of complications that I’m completely glossing over – what counts as a new expenditure vs a change to expenditure, what do you do about changes that don’t currently require legislation, how does government debt fit into this, etc. Those would all have to be solved in order to implement something like this in practice, but I expect there are reasonable solutions.

What I suspect to be the real problem with implementing something like this is that people on the left will describe it as a libertarian power fantasy and people on the right will describe it as literally communism. It seems to be almost perfectly designed to be politically unacceptable to both sides as a mechanism for giving both sides a common ground.

But I still think it might be a good idea.

An amusing financial instrument for creating a common currency

After my manifesto, I started thinking about the relationship between the new hippy socialist utopia, the EU, and exchange rates.

This got me thinking:

I like common currencies as a way of creating common economic zones, shared trade, etc. They’re not essential but they’re nice
But individual countries and governments need their fiat currencies, otherwise they’re kinda fucked. Witness, recent history
The ideal scenario is that you would be able to use either the local or the common currency in each country. Or at least that certain classes of things would accept either
But how can you create a shared common currency without linking it to governments?

After some (read: 5 minutes) pondering I came up with what I think is a neat solution. You can create a common currency which is naturally linked to the local currencies and has an effectively unlimited supply as a sort of financial instrument. Further, you can do this without requiring a central organisation to administer the currency (although you will probably want to have recognised organisations who are allowed to print paper versions of it).

Suppose we have some collection of countries who want to define a common currency. They each have their own local currencies. We can define a shared unit of currency, which we will call a Credit, as a promise to play a game.

How does this game work? Simple. You pay me one credit. I now pick a country from this set uniformly at random (according to some prescribed and verifiable randomization mechanism). I pay you one unit of that country’s local currency.

A credit is simply a commitment to this contract. Anyone can issue one, and it is subject to local contract law.

However I do not expect that in practice many people would play that game. In reality, the credit has a unique exchange rate defined for it: The worth of one credit in a given currency is the average value of the worth of one unit of currency in each of the countries in the union. If the original set of exchange rates is arbitrage free then so is this new set.

Edit: I’ve just noticed that a much more sensible way to do this is to not have the randomization at all and simply to commit to paying this exchange rate in some subset of the currencies. It’s simpler to just have the contract to be a commitment to pay that average exchange rate for any currency in the union.

Edit 2: On second thoughts, I’ve flip flopped. I think the randomization serves a useful goal after all, because it decouples the contract from the foreign exchange market, which although it roughly follows the simplified model of having a set of consistent exchange rates, that’s not how it really works and pretending that it is ties you to a central exchange. I think in practice you will rarely find you want to employ the randomization, but I think it serves an important theoretical benefit.

It might open interesting options for time based arbitrage – I’m not sure – but I don’t think so. In general you would expect the credit to be more stable than its constituent currencies because the rate of change is averaged, which damps out small fluctuations.

How do you deal with changes to the union?

Well you can do it in two ways. The first is that you can just let it revalue the currency. If your union is large enough this can’t go too badly wrong – e.g. at the 27 member states of the EU, the worst case scenario for adding a new member is that they contribute a 0 value currency, at which point your currency drops 3.6%. Much larger fluctuations in exchange rate are common.

Another solution is that you can version the credit. So rather than committing to a credit for the entire union, you commit to a credit for the union as it was at this date and time. Issuers of physical currency will then have to make sure they create a new distinct currency look for each change to the union and encourage people to sell them old versions of the currency at the exchange rate with the new one. This is not a terrible solution over all.

Note that although it lacks a paper currency, you can use this right now. You might want to get a lawyer to draft up the contracts, but it’s completely workable on a contract basis. Also if you can’t design on a set of countries, just use all of them! Instant global currency.

What would the effects of widespread use of such an instrument based currency be? I don’t know. I like how stable the exchange rate is, and it certainly seems like a more sensible choice than bit coin.

A manifesto

I have been requested to put together an up to date manifesto for what I will do when I take over the world. This is perhaps a bit too large in scope, particularly as I don’t really believe in world government, so instead I’m putting together a reduced manifesto for what would happen if the queen wakes up one morning, has a moment of clarity and is basically all “Fuck it. I’m going to dissolve parliament and put David in charge” (yes I know she can’t actually do that).

Note: I have previously written some more expansive and less structured notes on how I would structure a government: Part 1 and part 2. These are a bit more far reaching and less focused than this manifesto, and I’ve since refined my political beliefs somewhat, but I largely still stand by them I think.

This is probably the more extreme version of what I would do. I imagine if I somehow actually found myself in this position I’d be slightly more measured. Slightly.

So, that disclaimer aside, here is my manifesto:

A precommitment to democratic oversight

I do not know what the best way to run a government is, but I’m pretty sure it’s a) not what we currently have and b) not a dictatorship. It’s pretty clear that even if putting me in charge turns out to be the best decision ever, it’s incredibly hard to guarantee the same about my successor.

I think in order to ensure it does not all go horribly wrong, democratic oversight is important. As such I precommit that I will reign unchecked for no more than 20 years. After that point, at any time a petition with at least 10k signatures will trigger a referendum on my continued rule. Such referendums may occur no more often than annually, but may continue until I am deposed or step down voluntarily.

I additionally commit to having some form of democratic government in place by the 10 year mark. I will retain complete veto rights over their decisions, but the intent is to let them do most of the running of the country and only step in when I feel necessary.

Short term plans

In no particular order, I plan to get all of the following up and running as quickly as is feasible. Certainly within the first year:

Raise taxes

Income taxes will probably not go up much at the lower end of the income range. They will certainly go up at the upper end of the range – probably to something around the 60% mark. More importantly, I will crack down severely on tax avoidance and corporation tax issues. This country is not going to be a tax haven.

Universal Basic Income

That’s right. Free money for everyone!

Getting this fine tuned is going to be tricky. My initial plan is to give every single person over the age of 10 who requests it £500/month tax free. for those tracking along at home, this is about half a living wage for the country at large, and consequently a bit further under for London. As such it might need adjusting upwards, but I feel like starting a little low is probably a more sensible option. Additionally because it’s not in any way linked to what you’re otherwise earning, it should be comparatively easy for people to top it up to a living wage (a little over half the year working 40 hour weeks at minimum wage + the UBI should give you a living wage)

The existing benefits infrastructure will remain in place, but the new UBI will be counted as income. I expect a great deal of the benefits system to become unnecessary under the UBI, and the next couple years will consist of slowly dismantling the bits that are unneeded and refining the bits that still are, but I’m not touching it until the dust has settled.

As a minor note, this income will come out of your tax-free personal allowance.

Strict financial regulation

You know all those laws which the bankers insist will cause finance to leave England and go elsewhere?

Go on then.

No doubt having closed all the corporation tax loop-holes and raised income tax for rich people, they’ll already be hurting. Good.

My initial proposal is simply a variety of financial transaction taxes. Especially designed to clamp down on high frequency trading, but others as well. I’d also impose a cap on bonuses to be no larger than your current salary, but it looks like the EU might beat me to that one. I will also roll back much of the deregulation of financial markets.

Other than that I’d hire a team of economists to come up with a more comprehensive plan than I am knowledgeable to create. Their two guiding principles will be:

Stability is more important than growth
Money is supposed to represent value. If you can make dramatic amounts of money without adding value, this is a bug in the system and should be patched

Medical infrastructure

I don’t believe in private healthcare. Nor does any country under my rule. All private health care assets will be immediately and irrevocably seized, including drug and medical suppliers. For the moment they will continue to be run exactly as they currently are, but with all profits being directly channeled to the NHS. Over time my intent is to more thoroughly integrate them into the NHS, with the long term plan being to have a system which retains the property that you can pay money for health care but levels the playing field rather more.

While I’m in the area, immediately and painfully clamp down on all homeopathy. It’s not something I consider high priority so much as a convenient low hanging fruit. Look menacingly at other forms of “alternative medicine”, but don’t do anything about it right now.

Justice system

My immediate plans for reform of the justice system mostly include reforming the #1 source of injustice in it: Drug policy.

All drug possession for personal use is immediately decriminalized. Anyone in jail for such an offence is immediately pardoned.

Drugs will be reclassified in severity by actually listening to the advice of people who are experts on this subject instead of asking them for their advice and then ignoring it when it doesn’t fit. Anyone imprisoned for dealing a drug whose classification has been reduced will be retried.

I do not have concrete plans for an over-all justice system reform, but intend to form a body responsible for designing one, with the eventual goal of nearly completely phasing out the prison system (I acknowledge that some prisons will probably remain necessary, but regard anyone in long term incarceration as a symptom of the system failing. Prisons are a failure at rehabilitation and massively disproportionate as a retributive measure).

Be warned that my ideal justice system is probably a mix of rehabilitative and retributive that will satisfy neither side of the political spectrum. I am however prepared and able to listen to evidence and expertise on this subject, so you might find it turns out OK anyway.

Medium term plans

My initial main medium term plan is “Deal with all the fall out of the short term plans”. By now I’ve pissed off all my neighbours (a bunch of the assets I seized will have been foreign owned) and my economy is in free fall.

I don’t really have any more specific plans than “deal with it”. I think the economy will prove to be a non-problem. I am the controller of a fiat currency, and I can basically print money until the numbers balance. I don’t think that will take very long – I’ve basically just dumped a giant stimulus package on the economy. Sure people up top are hurting, but people at bottom are spending.

The ruffled feathers amongst neighbours might be more of an issue. I expect I’ll have to pay compensation in some manner, but I intend to make a long and drawn out process of negotiating that.

More concrete medium term plans:

Renationalization

You know all those things we privatized? Bit shit, isn’t it?

We’ll start by nationalizing the railways and the phone lines and see how things go from there.

Education

Education needs to be affordable. Given the UBI, it doesn’t necessarily need to be free, but it should be possible for someone with no means of support other than the UBI to put themselves through university. I have no concrete plans except “throw money at the problem in the form of subsidies and grants”, but let’s do that.

I would also like a wider range of vocational schools to be available for people who are less interested in going into academic study and more interested in learning to do something useful. I will delegate the exact details of this plan to someone more versed in the issues.

Non-university education is a more pressing issue. I have a very simple plan for solving this problem.

What is that simple plan? Step 1: Find a country that has a working system. I’m going to go with Finland here, but could be persuaded to do otherwise.

Now take the Finnish education system and copy it. Keep on copying it. Bring in actual Finns to tell us what we’re doing wrong. Listen to them. Keep listening to them. Once we have hit parity with them in terms of educational results (at which point I will probably be out of power, because it’ll take a full generation of school children to tell if we have), we can think about doing something more complicated, but until then take something we know that works and copy the fuck out of it.

Energy policy

We’re going to build nuclear reactors, we’re going to build a lot of them, and you’re going to like it god dammit.

Don’t get me wrong. We’re going to build renewables too, but in case you haven’t noticed we don’t get a lot of sunlight here. We’re going to build wind farms (and you’re going to like it goddammit) and wave farms, and we’re going to invest in large energy storage mechanisms to smooth out the load, but it’s simply the case that we need more power than these are going to provide.

How are we going to get our nuclear program off the ground quickly enough?

Simple. We’re going to bring in the French. They have this working right. We’re going to get them to design and build reactors for us.

The long-term goal here is that all energy in the UK should be nuclear or renewable. I don’t expect to hit this goal in my life-time, let alone my reign, but I want to make a damn good try at it.

Long term strategy and general notes

Now that I’ve got the building blocks for my hippy socialist utopia, what’s next?

I don’t know. There’s a list of things to address that would fill a book. Here are a few things that come to mind.

Firstly, I need to actually start building in the democracy part of it before all this power goes to my head and I do something really out there…

There’s still a lot to do around poverty and class inequality. I’ve thrown money at the problem, and a commitment to addressing education should help a lot there, but I expect there is more to fix and deeper problems to root out.

How do I feel about immigration? I’m totally pro it. Lets have more immigrants. They’re not going to take our jobs, they’re an opportunity to make more jobs.

London is something we need to sort out. Or rather, not-London is. Currently the UK seems to be starkly divided into London and the rest of the place. The axing of the finance industry should help with this, but I think fundamentally the problem is that London begets London: So much is here, and so many people are here, that there is essentially a black hole effect creating a strong social pressure to move here. I have plans to solve this, but they’re speculative enough I wouldn’t want to make this a manifesto item.

An important thing that is going to need careful watching is business. I want it. Sure, I’ve created a socialist utopia in which it’s inconveniently hard to exploit people, but I’d still like them to be able to buy stuff on Amazon. Careful attention is needed to make sure business doesn’t abandon the UK entirely. I think it won’t, because I think we’ll end up with a large number of well off people with money to spend (and not just the pound, which naysayers might suggest will be devalued by all my economic shenanigans. If you’ve got 60 million well-fed, well-educated people you really are going to get international money coming in one way or another). Care needs to be taken to make sure that it doesn’t get out of hand, but I definitely want to actively encourage both foreign and domestic business within my domain.

A lot of work needs to be done on becoming more socially liberal.

I touched on the fact that I’d have a much more relaxed drug policy. I’d also legalize sex work. I’d probably stop short of actually forming the ministry of dancing, getting high and fucking but I’m not opposed to plans in that general direction.

On a less hedonic and more human rights note, I plan to drop some of the more absurd moralizing and outdated aspects of our laws. Legal recognition for non-binary genders, absolutely. Legal recognition of whatever-the-hell-you-like-sex marriage? Totally. And not this half-assed same-sex marriage bill where it explicitly permits same as well as different sex marriage. We’ll just erase all the gendered language from the marriage legislations. While we’re at it, we’ll also legalise poly marriage. In general I’d probably like to move away from marriage as a legal concept, but that needs to be a gradual transition and in the mean-time that’s no excuse for not just getting it right.

Other than that, I plan to experiment. There’s a lot we don’t know about how to run a society and, while I’m in general delighted to shamelessly steal from other countries who I think have got it right, I think it’s also important to try our own things. Hello, my little guinea pigs.

A freemium model for scheduling

As a software developer I like proposing algorithmic solutions to social problems.

As someone with an unhealthy addiction to startups, I like business models (actually I’m not sure that follows…).

As a Brit, I obviously fucking love queuing.

As a leftie, I think socialized healthcare is a fundamental human right and I love the NHS to bits.

So when tell you that this is a blog post about a queuing algorithm based business model inspired by a question of socialized healthcare, you can understand how it might be difficult to convey my excitement about this idea without, frankly, being a bit inappropriate.

It also works well with randomized algorithms, a pet love of mine, so there’s that too.

Best cup of tea ever by alittlething, on Flickr

For some added Britishness…

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