Monday, July 9, 2018

The Case for Corporate Personhood

 Corporations take a lot of heat and one of them is the concept of corporate personhood. I hear it from left wingers that hate corporations and even from libertarians trying to fit in with the narrative (though a left winger hates a corporation in a totally different way).

I find the arguments against corporate personhood to be quite manipulative and utterly unhelpful. My plan is to make the case for corporate personhood here and simply explain why it’s not even that controversial. It’s important for me to make the distinction between two separates parts of corporate law, as two arguments are needed here. There’s the aspect of personhood rights and the other is limited liability.

Personhood Rights

I think this is the easier argument to make despite many people having issue with it. Many, especially on the left, view these rights as special rights. That these corporations are given rights that people have and that shouldn’t happen because they’re businesses.

The reality of it is that a business is owned by individuals. The business itself doesn’t have rights, it’s the people (the owners) that have the rights. Personhood is the recognition of these rights of the individuals that own the business. They’re not special. They’re not up and above what any other individual in the market has. They’re not anything different than what anyone else can do.

You have to think of personhood in a practical manner. The main purpose is for the right of contracting and the right of property owning. The corporation can contract and own property on behalf of the individuals that own it (which hold the same rights). Could you imagine a business with 10,000 stockholders trying to contract without that business having personhood? It would require all stockholders to sign for it (making business horribly inefficient). The same is true of property.

There isn’t much to say beyond this. Personhood is the ability of a group of people to exercise their rights as a group.

Limited Liability

This is the larger side of the argument against corporate personhood. The previous section gets lumped in with it for some odd reason, so that’s why I’m tackling these issues separately. It’s definitely easier and more debatable to be against limited liability, but personhood rights is something I don’t see too many solid arguments against.

People have a sour view of limited liability because there is a line with how far liability extends. The problem with this type of thinking is that, unspoken, there is such a thing as unlimited liability. All liability is limited in some capacity. Unlimited liability is a very unworkable and absolutely crazy concept when you think about it.

Imagine that you get sued. You own shares in Microsoft and Apple. Therefore they’re liable. And they’re owned by a lot of shareholders, and they’re liable. And these shareholders own stocks in other companies, and they’re liable. And on and on. It’s just insanity.

Another example, you’re planning to watch the game tonight and you ask a buddy to pick up the pizza on his drive to your place. Your buddy ends up getting in a car accident and is sued. You’re involved in the pizza, so can you lose your house? With unlimited liability it could happen.

With a corporation, the government has set in law what the limitations on that liability are. It’s as simple as that. Obviously arguments could be made on the limitations of liability, but not the very concept of limited liability. Opponents of limited liability often cite that a corporation could cause a lot of damage (say to the environment) and then not have enough money to fix their liability.

In this case, I think it’s important to note that being a corporation isn’t a free way to do bad things. Courts have often gone around limited liability when criminal or gross negligence was used to cause issues. This was the case with Bernie Madoff.

It’s important to note that limited liability is a real concept that individuals can control. The best example I’ve experienced this was when I visited Cambodia. I was taking a bus from Phnom Penh to Siem Reap and before leaving they announced “we’re not responsible for any lost bags or damaged property.” That’s a very simple means of limited liability. It’s the same for many loans and even hotel rooms.

An individual investing with the terms of “no liability” is a very real concept. If I’m investing for my retirement and I’m not involved in the day to day of the business, I’m going to limit my own liability. Again, an argument can be made that an individual should be able to choose the terms of their liability rather than the government determining it through corporate laws. It’s a fair argument, but doesn’t change the limited nature of liability.

Conclusion

Corporate personhood makes up two concepts; personhood rights and limited liability. When it comes to personhood rights, we’re talking about the rights of the individuals that own the business. They’re not special rights or rights that supersede others. They allow a corporation to act with the same rights it’s owners have - such as owning property and entering into contracts.

Limited liability is something that sets the line on how far liability will go. There is no such thing as unlimited liability. There’s always a limit and for corporations the government has defined it in law. An argument can be made on the range of that limit, but not on it being limited. It’s also important to note that individuals can limit their liability, which doesn’t require the government to define that limit.

Sunday, July 8, 2018

The Case for Governments Open Bidding

 The process of creating and building a structure requires a different approach as a consumer. I’m arguing that the government should do contract bidding in the marketplace and be transparent with the people.

As a regular consumer, if you have a problem with your car, you can go pick up the parts online, take it to a variety of different mechanics and service it in the future at a different location. A consumer can look around at a variety of features, benefits, prices, timelines and a near infinite amount of other metrics.

What is Contract Bidding?

When it comes to buildings, infrastructure and many of the items that the government builds there is a different approach. The way it works with private business is that they solicit bids from private contractors for various stages of the process. For example, architects will be contacted and will provide a cost to design, a timeline, a portfolio and whatever other information the government requests of them. This works for a variety of disciplines; the architect designs the building, the structural engineer designs the structural requirements, the mechanical and electrical design more of the nervous system of the building.

And this is just the process of design. When it is designed, again another solicitation of bidding occurs for the contractors that put the designs together. Things like plumbers, electricians, HVAC, carpenters, general contractor and on and on.

Contract bidding is the equivalent of shopping around for the best deal. Best is described as the desired metrics by the client (government). That doesn’t necessarily mean the cheapest price, but if desired this would be the way to find it.

If Contract Bidding isn't used, what is done?

When the government doesn’t have a bidding process it essentially picks someone. This act alone doesn’t necessarily show corruption, as private developers sometimes do the same thing. For example, if you work with an architect that you like, you may just want to use them (though typically bids are still solicited, most of the time, to ensure price competitiveness).

You can probably guess what happens with a corrupt government, they hand off the job to a friend or political ally at an inflated cost to taxpayers. The biggest issue, even when the process isn’t even corrupt, is that there are no means to justify the choice to taxpayers. For example, the Peace Bridge in Calgary was a no-bid contract. The city wanted to use the Spanish architect Santiago Calatrava, who is well known and expensive (he’s earned it), but how does the city justify the choosing metrics - other than just vanity? How does a taxpayer know that they got their monies worth at $30,400 per sq. foot? The Peace Bridge, a pedestrian bridge, is one of the most expensive (per square meter) pedestrian bridges in the world - precisely because there was no bidding process.

Contract Bidding Isn't Enough - Transparency is needed

The bidding process doesn’t provide any immunity from overspending or corruption. Bids can still be solicited and contracts awarded to political allies. Bids are always selected on a quality metric defined by the client (the government). The cheapest bid isn’t (and shouldn’t) be automatically selected. This bid may contain an unacceptable timeline, an inexperienced contractor or even the general belief that the work could be done at that price.

Transparency makes bids public. That doesn’t mean that bids are made public prior to being awarded - as this provides unfair advantages. When the bids are released after being awarded (how long? I don’t know what would be appropriate) this allows the media and taxpayers to question it. This means that politicians will have to justify the choice. Why did they choose bid #1 over bid #2? Well, because of metrics A, B and C.

Conclusion

When the choice to have a bidding process versus no bidding process, the best choice for taxpayers is bidding. Bidding alone gives better options for politicians/bureaucrats to make decisions. The bidding process alone isn’t enough to weasel out corruption from the process. The only way to do this is by making the bids public, eventually, which requires politicians/bureaucrats to explain why chose the winning bidder, but why they chose it over other options.

Saturday, July 7, 2018

The Case Against Expanding CPP

 There has been a lot of discussion lately regarding the expansion of the Canadian Pension Plan (CPP), so I felt this was an appropriate discussion. CPP is a program for people living outside of Quebec aged 18 to 70. Anyone earning work income have to pay into the CPP program.

Currently, as an employee, you’ll pay 4.95% of your pre-tax income to CPP with a basic exemption on the first $3500 up to a total income of $54,900 (as of 2016 - this is an indexed to inflation number). This equates to a maximum of $2544.30 for 2016 as an employee. An employer also has to pay into the CPP program, for the employee, the same amount. This amounts to a max of $5088.60 for 2016.

The push for expanding CPP has been mainly been from large unions; such as CUPE and the Canadian Labour Congress (CLC). The desired CPP expansion from the CLC is to double contributions. They also wish to increase CPP replacement rate (essentially pay out) to grow from 25% to 50% (also doubling). The argument for this expansion is that some studies show that Canadians won’t be able to save enough for retirement.

The Case Against

When it comes to the actual argument for the expansion of CPP, I wouldn’t deny that some don’t save enough for retirement. From my own personal experience people seem to put a lot more value into a hard asset like a house, rather than actual retirement savings (more liquid investment vehicles). With that said, The School of Public Policy, at the University of Calgary published a study titled “Expanding Canada Pension Plan Retirement Benefits: Assessing Big CPP Proposals” by Jonathan Kesselman. It stated the following when analyzing the studies addressed in the main argument:

Several studies have examined how well the Canadian retirement income system has been fulfilling the income replacement goal, and how well it is likely to perform in future years. The studies reach varying conclusions on the adequacy and/or deficiencies of the current system. However, they agree that the system performs adequately for the lowest earners (mainly through the OAS/GIS and with some CPP benefits) in maintaining pre-retirement living standards. While most studies find adequate income replacement for most middle-income earners on average, they also find that a significant proportion of middle- and upper-middle-income earners face deficiencies in sustaining pre-retirement living standards.

Summing it up, lower income individuals (often the poster child of retirement poverty) are the ones that do fine with their retirement. They receive pre-retirement living standards. For those in the middle class and upper middle class tend to have a harder time maintaining their pre-retirement standard of living.

CUPE uses the phrase “can’t afford” and afford is based on the standard of living a retiree chooses to have. A low income person isn’t going to experience any sort of strain unless they adopt a more expensive retirement. The ‘deficiencies’ between pre and post living standards for middle and upper-middle class is the progression of their career salary. For example, an engineers last 10 years of working should be their highest paid years. This peak in salary is not exactly a standard for retirement income requirements.

My first point regarding people not being able to afford retirement is that it really isn’t true. Lower income individuals will experience similar outcomes. Middle class and above individuals will experience a decline in living standards only because we are measuring pre-retirement income - which should be at a peak.

Choice

I think microeconomics plays a big part of this and it’s the concept of choice. People trade finite items for other finite items. We trade our time, money, experiences - everything because we can’t do everything and have everything. Saving more for retirement, through the government, is forced. The concept of choice is taken away from the individual. That individual is impeded in making the important choices in their life.

Saving more for retirement might be good for some people, but not all. We all work hard today for our income, but what is the appropriate amount to trade today for tomorrow? Or better put, how much do I live today versus how much I prepare for tomorrow? There’s no universal answer to this question. Each individual has to make this choice based on their values. Some may want a modest retirement, while others want to travel the world. Others may die before they ever receive it.

When looking at doubling CPP we’re looking at nearly 10% of salary deduction and another 10% from an employer - we’re looking at massive chunk of cash. If we ignore the employers cut and the implication of costs (lost salary of employees - as CPP matching is a cost), we’re talking about 10% of an individuals income, along with regular income taxes, EI deductions, and other benefit deductions

Expanding CPP makes individuals more dependent on government to take care of them in retirement because they have even less after tax income to allocate as they see fit.

Another side of this choice premise is that an individual should be able to use their own judgment on what they do with their money and live with results of such a choice. CPP forces an individual into the government program. This program may have changing standards in the future (such as an increased benefit age), which lowers your overall return. An individual may not receive back a decent return because the program does have aspects of wealth redistribution.

An individual should be able to use the money that goes into an expanded CPP to spend on the here and now, or invest it for the future how they see fit. This could mean risky stock market investments, safe bonds, in their own businesses, or into their house - which they may sell in the future to fund their retirement.

Conclusion

An expansion of CPP is something that reduces an individual’s choices in life. They are forced to buy into a government program that may not provide the necessary flexibility or return that their own personal choices may desire. This lack of choice is fundamentally taking away from an individual to live on their own judgment. The proponents of expanding CPP argue that many Canadians won’t be able to afford retirement, which isn’t what the studies actually show. Many Canadians may have trouble maintaining the standards of living of their peak income years, but the case hasn’t been made whether this is a problem or that it needs to be fixed.

Summing it up simply, the best person to determine the course of an individual’s retirement is the very person that is going to live it.

Friday, July 6, 2018

Trade Deficits are not Bad

 The narrative around trade deficits in society is wrong. It's something driven in by mainly left wing politics and generally viewed as a negative thing. The concept really took place in the United States where it has had a trade deficit for a long time. In Canada, we've had a trade surplus for a long time, but deficits are happening and in the future we'll most likely have them all the time.

Trade deficit and trade surplus are an oxymoron

Let's think about what the word trade means. A trade is when two individuals or groups/businesses exchange goods or services. This trade is mutually beneficial for both parties; meaning that each party trades for a more preferable outcome than their current state.

The concept of deficit and surplus with regard to trade isn't a fair measurement, especially with regard to arbitrary lines in a global marketplace. If you look within the country, most seafood is purchased on the coasts. Just because a Saskatchewan wheat farmer buys fish from B.C., and the merchant buys fishing equipment from Quebec doesn't create a deficit for Saskatchewan. All parties have engaged in beneficial exchanges.

International trade

People often get lost in this discussion when trade becomes international. There is too many moving pieces here. The measurement of trade deficit/surplus is one of manufacturing. We buy a million goods from Vietnam and they buy no goods from us. It ignores the fact that they're given money. Just the exchange itself is mutually beneficial, but Vietnam ends up with Canadian dollars. They have to do something with those dollars. It's not like they disappear. They have to trade them with another country that wants to buy/invest in Canada or they have to do that themselves.

Anti-free trade and manufacturing lobby & economics

The concept of a trade deficit really comes about through two specific forms of politics; anti-free trade and the manufacturing lobby. Free trade is valuable because of the concept of comparative advantage among nations. And the manufacturing in our country view themselves as comparatively disadvantaged compared to a country like China or Vietnam. It's true in many ways. It's heavily unionized and our country's productivity is not good.

When one is a proponent of free trade, there is an understanding that there will be changes in the economy. It is this change that inevitably creates fear and people want to stop it for their own jobs. It's understandable, but it's ignorant. It's the equivalent of fighting the first tractor because it puts farmer laborers out of work.

Now, the other side of this is an economics movement. I'm not an expert on the history of economics, so I'm not sure whether manufacturing as a pillar of all of the economy is something that is real in the science or something that came about due to politics. But there is a view that manufacturing is all that makes up the economy. If a country isn't manufacturing, it's doomed to fail. And just so I'm not picking on the left here, there's also someone like Peter Schiff that thinks this way too.

It is true that wealth is something created (ie: made). There are laws in nature, plants that grow, rocks and boulders - but they're of no value until man does something (labor) and creates something that doesn't exist (wealth). And a key component of that is thought. One must think before they can create something.

The part to focus on is thought because that is the important part. The industrial revolution was the greatest thing to happen to humanity and it lifted so many people out of poverty, but that's just manufacturing. As globalization has grown we have experienced the comparative advantage of other countries and for the most part they can do manufacturing better than us. It's not game over, we're evolving to the intellectual revolution in the market place where we hold the comparative advantage in thought.

For example, an iPhone is a trade deficit maker since it is manufactured in China and imported to United States. This a very short sighted measurement. The iPhone is created in the United States. Many talented engineers designed all aspects of it. The body, the components, the mapping of the components and how the components work together (software) is what makes the phone possible. A plant in China making them is just the unthinking actions of workers. The creation is done in California.

Conclusion

A trade deficit (or surplus) isn't something real. It's a measurement of mere manufacturing value. We must not forget that every trade, both parties benefit. Since we don't barter and use Canadian dollars, those dollars have to eventually work themselves back to us. The proponents of trade deficit measurements are desperately clinging to manufacturing as the basis of an economy and do it at the expensive of comparative advantage. Thought is an important part of what makes wealth possible. Our economy doesn't lose, when manufacturing goes out of the country. The key component is that the economy changes and labor moves to more advantaged industries - and in a lot of cases these are the skilled thought industries.

The Case for First Past the Post

Something that is going to become a big topic in a few years, whenever the LPC decides to act on their election promise, is to change the way our votes are counted. The current system of elections we have is known as the first past the post (FPTP). It's a really easy system to understand. We have constituencies (also known as ridings) for a specific geographical area and the person that receives the most votes win.

When I was younger and in school, I took a lot of political science courses just because it interested me. I had the chance to learn about other electoral systems like the United States, Italy and Germany.

The main criticisms of FPTP is that people end up winning seats without getting a majority of votes in their riding. For example, some will complain that more ‘left of center' votes were cast, yet the Conservative Party won. Another example is that voting for your preferred choice, if more fringe or small, is essentially throwing your vote away. These criticisms of FPTP are true and completely fair.

I'm going to argue for FPTP, but that's not me saying it is perfect. There are deep flaws in every voting system that doesn't necessarily provide the best results - especially when there are different views on what is expected to be the result of an election. There is one observation I have, and the drive to remove FPTP are from those that are losing elections and I don't think that's the best direction to approach it.

I have a few particular angles and views on this issue, so I'll break that out for you.

Political outcomes are determined by culture, not the election system

This is my main issue with changing the election system is that it really doesn't matter. The culture of people in society inevitably determine elections. Sure your person or your party may not be the one that gets in, but it's the nature of politics. The parties and people that want to get elected must reflect the people of the riding. They must represent those views.

A false strawman is that political opponents are far off base. This alleged statement gives the impression of an injustice when there really isn't. The Conservative Party of Canada may have very conservative or have libertarian leaning individuals, but it had to govern in the center. It may be a little center-right, but that's the nature of politics. The Liberal Party of Canada may have some idealistic socialists, but it will govern from the center - even if it is a little center-left.

I'm of the view that if you want to change policies of parties, you need to change the views of society. If you want a more libertarian society, you're going to need to change society and convince people of these ideas - and politicians will follow through. If you want a more socialist society, you're going to need to change society and convince people of these ideas - and politicians will follow through.

The center is where society lives. When you convince society of socialist/libertarian ideas, than the center becomes that with parties that live on different sides of that center point.

FPTP is decisive, easy and creates governments that can act(stability)

You vote, and winner takes all. It's easy to understand. The type of election outcomes are better governments that can act because we are most likely going to end up with a majority (at least most of the time). Countries like the United States, Canada and the United Kingdom have survived wars, internal conflict and transitions of government easily under the system of FPTP. Countries that don't have it have happened to fall into chaos, become occupied and end up in deadlock.

Problems with Proportional Representation

Another popular voting system is proportional representation. This is a party based voting and the percentage of each party goes to Parliament. Many argue that this is a better representation of votes. The problem with this type of system is how a government can act. Italy has something similar to this idea. What does this produce? Minority governments that can't act, much bickering and gridlocking, and elections in very short orders of time.

A purely proportional representation system eliminates the concept of independents and individuals from the system. It becomes parties and parties only. Maybe you like a party, but really have a problem with specific people in the party. Well, you don't have a choice in that. As well, you have to consider that someone has to represent your local area. The Green Party should receive roughly 5% of all seats, but it mainly gets 5% in all ridings. So - some areas of the country will end up with a Green Party representative - even though 95% of the riding didn't vote for them.

Pure proportional representation is easy to understand, but for the problems above it becomes complex. No one does pure proportional representation and make it complicated. Italy, for example, has 2 rounds of voting, party based proportional representation with a majority bonus and a 3% election threshold. Not so simple anymore. I'm not trying to pick on proportional representation (it is the most popular), but these points need to be thought out.

Proponents contend that you can vote for your most representative party of your views and in Parliament they'll have to work together, blending views, moderating and that's how they govern. I would argue this is what we have already in Canada and the United States, only that this process happens before the election. It's more apparent in the United States where there are big elections within the two main parties, picking a leader and direction. A ton of interested people in the election vote in the party primaries to choose how the party will be.

I would argue that this is far more preferable to democracy because on election day I know what I'm getting. After election bargaining and compromises may result in something I don't support. For example, let's say I really believe in polices A, B and C, but I also hate with a passion policies D and E. How do two parties supporting these different ideas compromise? I may find a compromise of A, B and D as tolerable, but deplore a combination of B, C and E. If you're curious what situation this could be, a simple example would be very liberal social programs and welfare combined with open borders - or something along those lines.

Another issue with proportional representation is the addition of extreme parties and extreme views. From Nazis to Marxists we end up with elected officials (and yes the Nazi and Marxist representative) has to represent some area of the country. In other systems the fringe would be kept off the map as insignificant.

Ranked Ballot Creates Less Diverse Ideas

Ranked ballot is an interesting one, but something that probably won't be adopted because the complainers (remember the people that lose) will not win with it. The idea is that you don't just vote for your ideal candidate, you rank it. It doesn't necessarily mean you rank them all, but maybe top 3 or something along those lines.

If we look at a few different examples we can see how weak this system actually is. Take a typical conservative: they'd pick maybe a more fringe right wing party as first, Conservative party as second and Liberal party as third. A typical liberal: they'd pick liberal, and second maybe Conservative or NDP. A typical socialist: they'd pick NDP/fringe, NDP and Liberal.

And what we end up with is Liberal wins every time. I heard the argument that it would convince the Conservatives to be more like the Liberal Party. I don't know if that's a good thing or a bad thing. But as you can see you just end up with a very generic party that is typical of most parties. It's just another form of finding center, but instead of there being a center , one party (which may not be truly center) becomes center.

Whether that is good or bad, I'll leave to you.

Run off Voting

This is a voting system where there are additional votes until a candidate gets 50%+1 votes. The idea is that they eliminate a low (or multiple) low candidate(s) and people vote again based on the choices. It's a good system I think. It's easy to understand and people will eventually get to the candidate everyone can agree on.

The problem with this type of system is that it's expensive and really hard to do. It's easier at a small event or something along that, but doing a national election like this would require a lot of time, money and we would lose a lot of voters based on the time constraints and complexity. Ranked ballot is a means to deal with the costs and time of run off voting.

Conclusion

I realize I haven't addressed all the different electoral systems that I could possibly do. There are far too many and far too many options applied to each to address everything. FPTP is a good stable system that is easy to understand, easy to apply and creates strong stable governments. It's not a perfect system, but neither are the others.

Each of the proposed other systems have flaws and I think I've demonstrated that they don't necessarily correct issues of FPTP, but create new ones. The main premise seems to be whether we create stable governments or whether your vote enables the best outcome of your views. I think it's a compromise between these two ideas. I want a government that can be stable and be productive, with a representation of the people that vote. I think FPTP provides that.

Either way you lean, you have to consider what you're going to be told in this upcoming debate on electoral reform. You will be told all the negatives of FPTP and all the positives of a proponents desired electoral system. This is marketing. All systems have flaws and I think you'll find, far more than FPTP. Whether we the people will get a choice on this matter remains to be seen, but if we do you should pick FPTP.

Additional Reading

 

The Energy Market with Unreliables

 The energy market is going to be something that will be on people's minds for a long time because right now there is very poor policy a...