Tuesday, May 15, 2012

Crowd funding government.

Would you accept this deal?
Someone on a blog was talking of sacking all public servants.
It's the wrong strategy.

We need to make the public service work like the market. We have emerging tools. Block chain, Crowd sourcing and insurances can do 80-90% of what governments claim they are there to do.
Our public servant needs to be a true Public Entrepreneurs.
Tools need to be set up to make them such entrepreneurs. It's mostly just software as the links below show.
Try these examples.

The bridge needs fixing. A Public entrepreneur, Mr Bridger, has $10000 and the connections to get it done at $200000.
He offers the following deal on yourroad.org *
Pay $1 - $10 and get an internet thank-you note.
Pay $11-$100 and you get a sticker to put on your car.
Pay $101 and your name will be embossed on the handrail.
Pay $2000 and you get a table at the bridge opening dinner (max 20 seats be quick).
If $200000 is raised/pledged by November the money comes out of your account and the bridge will be repaired.
If under $200000 is raised by November your money will be refunded (or never collected from your account), You will still get the internet thank you note and Mr Bridger will pay you $5000/ the number of individual participants.
If more than $200000 is raised; its oversubscribed. Mr Bridger will take a 5% profit from the surplus, contribute half the remaining surplus to charity (named) and will find another bridge.
Needless to say the thank you note, sticker and embossed handrail all cost a fraction of the remaining $5000.

This is the most powerful crowd funding contract possible. If the 200000 is raised the bridge gets fixed. If not; those giving up their credit card details 'get their money back' with a tiny profit. The Public Entrepreneur only risks $5000 of his $10000. He may spend some of the rest on advertising in October if he's close.

The first actor problem is solved. Anyone contributing first risks nothing and may even profit if he is the only person tossing into the hat. Digital tracking makes the transactions on the site cheap treading to free. Frauds get dropped from the site. The cost is spread thinly over many people so the free rider feels little financial pressure but a little social pressure "Where's your sticker Bill?" With less than 50% paying tax the free riders are abundant today. With some of that tax being public service staff pay going around and around in the tax system the numbers are often much lower.

How would this finance a pension for a disabled person? These are the true undisputed poor not the lazy. This is medicaid, public health and the third rail of social security.

It's simple, Create an assurance contract for an eligible person, the money if raised goes to create a savings account (with a gold based inflation hedge if needed). Part of the interest is compounded part is paid out as weekly instalments. The biggest and best target would be about $500000. At 5% that would pay $235 week; 52 + 1 Christmas bonus. With half compounded until the trust's doubled. If there are exotic medical costs another round of fund-raising would buy extra medical insurance. This person is set for life and never needs to be a government problem ever again. This would work for veterans too. 

How would it do flood rescue? Buys equipment, train people, pays a very poor person to put his house up on stilts.
Can you create a private animal park and put tracking collars on lions? Their already being funded this way.

What would you not fund?
If you think the town drunks not worthy of your money would you throw a dollar in for the chance of the Public entrepreneur's $5000? 

Most known classes of public goods have been done. Police, parks, roads, medical research, hospital care, getting into university fully funded.
One girl from South America crowd funded a position in a top US UNI without knowing that she needed to meet other conditions besides just having the money but they waved the conditions. They wanted her crowd funding skills.

Public entrepreneur's replace bureaucracy, treasury and money bills in legislatures. It's a better deal than lobbying and paying off a politician so it may partly eliminate E street [The lobbyists in Washington. Every capital has it's equivalent. ] It replaces debt funding of the projects people genuinely need and want doing.

An Assurance Contract could fund a money bill in the legislature in a fraction of the time of the normal political process. Everything with the exception of law and defence could be crowd funded and we could Crowd fund equipment, insurances and research there too.

Is the freerider still riding free? Yes so are all non taxpayers today.
Are there positive externalities to others? Yes but so what if Joe from interstate gets to cross the bridge once a year!
Are there any externalities that can't be financed this way? I don't think so. We can only find out what can't be funded by trying. 

Are some projects too big? Yes but subdividing a project that is unworkable due to size into several smaller ones may succeed.

There may be a few cases where the money is raised but the task turns out to be impossible, beyond the organisers capability, or just silly. However this happens all the time with your tax dollars.

As long as it's as easy as posting on facebook, as simple as Kickstarter or indiegogo. It's mostly free digits until you hit the target. Then it will fly like this kickstarter project.

Kickstarter is 'no dollars down' preorder capitalisation! {Business finance banks are toast.}


Bitcoin already includes provision for this level of crowdfunding. 

  * yourroad.org is not real, yet.

1 comment:

Dave said...

Love it.