From: Suehiko Ono <sdo7@columbia.edu>
  To  : <CPC@emoglen.law.columbia.edu>
  Date: Thu, 11 May 2006 16:54:12 -0400

[CPC] Paper 2

	At the time of our founding period, our forefathers accepted that the vast 
majority of the population would not participate meaningfully in government 
because of the practical impossibility.  The greater good of society 
required that the majority of people spent most of their time carrying out 
production.  Furthermore, after a population reaches a critical mass, it 
becomes impossible to gather everyone to meet and make group decisions. 
Therefore, the most virtuous few within society were to be the 
representatives of the many.  The excellent representative was he who could 
and would act in the interests of the governed.  In an ideal democratic 
society, politicians are enlightened administrators who distill the public 
interests and make decisions on their behalf.  Today, there are several 
ways in which American citizens can participate in politics, ranging from 
voting to campaigning and belonging to a political organization.  People, 
citizens and foreigners, also participate in decisions about the production 
of society as executives of corporations and as consumers of goods and 
services.
	Given the progress in the ability for vast groups to collaborate 
effectively, to quickly and inexpensively communicate, and to gather, 
store, and interpret information,  society may no longer need a centralized 
representative body of decision makers for many broad political and 
economic decisions.  I contend that under appropriate conditions of 
freedom, the Internet wrapped around people enables them to ascertain the 
interests of their communities and results in the best decisions and 
strategies for pursuing those interests by naturally bringing information 
forward.  The technology we see today is evidence of possibilities.  One 
could imagine legislative drafting being replaced by wikis and other 
collaborative technology.  Hearings, meetings, and debates could be 
replaced by national, digital audio-video conference calls and discussion 
forums.  Expert testimony could be supplemented or replaced by data mining 
technology.  Of course, it is only under the right legal framework that 
technology will be useful for group decision making.
	I will present one possible set of legal default rules within the context 
of corporate law that would enable somewhat large communities to 
participate in group decisions.  Let us assume a technology that permits 
inexpensive digital audio-video conferencing, i.e., the net.  I propose for 
a company with many shareholders (more than 500) the following three rules 
(ignoring liability rules and group decision problems, e.g., "discursive 
dilemma," for the moment). 1. Eliminate the distinction between the 
shareholder and the board. 2. Set the quorum as all board members present 
for board meetings. 3. Appoint professional intermediaries as secretaries, 
treasurers, moderators and other administrators.
In this model every shareholder is also a board member, but any member can 
opt-in or opt-out of the board freely. Fluidity would be achieved by 
permitting a dynamic quorum, which consists of all those "present" at board 
meetings. Every shareholder has the authority of a board member, but the 
"actual" board is self-selecting because not all shareholders will exercise 
their right to act as board members.  On the contrary, one may predict that 
most shareholders would exercise control only on topics of interests and 
expertise as they arise.  All information (including documents, recordings 
and minutes of conferences, forums, discussions, and wikis) is available at 
all times.  All moderating and other necessary administrative work is 
carried out by professionals, and committees could still be appointed for 
specific issues.  In essence, the conventional static board is replaced by 
a fluid board that is guided by primary legal rules and a static (or 
rotating) administration.
	One can immediately predict free-rider problems.  Most people who own 
securities have a diversified portfolio with ownership in any one company 
representing only a small fraction of their total assets so most people 
would not want to participate on the board of every company for which they 
owned stock.  It seems this model would result in a board structure that is 
the same as it exists today - a small, centralized body of paid experts. 
However, if we establish a set of rules which allows members to participate 
as they see fit, as the costs for vast groups to collaborate effectively, 
to quickly and inexpensively communicate, and to gather, store, and 
interpret information decrease, barriers to participation approach zero. 
Meanwhile, incentives for participating in the board would range from 
financial interest, to psychological satisfaction, to concern about the 
social consequences of board decisions.  Another possibility is an hourly 
payment schedule, which would add another incentive.  Boards may become 
smaller subgroups of all shareholders, but the group would be significantly 
larger and would constitute a better representation of shareholders than 
conventional boards.  This is not only better from the standpoint of 
democracy, but it may even result in better decisions.
	F. V. Hayek argued that free markets work more efficiently than a command 
economy based on the fallibility of human knowledge.  Given the many 
variables that operate on the economy, it is humanly impossible to 
accurately plan and coordinate the production and consumption of society 
through a centralized bureaucracy.  In coordinating the economy, groups of 
people organized in markets out-perform individuals.  Perhaps the same 
could be said about coordinating the economy of a firm.
	There is also evidence that groups of people organized in markets perform 
better than individual experts when making predictions. [1]   An ideal free 
market operates because there are no barriers to the exchange of 
information between many producers and consumers.  Markets operate through 
communication to coordinate information and bring it to the fore.  If this 
is accurate, it seems the same hypothesis could be made about effective 
corporate (or political) decisions.  Wrapping the net around shareholders 
(or citizens) could have the effect of bringing all the most valuable 
information to the fore by reducing the costs of acquiring and storing that 
information, but, again, only if we allow free access to the information, 
communication and decision making apparatus.
The formula is perfect communication and freedom.  Given the apparent 
direction that technology is going, there may be no limit to our ability to 
communicate with each other.  Group decisions are now possible on scales 
that were once inconceivable.

[1] http://www.sciencenews.org/articles/20031018/bob9.asp.

Word count:  999

Suehiko Ono

-----------------------------------------------------------------
Computers, Privacy, and the Constitution mailing list