The Price of Freedom – a quick look at initiatives

Many states have some sort of initiative process, allowing citizens to vote directly on ballot measures if they get enough signatures. This year California has twelve. Do we have too many of them? Too few? How should we think about such a question?

Here’s a very simple model involving two agents – the initiative proposer and the rest of society.

The proposer has to decide whether or not to propose an initiative. It has probability p of passing, gives him benefit b > 0 if it does, and has no cost, so the proposer’s expected benefit of proposing the initiative is pb.

The rest of society gets benefit b’ if the initiative passes, but always has to pay cost c’ (e.g. cost to study the initiative, cost of printing etc.). So their expected benefit if an initiative is proposed is pb’ – c’. p does not depend on b’ here.

Under this model, the initiative is always proposed (as pb > 0), and expected total benefit to society and proposer is pb + pb’ – c’. The problem is that this may be < 0 – the proposer ends up imposing a cost to society to study his initiative, or may actually fleece the rest of society (b < 0). Society ends up getting flooded with initiatives.

Let’s say that we impose a fee c for proposing an initiative, which goes to the rest of society. In this case, the proposer’s expected benefit if he puts forward the initiative is pb – c, and the rest of society’s is pb’ – c’ + c. The proposer only puts the initiative forward if pb – c > 0.

We have looked at c = 0, where we have too many initiatives. If c = infinity, then the proposer never proposes anything. The problem is that this rules out initiatives which could have a big benefit to the rest of society.

The total expected benefit if an initiative is passed is still pb + pb’ – c’. Let’s say we want to have initiatives proposed if and only if this is > 0. In other words:

pb + pb’ – c’ has the same sign as pb – c

The simplest way to do this is to set them equal, so pb + pb’ – c’ = pb – c

Rearranging, we get c = c’ – pb’.

Basically, the proposer should cover the inconvenience cost to the rest of society, with a discount for initiatives that are socially beneficial and more likely to pass.

In general, good initiatives are ones that would be beneficial if they passed (b + b’ > 0), have a high probability p of passing, and are simple to decide (low c’). There is an argument to be made for frivolous initiatives, such as renaming a San Francisco sewage plant after George W. Bush. The cost to decide is low, there are enough San Franciscans around who would get a small amount of enjoyment out of it if it passed, and there’s a reasonable probability of it passing.


2 Responses to “The Price of Freedom – a quick look at initiatives”

  1. Jake Says:

    It seems to me there are far too many initiatives, for reasons outside the framework you describe above. One reason is that initiatives are hazardous in that they are “one-off” decisions that are difficult for the layperson to analyze in the context of other expenditures and statutes, current and future. Should the state issue bonds for X million dollars for children’s hospitals? It would seem the average voter is poorly equipped to assess the true costs and benefits of such a decision, and whether better value could be reaped using the money for something else.

    Ballot initiatives have their place, but they should be restricted to broad expressions of the electorate’s values and desires: issues like affirmative action and medical marijuana come to mind.

    And with regard to Prop 8, why on earth is it possible to amend the state’s consitution with no more than a bare majority of a popular vote? Even tax increases require super majorities in California, yet the constitution can be amended by 52% of a voting public that has been showered by misleading ads funded largely by out-of-state Mormons.

    Granted, the Mormon church has such an exemplary history with regard to marriage and discrimination, but still.

  2. erehweb Says:

    I agree – it’s often far too difficult for people to determine the effect of an initiative, which makes things harder. It seems that various groups try to use this to their advantage – e.g. T. Boone Pickens with Prop 10, which seemed basically to be an attempt to bilk the state out of a lot of money under the cover of the environment.

    I think the original reason for the constitution being very easy to amend was to break the power of the railroadsl. Now it’s that people really care a lot more about their pocketbooks than the rights of their fellow citizens. And, as the SF city attorney says, it seems like there’s something wrong with the idea that you can just claim that equal protection doesn’t apply.

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