Thursday, June 4, 2015

“The majority should incorporate minority’s ideas,” The Colorado Springs Business Journal, May 29-June 4, 2015, 23.



The Majority Should Incorporate Minority Ideas

Given the election results, John Suthers (63), former Attorney General for the state of Colorado, beat Mary Lou Makepeace (73), a former councilwoman and mayor, by a wide margin: 68% to 32%. What do these numbers tell us?

As the business community knows all too well, marketing hype is one thing, actual results may tell a different story. Doubling your sales sounds impressive only when you forget to disclose that you sold only two cars last month.

So, let’s dig one level deeper into the election numbers. To begin with, there are about 439,886 residents in Colorado Springs (official site, 2013). Not all residents are eligible to vote: those under the age of 18 account (about 25% of them), so that leaves about 329,914. We must deduct the number of felons and foreigners (legal or illegal), so we can assume about 300,000 in round numbers.

How many of these are both eligible and registered to vote? Without an official answer, we can estimate about 75%, which would give us 247,435. What we do know is that about 39% of those actually voted, 95,502. 

This also means that only 21.7% of the total population voted. Of that group, 68% chose Suthers (64,941 voters). If you consider all the residents of Colorado Springs whose mayor he’ll be, then about 15% actually endorsed him.

In case you think that this situation is unique to our city, the same percentages in round numbers are true of presidential elections when only about 146 million Americans are registered out of a population that exceeds 300 million.

The point, of course, is not that the new mayor or any other elected official hasn’t been properly elected; only that the rhetorical claims for public support and mandate are greatly exaggerated given our current democratic system of election.

But there is another point about the “wisdom of the crowds,” so named and popularized by James Surowiecki in 2004. According to this theory, the wisdom of the many (the majority) is greater than that of the few (however expert they may be).

This view was illustrated in a TED talk by Lior Zoref in 2012 when he asked the audience to estimate the weight of an ox. Of 500 entries, the lowest guess was 308 pounds, the highest 8,000, and the average was 1,792. The actual weight was 1,795. Pretty impressive!

This live experiment has been used to argue that if we polled lots of people, no matter the issue, their collective wisdom would exceed or be more accurate than that of a few CEOs or politicians.

Would that be true of political decisions, say, about the future of the City of Champions or the oversight of city-owned utilities? The public will always want to pay as little in taxes as possible while maintaining a high level of city services. Public officials will be the bearers of bad news: the less tax revenue, the less service.

Not only is there an inherent conflict between residents’ aversion to paying higher taxes and city officials who wish to ensure services are delivered, but there is another problem to consider. What if following the so-called wisdom of the crowd, the majority, leads us to adopt the lowest common denominator? 

Instead of making difficult choices that may upset some in order to ensure long-term viability, we follow short-term sentiments and face future disasters. Scientists and innovators, entrepreneurs and thinkers, worry less about what everyone thinks in order to forge ahead into uncharted territories. 

It was the British philosopher and economist John Stuart Mill who cautioned us in the 19th century against the tyranny of the majority. For him, it was important to listen to and account for minority voices, those whose insights may shed light on issues the majority may overlook.

A similar sentiment was expressed by the German philosopher Friedrich Nietzsche, also in the 19th century, about “herd mentality” and the ways in which crowds can be swayed in one direction or another, especially when a charismatic leader pushes an ideology.

Coming back to mayor Suthers, yes, he has a mandate, but it’s a thin one. Yes, his proposals were endorsed by more than twice as many people who endorsed Makepeace’s. But as we know from voting patterns in our city, retired voters (military and others) vote in greater proportion to young ones. What do young residents want?

Would legalizing recreation marijuana sales within city limits have the same effect as in Denver? It’s not about “pot-heads,” but about an image of open-mindedness that invites newcomers, as Denver has successfully done. If we want to balance the city military-dependency with startups, listening to minority (voting) voices might help.

Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com

Tuesday, April 28, 2015

“Comparing double standards with debt-ridden Greece,” The Colorado Springs Business Journal, April 24-30, 2015, 25.



Double Standards

Just as banks are tested by standards different from those they apply to their customers, so are countries that owe a great deal of money, like Greece.

How “healthy” are the largest banks? If derivatives are not considered as part of banks’ assets (Fed), then they can withstand another financial crisis without bailouts (with 13% capital); accounting practices of the FDIC claim that they cannot (with only 5%).

While our political leaders and the moneyed elite espouse conservative ideals of small government, you can readily find them courting military contracts (of big government spending, if not waste) and prohibiting the laissez faire market forces of recreational marijuana sales, infusing government control.

What about endorsing the proliferation of houses of ill spirit (if not ill repute) in the center of downtown because of sales revenues, while responding to their dangerous prospects with the surveillance of street cameras (Big Brother).

Pointing out these kind of inconsistencies may seem like sound medicine, but as many scholars remind us, facts seldom change beliefs. So, what does? 

Perhaps a trauma or a crisis, the kind that shakes the very foundation on which such beliefs rest. The imminent threat of a Greek default on its Eurozone debt provides a good case study.

The so-called cradle of democracy, Greece, has a population of 11 million and an annual GDP of about $240 billion. By comparison, Colorado has a population of around 5 million and an annual GDP larger than $270 billion.

With over $300 billion in foreign debt, Greece is rumored to be on the verge of default. All the questions about the adverse repercussion of a default—from creditor-banks and their respective government guarantees to a potential exit from the Eurozone—may miss some moral issues related to this situation.

To begin with, as David Graeber (2014) reminds us, the very notion of debt is bound by two unrelated moral principles. One has to do with the obligation one ought to feel about repaying borrowed money, and the other is that lenders of money are considered inherently evil.

Those who fail to repay what they owe are then considered evil. How do we view individuals who take out mortgages and default on them, or those filing for personal bankruptcy to wipe clean their debts?

But by the same token, we also consider lenders to be evil, whether under the influence of Jesus’ condemnation of the money-changers in the Temple, or more recently the bailout of banks who gambled foolishly and received taxpayers’ help.

In local communities like ours, the very notion of public works of any sort, like the City of Champions, is considered problematic (evil?) because public debt may saddle the community with additional taxes. But what if debt is labeled investment? Will the next mayor go on record in support of such investments?

The Greek case study is much more complex than we are led to believe from sensational headlines that ensure the volatility of the stock-market (where brokerage firms enjoy the ride).

If we remain on the moral level for a minute, we should ask whether or not one country has a moral duty to help another? Though philosophical in nature, the answer is commonly couched in practical, utilitarian terms: yes, as long as it can afford it.

The Greek government, says Frank Jordans (AP), is reminding the German government—its largest creditor—that after WWII Greece was among 22 countries that agreed to halve Germany’s debt (1953).

More concretely, Greece has definite reparation claims against Germany from its WWII occupation of Greece: billions of euros worth of infrastructure destruction, millions of euros as compensation for massacres of resistance groups and Jews, about $7.7 billion of an interest-free loan made in 1942. This isn’t an exhaustive list.

So, who is the debtor and who is the creditor? On balance, who owes whom how much? Is there a moral injunction for aid among nations, even when it’s called debt?

The Germans, leading the Eurozone’s claims against Greece, insist that it’s the moral failings of the Greeks, as individuals and as a society, that have contributed to their current crisis: lazy tax evaders who expect the state to spend more than it can afford.

This systematic irresponsibility has raised the question every parent asks: should I enable bad behavior? If I punish, will I lose my child?

And punishment is expected in the Greek case, from austerity measures that hurt the poor to leaving the European Union, the kind of punishment our local leaders inflict on young entrepreneurs who haven’t made it yet to the top.

Can a small local startup expect the same royal treatment reserved for the military-technological complex? What will the next mayor do?

Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com

  
   

Monday, April 20, 2015

“Why not let student-athletes pay taxes?” The Colorado Springs Business Journal, April 17-23, 2015, 25.



Let Student-Athletes Pay Taxes

As tax season comes to a close and all the standard complaints against the IRS is heard, there are some who might be more than happy to pay taxes, if they only got paid for their services.

Student-athletes aren’t paid, despite the fact that March Madness has netted their respective 32 universities about $1 billion with around 30 million viewers for the championship game. Total viewing of all the games was larger than the 2015 Super Bowl of 120 million. 

The NCAA remains steadfast in its reasoning for not “professionalizing” collegiate sports, claiming athletes aren’t “employees,” but instead amateurs. Given the amount of money involved here, many find this stance both unfair and hypocritical.

The designation of student-athlete is also a legal ploy that shields universities from paying any compensation for injuries while playing for the team; no workers’ compensation can be claimed or granted to “non-employees.”

Unlike the competition to attract student-athletes, coaches’ salaries at high profile institutions are rising to levels seen only in professional sports. In basketball, just look at Mike Krzyzewski of Duke at $9.7 million, Rick Pitino of Louisville at $5.8 million, and John Calipari of Kentucky at $5.5 million. In football, note the compensation of Nick Saban of Alabama at $7.3 million, Bob Stoops of Oklahoma at $5.25 and Jim Harbaugh at Michigan $5 million.

True, only about 10 Division I athletic programs are profitable, according to most reports, but the accounting used for this assessment is always problematic. Even so-called “losing” programs can attract alumni contributions and help significantly with freshmen recruitment in ways difficult to measure, but that surely exist.

Assuming that university presidents will never collectively decide to turn their “professional” athletic programs into truly amateur ones, where the love of sports and student spirit reign, is there a middle ground between these two poles?

From its inception with Adam Smith, economic literature has always tried to keep a core of moral values afloat so as to justify private property, for example, and market exchanges.
Given the sheer size of the collegial athletic market, is there any moral ground for outlawing student compensation? Academic scholarships are usually counted as a compensation but in fact carry with them very low marginal cost (of having one more student in a class when 30 others are already paying).

If the outright payment to athletes is inappropriate, how about establishing a personal account for each athlete and contributing to it $50,000 annually. If an athlete plays for four years, his/her account reaches $200,000 (plus interest) and s/he has a nice nest-egg upon graduation.

Given that only 2% of student-athletes ever make it to the professional leagues, the other 98% may at least have some financial compensation for their contributions to the coffers of their Alma Maters.

As for injuries, student-athletes should be added to university employees’ plans, so that their treatment and rehabilitation over the years will be covered by proper insurance. If it’s good enough for the coaches, why not extend it to their players?

The University of Texas (Austin) athletic revenue for 2012-13 was in excess of $165 million; a million or two set aside for graduating athletes would easily allow the program to retain its overall net profits.

Since there is no reasonable economic argument against sharing the revenue of athletic programs with those on whose backs success is achieved, and since there is no moral argument against it either, what is the obstacle to this common sense proposal?

Perhaps it’s the myth of amateurs competing solely for the love of the sport, as if this competition is happening in an economic vacuum and all amateur athletes share the same motivation.

Or it may harken back to gladiators who competed in the arenas for their lives, and if lucky enough, for their freedom. True, athletes are not slaves in the technical or legal sense of the term, but on an economic level, they are treated as such.

Even if we solve the financial dimension, what about the “student” part of the designation? The hypocrisy here is even more upsetting. From Ronald Smith’s Pay for Play (2010) to Jay Smith & Mary Willingham’s Cheated (2015), it becomes clear that athletes’ education is compromised.

It’s not only scandalous that student-athletes are cheated out of their rightful share of the money they earn for their universities, it’s even more alarming that they are exploited for their talents with complete disregard to their academic work.

If 98% of student-athletes never make it to the professional arena, and if they lack the skills higher-education is supposed to provide them with, what are they supposed to do?
We should let student-athletes pay taxes, it’s the right thing to do!

Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com