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New York City has joined Maine in recognizing the danger of traditional plurality voting methods and has embraced ranked-choice voting. Ranked-choice voting is not new. Australia started using it in state elections in 1918, and Ireland started using it in presidential elections in 1937. Commentators have frequently pointed out that ranked-choice voting eliminates extremist candidates who are not favored by a majority of the electorate and allows a more moderate candidate to get elected. But the best way to understand the pitfalls of our traditional plurality voting system and the advantages of ranked-choice voting is with some simple examples.

Suppose that there are only three candidates. Candidate A gets 35 percent of the vote, Candidate B gets 33 percent, and Candidate C gets 32 percent. Without a runoff election, Candidate A wins even if most of those who voted for Candidate C would have preferred candidate B. In the extreme case, Candidate A was preferred by only 35 percent of the voters with 65 percent opposed, yet Candidate A wins, while a majority of the voters favor Candidate B. With Ross Perot running as a third party candidate in 1996, neither Bill Clinton nor Bob Dole was able to get a majority of the votes. We will never know who would have won if Ross Perot had not been in the race.

A runoff election could solve the problem, but only with an expense that would be unnecessary if the original ballots had allowed each voter to rank the candidates as first choice, second choice, and third choice. In a three-candidate race under ranked-choice voting, if none of the candidates received 50 percent or more of the votes in the first round, the third-choice candidate would be eliminated and the ballots of all those who had ranked that candidate as their first choice would be recounted, moving their second choice candidate up to first place. In the extreme example above, this ranked-choice voting procedure would enable Candidate B to win with 65 percent of the vote without requiring an expensive runoff election.

In the 2000 election both in Florida and nationally, George Bush beat Al Gore, but failed to get a majority of the votes, with Ralph Nader as the spoiler candidate. If ranked-choice voting or a runoff election had been used in Florida in 2000, Al Gore might have won the presidential election, but we will never know. In November of 2018 in the Australian state of Victoria in a race with several candidates, a Green’s party candidate, who came in third in the first round of voting, won the election under the ranked-choice voting system. In other words, ranked-choice voting can sometimes make a dramatic difference in an election outcome.

Now consider an election with 13 candidates as in the June 22 Democratic primary for New York City mayor where ranked-choice voting was used with voters ranking up to five candidates. First suppose that the traditional plurality voting method was followed. Imagine that an extreme left-wing candidate got 17 percent of the vote and an extreme right-wing candidate got 17 percent of the vote, and each of the 11 moderate candidates got 6 percent. Even in a runoff election between those top two extremist candidates, the winner might be truly favored by only 17 percent of the electorate with a majority of the voters preferring any of the more moderate candidates. In other words, in the extreme case, a candidate with just over 17 percent of the vote could get elected under traditional plurality voting even with almost 83 percent of the electorate strongly opposed to that candidate. If ranked-choice voting had been used instead, the most likely outcome would be the election of one of the more moderate candidates. In other words, under traditional plurality voting, even in the case of a runoff election between the top two candidates, one of the extreme candidates would win, but under ranked-choice voting, a more moderate candidate, preferred by a majority of the electorate, would ultimately win.

Maine is the first state to mandate ranked-choice voting in federal elections. Losing Republican incumbent Bruce Poliquin from Maine’s Second Congressional District challenged the use of ranked-choice voting in federal court. He was in the lead in the first round, but lost after the votes of third-party candidates were reassigned under the ranked-choice voting procedure. After losing the recount and after a federal judge rejected the claim that ranked-choice voting was unconstitutional, Poliquin ceased his challenges to the outcome of the election.

In Maine and several cities throughout the United States, ranked-choice voting has been successfully implemented without much confusion or disruption. Once the voters get used to it, they will see how easy it is and the advantages of ensuring that only candidates with widespread support get elected. The delay in the New York City tabulation is not due to the use of ranked-choice voting, but because of the need to wait until all the votes, including all those mailed-in ballots, are received. Once all the votes are in, it only takes a few nanoseconds for the computer to determine the winner under ranked-choice voting.

We like to think of the United States as that “shining city on a hill” as President Reagan said, yet our democracy has serious drawbacks and disadvantages. A combination of our traditional plurality voting system, especially as used in primary elections to defeat more moderate candidates, along with gerrymandering, influencing politicians through massive campaign contributions, and other aspects of partisan politics, has produced a much less attractive version of democracy. The widespread use of ranked-choice voting could be one step in the right direction toward correcting these deficiencies.

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Public libraries now allow free 21-day access to audiobooks via Hoopla. Now you can listen to “Optimal Money Flow: How a Dynamic-Growth Economy Can Work for Everyone” on your smartphone for free when you exercise, drive or just hang out. Here is the Hoopla link for free audiobook (click on book image for book description): https://www.hoopladigital.com/title/13557352

The Money Flow paradigm recognizes that people are our most essential economic resource in both production and consumption. They are motivated to enhance their self-worth through activities that give them a sense of purpose. Money flow is a key ingredient in both production and consumption activities. In order for people to be fully employed and to fully benefit from economic activity, money must flow efficiently and effectively to everyone throughout the economy.

Just as a healthy body requires that blood flows throughout the body so that no part of the body is deprived of adequate blood for any length of time, money must flow to everyone so that they can contribute to the best of their abilities in production and consumption. However, as George Cooper made clear in his book “Money, Blood and Revolution,” just as the heart is essential to blood flow throughout the body, government is essential in the free enterprise system to keep money flowing to all corners of the economy including to people in the inner cities and distance rural communities.

We have failed to appreciate the central and essential role of government in maintaining a healthy economy through proper money flow. The many variations of neoclassical, monetarist, Keynesian and other economic paradigms have seen the role of government as primarily passive with only occasional need to intervene in response to unanticipated economic instability. None of these earlier paradigms see government as continuously monitoring, adjusting and guiding the flow of money.

Our failure to recognize the proper role of government has led to the dangerous and distorted money flow that is undermining productivity and economic growth and leading to cycles of economic instability and collapse. In particular, large amounts of money are accumulating in financial markets and company coffers due to a highly distorted money flow that directs a disproportionate amount of money to wealthier individuals and corporations. This wealthy savings bubble is one of three bubbles recognized by the Money Flow paradigm.

The second bubble is the middle class debt bubble where credit card debt, mortgage debt, student loan debt, home equity debt as well as health care and other unexpected costs have created a situation where workers are unable to buy back the goods and services they are producing without the help of government. To keep money flowing and avoid financial collapse, government engages in unpaid for tax cuts and unpaid for expenditures that lead to the third and final bubble: the federal debt bubble.

The Money Flow paradigm sees the income and wealth inequality as an inherent problem in the continuous transitioning from a variable cost (e.g. unskilled labor) economy to a fixed cost (e.g. physical and human capital) economy that is greatly exacerbated by “pay-to-play” politics that rigs the rules and regulations in favor of special interests. As technological change speeds up, with millions of blue collar and white collar jobs being automated, the central role of government as the heart of the free enterprise system is ever more important.  Government can no longer wait until disaster strikes, but must anticipate and continuously proactively intervene in the economy to maintain adequate money flow to all parts of the economy. This is the key message of the Money Flow paradigm.

For additional details see 2018 paper presented at 2019 American Economic Association conference in Atlanta, GA:
https://www.aeaweb.org/conference/2019/preliminary/paper/FT7A95eS

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The author has agreed to forgo his book royalties so that the full purchase price ($24.95) will go into the student scholarship fund when purchased through Avila University Press at the link:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh

Is there a small college or university near where you live? Declining birth rates threaten to cause it to go belly up in coming years unless more students are found. Do you want to see a vibrant campus become a bunch of empty buildings? That would just attract illegal drug dealing and become a possible hangout for street gangs.

How about giving more financially challenged students a chance to attend college? We like to call our country the land of opportunity, but children who happen to be born into poor families cannot afford the high cost of college without financial assistance.

Let’s make a major effort to make it possible for financially disadvantaged students to attend college. Basically this means contributing money, both directly as individuals, and together as a community, to student scholarship funds that pay for tuition and college expenses such as books and student housing.

Many people are concerned about extreme income and wealth inequality, but they don’t seem to realize that economic inequality is just as extreme between the most well-known and highly-ranked big universities, and the less well-known, but highly-respected, smaller colleges and universities. The large, well-known universities are in great demand and have very large endowments of over a billion dollars, whereas the smaller, well-respected colleges and universities may have less than 10 million dollar endowments, which will have to be tapped, and will be consumed quickly, as enrollments drop off.  As with people, the well-to-do are well-to-do indeed, while those with little to start with are struggling to get by.

It’s great to say we live in the land of opportunity, but let’s make it a reality for those who didn’t happen to be born into financially secure families. In thinking about tax write-offs for charitable giving, why not include giving some money for student scholarships, especially at those smaller, less-well-known, but highly-respected colleges and universities?

Lawrence C. Marsh, the author of “Optimal Money Flow: How a Dynamic-Growth Economy Can Work for Everyone,” has agreed to forgo his book royalties so that the full purchase price ($24.95) will go into the student scholarship fund when purchased through Avila University Press at the link:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh

=> Understanding the origin of our very unstable triple bubble economy: the Middle Class Debt Bubble, the Federal Debt Bubble, and the Wealthy-Savings Bubble. <=

Too often our economic textbooks describe economics as a simple transition from one static equilibrium to another without a full understanding and explanation of the accommodative or disruptive forces that drive us toward or away from such an equilibrium state. We need dynamic analysis to better understand the underlying forces that contribute to or disrupt optimal money flow in our economy. This involves population dynamics, technological innovation and the role of globalization with the increasingly interdependent world economy.

In 1839 Thomas Carlyle declared economics to be “the dismal science” because of Thomas Malthus’ argument that the supply of food could never keep up with demand, because population growth would always expand demand to more than absorb any increase in supply. For centuries demographers and economists have warned of the unsustainability of the world’s population growth and all of the economic and environmental problems that would follow.

Full stop. Rather suddenly, the dynamics have reversed abruptly. Population growth has dropped dramatically and many advanced economies have populations in decline. Japan, Germany, Italy, Russia and many other developed countries have been losing population. The United States would have a declining population if it were not for immigration.  Even China is destined to see its population peek and then decline partly as a result of China’s one-child policy, which was introduced in 1979 by Chinese leader Deng Xiaoping.

In my economics class at Notre Dame at the start of class on a Monday morning, right after an exciting football weekend, I was trying to get my students’ attention. After several failed attempts to begin our discussion on international income distribution, I suddenly announced: “Today we are going to discuss birth control.”  My students immediately blurted out: “Birth control. This is a Catholic university. We can’t be discussing birth control.” I persisted. “What is the most effective birth control method in the world?” I asked.  The students were shocked and incredulous.  Finally, I said: “It turns out that the most effective birth control method in the world is per capita income.  When per capita income rises above $6,000 US dollars, birth rates drop like a rock.”

The problem is not just fewer people, but fewer young people. Other than more medical care, most older people don’t need a lot of things. Typically, they already have accumulated too many possessions from clothing to pots, pans, tools and books. And old people tend to be more conservative and want to hang on to their possessions. It is hard to convince them that they need a whole new wardrobe or a new style of furniture in their old age. At the same time, young people are expressing a desire for experiences (often involving international travel) instead of acquiring lots of possessions. This also reduces the demand for goods and services in our economy.

Now consider the role of changes in technology in driving a transition from a primarily variable cost (labor) economy to a primarily fixed cost (capital) economy.  ………………………….

While demand slows with declining population growth and the aging of the population, the supply of investible capital has grown exponentially. Extreme income and wealth inequality has provided a small segment of the population with way more money than they know what to do with. This wealthy-savings bubble has led to a build up of investible funds in financial markets driving up stock and bond prices. Large corporations often use the excessive pool of cash to buy up rival companies or buy back shares of their stock.

At the same time, middle class people are up to their eyeballs in debt. People have credit card debt, mortgage debt, college loan debt, home equity debt and ever more debt from rising health care costs. With so much debt the middle class cannot afford to buy back all the goods and services they are producing. To counter this middle class debt bubble, the federal government has filled in for otherwise inadequate consumer demand by providing unpaid for tax cuts and expenditures. This has produced an ever increasing federal debt bubble.

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Lawrence C. Marsh, the author of “Optimal Money Flow: How a Dynamic-Growth Economy Can Work for Everyone,” has agreed to forgo his book royalties so that the full purchase price ($24.95) will go into the student scholarship fund when purchased through Avila University Press at the link:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh