I recently read Robert Shiller's chapter on Financial Democracy in his book "The Subprime Solution". Here are some of my initial reactions.

Shiller is right that basic institutional reform is not only possible but necessary. Financial democracy is financial reform which encompass the majority of households. It means providing financial advice to people of all income levels. It means a new financial watchdog. (My comment here is that it should be independent of government control and special interests.)

It means providing prudent default options in standard consumer contracts and other financial agreements such as employee savings and withholding.

Shiller's use of modern Information Technology to set up large national databases of fine-grained financial data pertaining to individuals and firms is too risky on one hand and not innovative enough on the other, as compared to my idea of public benefit funds that include Tier 2 assets.

But he has some good ideas about risk management and insurances. He brought out areas of economic theories that apply to UDI-ism. Mathematical Finance Theory helps us understand how both sides of a financial contract can benefit ...how we can optimize the participation of the two sides so that human welfare as a whole is enhanced. He talked about appropriate incentives or who is on "the other side," paying for the bailouts. He mentioned Agency Theory which explains how to motivate agents to behave as much as possible in the interests of all parties to a transaction, not just themselves, with just the right balance of incentives. He is big on Behavioral Finance also.

These are also key concepts in UDI-ism. One excellent idea I picked up is the use of short-selling of a futures market as a precursor signal. His Case-Shiller index is for the futures market of houses in ten cities. That is why it drops before actual prices fell. My concern with his proposal to set up more of these future markets is that it is not realistic and risky to develop massive number of future markets for the only sake of obtaining precursor signals. Democratic polling is better and simpler. More markets means more risk of creating more bubbles and market manipulation. For house prices, polling should be stratified by renters vs homeowners. Homeowners tend to have wishful thinking about future home prices. Renters do not. For price drop, renters are more reliable. For price increase, homeowners are more reliable.

His idea about issuing national debt in trills is very interesting. To me that is like issuing a variable interest rate loan tied to the nation's economy. A trill is a bond which is entitled to one trillionth of the nation's GDP as annual dividend. One US trill pays $15 of dividend a year. Can this be similar to developing a market for the nation's total assets including TIER 2? Worth considering as a way to monetize the value of citizenship?