A bit of a tangent, but something that bothers me is the assumption in economics that the amount of money one is willing to pay for a good is equal to the utility provided by that good. And then it follows that if I am willing to pay €2 for a coffee and another person is only willing to pay €1 for that same coffee, then I value the coffee twice as much as the other person.
But to me that doesn't make much sense. What if I am a billionaire and the other person is very poor? It could very well be that the other person values the coffee a lot more than I do, but because I have so much more disposable income than they do I am willing to pay more for it. To me, the assumption should be something like the amount of money as a percentage of my total wealth that I'm willing to pay is equal to the utility of the good.
And because this assumption is so fundamental to economics, it determines the conclusions that the field reaches. For example, the definition of an "efficient market" or the optimal level of production of some good both embed this assumption that willingness to pay equals utility. And then one can imagine that policy decisions and such are influenced by this assumption. (And in fact the article itself mentions this problem: "Another challenge is that quadratic payments, being a payment-based mechanism, continues to favor people with more money.").
So I'm wondering if anyone has looked into an alternative formulation of economics with a different fundamental assumption (perhaps something closer to the one I proposed above). If so, do certain things that are determined to be "optimal" in classical economics turn out not to be optimal in this alternative formulation (and vice-versa)? Apologies if this is a bit of a naive question; Econ 101 is the most I've ever studied the subject.
Economics specifically does not make that assumption. You will see it in cost-benefit analysis, but it is not anything like a fundamental assumption in economics. I don't know where you got the idea that it was -- if you learned it from your econ 101 class you should demand your money back.
The fundamental idea in economics is "Pareto efficiency". Something is Pareto efficient if there is a no way to make someone better off without making anyone worse off. An idealized perfectly competitive market would be Pareto efficient, but the bulk of microeconomics these days studies market imperfections.
A level of production is "optimal" if it's Pareto efficient. Again firms in idealized perfectly competitive markets will produce a Pareto efficient output, but real markets can fall short of the ideal. For example, a polluting industry will overproduce, unless pollution is taxed.
IIRC, there are conditions where your alternative criterion matches Pareto efficiency, but they are somewhat special.
Pareto efficient is such a useless concept for any economic controversy; most real world decisions about how to structure society aren't between one Pareto efficient outcome and one non-Pareto efficient outcome, but between two Pareto efficient outcomes with different stakeholders gaining and losing.
If one trillionaire has their every indulgence satisfied, while the rest of the world starves, and our one trillionaire refuses the minor inconvenience of selling off one of their dozen yachts to invest in feeding everyone else? That's a Pareto efficient outcome; you can't make everyone else happier without making the trillionaire slightly less happy. This is a made-up story, but analogous to what actually happens, where there are many, many possible Pareto efficient ways to run the world, but those which privilege the status quo wealthy are always pointed to as somehow imbued with mathematically proven optimality because they are "Pareto efficient".
You mean that right now you think the world is in a Pareto efficient state, and the only question is distribution? You have a much more optimistic view of the world than I do.
Everyone agrees that Pareto efficiency isn't everything. But even there, the Second Welfare Theorem literally tells you how to efficiently redistribute wealth away from the trillionaire, to move to a different Pareto outcome.
Real policymaking is much messier than any of this, of course.
I believe most controversies over how to structure our economy/society/etc are not between "possibility X" and "possibility Y which everyone considers as good as or better than possibility X", given that they are, well, controversies. However poorly one thinks of the masses, Pareto improvements are not the stuff that people argue over; this is a red herring to the substantive questions.
My feelings about all of this, including the Second Welfare Theorem, are roughly those outlined in this post (or rather, series of posts): https://www.interfluidity.com/v2/date/2014/06.
"Most recently, we’ve seen that the 'welfare theorems' — often cited as the deep science behind claims that markets are welfare optimizing — don’t help us out of our conundrum. The welfare theorems tell us that, under certain ideal circumstances, markets will find a Pareto optimal outcome, some circumstance under which no one can be made better off without making someone worse off. But they cannot help us with the question of WHICH Pareto optimal outcome should be found, and no plausible notions of welfare are indifferent between all Pareto optimal outcomes. The welfare theorems let us reduce the problem of choosing a desirable Pareto optimal outcome to the problem of choosing a money distribution — once we have the money distribution, markets will lead us to make optimal production and allocation decisions consistent with that distribution. But we find ourselves with no means of selecting the appropriate money distribution (and no scientific case at all that markets themselves optimize the distribution). We are back exactly where we began, wondering how to decide who gets what."
> Real policymaking is much messier than any of this, of course.
Thanks for your posts which I find interesting. Can you point me to any good sources on crafting better policies?
For context, I'm most interested in better policy choices that generally prioritize 'equal opportunity for all' as opposed to trying to engineer 'equal outcomes for all'.
I don't know a good new source, but there's an old book by Alan Blinder, "Hard Heads, Soft Hearts" that talks about how to take existing policy goals and how to redo them so that they are more economically efficient.
> Economics specifically does not make that assumption.
As everything in economics, it depends on which branch you're talking about, but this assumption is the core of the marginalist revolution which is fundamental to the whole classical branch and it's derivatives, which makes the vast majority of mainstream economics nowadays, because the neoclassical synthesis made the biggest part of the Keynesian school move toward this assumption (say hello to micro-founded macro).
Anecdotally, claims that [insert a foundational hypothesis of classical economics] isn't really that important in the whole model has been the favorite defense of neoclassical economics against criticism since at least Friedman in 53 ( it might have existed before, but none of them had the popularity of his Essays in positive economics)
Classical economics is something different -- think Smith and Ricardo. Marginalism is sometimes called neoclassical, but is distinct from classical economics. The neoclassical synthesis was macroeconomics from the 1940s until the stagflation era. Micro-founded macro was later. I don't think neoclassical has a very clear meaning -- I would call any kind of Keynesianism non-neoclassical, personally.
Anecdotally, it's because so many people are bullshitting when they claim that something is a foundational hypothesis of the mainstream. People prefer to argue against a caricature rather than the real thing.
I don't see how micro-founded macro models equate utility with willingness to pay? Work-horse New Keynesian models begin with a representative agent so willingness to pay of different consumers doesn't even make sense in this context. Moreover, these models are (to my knowledge) seldom used for welfare analysis but rather to examine things like the effects of montetary policy on employment and growth. Models with heterogeneous agents certainly don't assume willingness to pay is the same as utility. I'm an econometrician not a macroeconomist though so perhaps I'm missing something.
> As everything in economics, it depends on which branch you're talking about, but this assumption is the core of the marginalist revolution which is fundamental to the whole classical branch and it's derivatives
Marginalism is saying something much more precise than that. It is saying that (in the given example) the two people value their marginal dollars differently than they value one marginal unit of coffee. A statement which is certainly objectively true, but doesn't capture the apparent contradiction present in the original example.
You seem to talk about Menger's view of marginalism, but Menger isn't really part of the classical branch I am talking about: he founded the Autrian School and was pretty skeptical about the neoclassic school at its time.
I suppose you could be right. My understanding is that literally that is what marginalism is. Where are you getting the idea that there are multiple branches of it?
> Where are you getting the idea that there are multiple branches of it?
That's common economics history: Marginalism was “invented” by Jevons and Menger pretty much at the same time (and Walras came a bit later with no prior knowledge of the two others' work at time of writing).
Jevons' work lead to the birth of the neoclassical school, while Menger's founded the Austrian school, and those two where pretty antagonistic for a while (One of Keynes' biggest achievement is probably the reconciliation these two branches in order to fight against his legacy ;).
This isn't accurate. Whatever Jevons and Menger thought of each other, the Austrians and the British were not completely distinct schools. People would call both groups "neoclassical".
The Austrian school in the modern sense only broke with the mainstream with Keynes. They had their own alternate explanation of the Great Depression that never caught on. I think the leaders of the school just moved to the US and became increasingly dogmatic, so modern Austrianism is a small niche.
There was a more recent form of macro that is anti-Keynesian that can be called "neoclassical", which would be the real business cycle theory, but it doesn't owe much to the modern Austrians. If you want to identify it with a specific marginalist, it's closest to Walras.
It is exactly as useful. Macroeconomics was completely tangled up until people understood that in a perfectly function economy there was be no business cycle, that even a serious shock would only temporarily slow down the economy. So the focus turned to understanding the market imperfections that make temporary dislocations have such long-term effects.
Physics in idealized situations is incredibly useful, and more importantly, absolutely necessary for understanding non-idealized real situations, so I'm not sure what you're getting at here.
...but then again (1) nobody has ever seen an idealized perfectly competitive market; (2) it's by no means clear that an idealized perfectly competitive market even serves as a useful approximation to the ones we have; (3) efficiency (in the narrow sense defined by efficient markets) is not the goal we want to be pursuing anyway.
There's a proof. The theorem is called the "First Welfare Theorem". There's also a "Second Welfare Theorem" that says that you can achieve any Pareto efficient outcome through a perfectly competitive market and lump-sum taxes.
There's a branch of economics, usually lumped in with "heterodox economics" that says that interpersonal comparisons of utility are impossible. This is called the Austrian school of economics, whose figures are von Mises and Rothbard.
Their basic unit of the market is the transaction. You know you value the coffee more than $2 and the coffee seller less than $2, and the other person values it more than $1, but until you and the other person actually make a trade you can't figure out the relationship between your preferences. That is, you are exactly right that you cannot say you prefer coffee twice as much.
Among the first things you learn in microeconomic theory are the expected utility axioms (developed by Von Neumann and Morganstern), and Afriat's theorem. These results give conditions under which an agent's behavior is indistiguishable from utility/expected utility maximization. This is the standard justification for the use of utility maxmization in economics: that it is a good mathematical model of decision making, not that it captures what actually goes on in people's heads. This is not a heterodox idea, it has been mainstream since at least as early as the 1950s. Of course, modern economists like to empirically verify whether these models of decision-making are accurate or whether other behavioral models are more consistent with the data, because economics is a science. Praxeology, on the other hand, is the opposite of science.
This is an example of a weird phenomenon where the heterodox schools of economics argue against a position that hasn't been mainstream in years. In this case, years and years and years. Economics stopped requiring interpersonal comparisons of utility a hundred years ago.
> But to me that doesn't make much sense. What if I am a billionaire and the other person is very poor? It could very well be that the other person values the coffee a lot more than I do, but because I have so much more disposable income than they do I am willing to pay more for it. To me, the assumption should be something like the amount of money as a percentage of my total wealth that I'm willing to pay is equal to the utility of the good.
You're right, it doesn't make sense and it's even worse than you think, because even a given individual doesn't give the same value to something depending on whether they have it (and are asked a price to sell), or not (price to buy).[1]
> It could very well be that the other person values the coffee a lot more than I do, but because I have so much more disposable income than they do I am willing to pay more for it.
In doing this (for any resolution of the question), you're making a quantitative comparison of utility between people. That transformation, that $1 for me is the same as $1 for you, is not at all a given -- but it doesn't have to be given, either.
> For example, the definition of an "efficient market" or the optimal level of production of some good both embed this assumption that willingness to pay equals utility.
You're neglecting that there are many possible definitions of 'optimal'. In fact, the fundamental theorems of welfare economics (https://en.wikipedia.org/wiki/Fundamental_theorems_of_welfar...) -- which give us the "market equals optimum distribution" idea -- only give us a Pareto optimal outcome, such that there exists no redistribution of products that would make everyone happier.
Only when we start comparing utility between people can we talk about ways of selecting between Pareto optimums. For example, a market distribution where I owned everything as god-king would be a (morally reprehensible) Pareto optimum, since you couldn't make anyone else happier without leaving me relatively worse-off.
Am I right in thinking that the concept of a social welfare function - which gives us a chance to specify that having you or anyone else as God-king is not the solution we want - is also considered part of welfare economics?
> one is willing to pay for a good is equal to the utility provided by that good [...] then I value the coffee twice as much as the other person
> And because this assumption is so fundamental to economics,
That's just plain incorrect, it is not. It might be one of the thoughts that has been used by some economists some time. It is far from any bedrock economic theory.
> Econ 101 is the most I've ever studied the subject.
Well there you go, that is the reason you would think that.
> To me, the assumption should be something like the amount of money as a percentage of my total wealth that I'm willing to pay is equal to the utility of the good.
I think you raise a good objection, but this metric overlooks the concept of leisure as consumption.
Say Alice doesn't like working and chooses to only work 10 hours a week. Whereas Bob really likes material goods and doesn't mind working a lot, so he works 80 hours a week. Bob will have eight times as much money as Alice, and therefore much more money to spend on things like coffee.
But this disparity really does reflect different utility levels for coffee (and other consumer goods). Alice does have less money to buy coffee but that's a downstream manifestation of the result that she genuinely prefers leisure over coffee.
To really get into it you have to start figuring out which wealth disparities are due to genuine differences in preferences (like higher savings rates, longer hours worked, studying harder in school, compensation for stressful or unpleasant jobs, more risk-taking, etc.), and which are due to exogenous factors (like higher intelligence, more opportunities, getting lucky in some endeavor, etc.)
As someone has already commented, the definition of an 'efficient market' in no way equates willingness to pay with utility, and in fact economists seldom make this assumption. Pareto efficiency is very deliberately not utilitarian. A Pareto efficient outcome needn't be a 'good' outcome, it is just an outcome such that no other outcome would make everyone better off. If an outcome isn't Pareto efficient then there is room for improvement. It's worth noting that while Pareto efficiency is central to some very neat foundational concepts taught in introductory econ, modern ecenomic research uses a range of welfare measures to quantitatively evaluate policies. This includes utilitarian welfare analysis. These maybe better capture the actual ethical goals we should have when making policy decisions, but they are usually a bit ad hoc and don't lead to such neat results.
> A bit of a tangent, but something that bothers me is the assumption in economics that the amount of money one is willing to pay for a good is equal to the utility provided by that good.
Some economic analysis uses that (or, rather that willingness to pay is linearly proportional to utility) as a simplifying assumption to make particular problems tractable (or, because the systematic bias it introduces is ideologically preferred by the actor doing the analysis), but it's fairly basic—like, 101 level—economics that aside from the biases introduced by variable wealth that this isn't true because money, like anything else—or, rather, a a direct consequences of this being true for everything money can buy—has declining marginal utility.
it seems like in the event that quadratic payments are applied to a situation where multiple parties are competing for a single good that it reduces to something similar to an auction. Imo it's clear that auctions, corresponding with what you said, favor those with the most income.
Yes, and adding a non-linear transfer function won't help in this case. To win an auction, I only need to outbid you by epsilon. Non-linear payments only help where the value of the thing being purchased can vary (non-linearly) with the purchase price.
can you go into more detail on this? it sounds interesting. What's an example of somethings value that varies non-linearly with the purchase price? Is a "non-linear transfer function" a stand-in for "quadratic payments" in this case?
"Non-linear transfer function" is a generalization of "quadratic payments." "Transfer function" is a general engineering term meaning a mathematical description of the output of a system in terms of its inputs. So the "transfer function" of a payment is its output (what you get) in terms of its input (what you pay). Normally that transfer function is linear: if one apple costs a dollar, then N apples will cost N dollars. (Actually, that's only true up to a point. In the real world, if N is large enough, N apples will cost you less than $N.)
You could imagine measuring in terms of each customer's annual incomes. In a year, you might provide value corresponding to 1% of ten customers' annual incomes, or you might provide value corresponding to 1% of a thousand customers' annual incomes. In some sense, in the former case you created a tenth of a person-income of value, whereas in the latter you created a hundred person-incomes worth of value. It'd be an interesting measure.
It would be difficult to make meaningful for a large group because a transfer from A --> B --> C --> D won't measure the same as a transfer from A --> C --> B --> D even though the outcome is equivalent.
Interesting, but if I interpret your assumption correctly it would remove the incentive for people to accumulate more wealth (if everything costs me a % of my net worth, why bother to own more than $1?). Continue the thought experiment and I suspect you'd arrive at some form of Socialism - a topic with a lot of academic material (as you inquired).
Neither does it take into account the ease at which one person can replenish their wealth compared to others (e.g. if rapid enough I can spend 100% of my wealth on every purchase).
But I get where you're coming from in terms of the entrenched economics being imperfect. I thought the end of the article offered some interesting ideas (even if they don't solve your problem), like:
A simple example would be a system where quadratic funding is done retrospectively, so people vote on which public goods were valuable some time ago (eg. even 2 years), and projects are funded up-front by selling shares of the results of these deferred votes; by buying shares people would be both funding the projects and betting on which project would be viewed as successful in 2 years' time.
This post describes a system of voting/payments where you can make multiple votes, depending on how strongly you value your preferred outcome, but each vote costs more than the vote before.
Identity management and collusion are big issues with these systems, as the essay points out.
For programmers, one way to think about this is that each voter has a state, n, that tracks how many of times they've voted. And each vote is more expensive than the last. Eventually you either run out of money or you lack the desire to spend more money on another vote.
But if you can create a new voter account as easily as you can create a new Gmail account, then once n gets sufficiently high, you just switch to a new account to lower the price of your vote.
Or if a really rich voter with a high n-value pays someone with a low-n value to make a vote on their behalf, the system collapses as well.
Enforcing strict identity management (e.g. requiring valid state-issued ID cards) and implementing secret voting can help address these problems, but my guess is that if there is a strong enough incentive, people will try their hardest and come up with novel ways to thwart these safeguards.
> But if you can create a new voter account as easily as you can create a new Gmail account
This is generally described as a Sybil attack [1].
> you just switch to a new account to lower the price of your vote. ... Or if a really rich voter with a high n-value pays someone with a low-n value to make a vote on their behalf
AFAICT the article discusses these problems:
> Perhaps the biggest challenge to consider with this concept of quadratic payments is the practical implementation issue of identity and bribery/collusion. ... Fortunately, there are technological means that can help, combining together zero-knowledge proofs, encryption and other cryptographic technologies to achieve the precise desired set of privacy and verifiability properties.
Fortunately, there are technological means that can help, combining together zero-knowledge proofs, encryption and other cryptographic technologies to achieve the precise desired set of privacy and verifiability properties.
This is placing too much trust in what is incomprehensible mathematics for 99.999% of the population. Even for those who understand it, they won't have any convincing way of being assured that 1) the maths is perfect and there are no flaws and 2) the voting technology in use is perfectly implemented.
On the other hand, the 'nineteenth century technology' of secret ballots is both obvious and simple. It's a shame that people like Vitalik are so dismissive of it.
I'm a developer with a strong math background, very security-minded, with experience using cryptocurrencies, pgp/gpg, privacy tools, etc.
I still would not be able to evaluate any sort of crypto program and certify its integrity, nor find any (save for the most eggregious) flaws. Even then, I have brought up questions in code reviews of "this seems to be flawed" only to learn "technically yes, but we have to do such gymnastics because of constraints xyz".
I, too, was big on the "blockchain is gonna make e-voting possible! Ra ra ra!" hype train for a while, but eventually wisened up to my own naivety.
I think paper is great because it's both proof of work (it had to be printed/written/modified) and proof of stake (e,g. I possess it and I can attest to its chain of custody), with zero lines of code!
SHA1 "is incomprehensible mathematics for 99.999% of the population", yet we do use it to great success. Same with public key cryptography. It doesn't seem to bother people that can't implement ssh/https from top of their heads, right?
> On the other hand, the 'nineteenth century technology' of secret ballots is both obvious and simple. It's a shame that people like Vitalik are so dismissive of it.
You can't write smart contracts based on secret ballots. The dream (well, one dream) is to have governance based on an ecosystem of programs that can vote perhaps hundreds of times a second. A lot of democratic procedure is built to work around the limitations of physical voting; this could qualitatively change the way decision-making works.
I don't think secret voting is as much of an issue as people make it out to be. Vote buying would in theory be a problem with today's usual voting systems, but in practice doesn't seem to be an issue. If we're voting on Proposition 1234 and I really really care but you don't, I should be willing to pay you to vote my way. But we don't see that happening.
You don't see it happening (much) because we have a secret ballot. If I really care about Proposition 1234 I can sell my vote to you, collect the fees, and still vote however I want. There have been cases where someone felt compelled to vote for something they didn't want because they didn't want to be seen voting the other way [their boss would fire them, or such situations], thus we no longer allow anyone to find out how an individual voted.
Ah, I thought this was about another kind of secrecy emphasized in the article:
>We don't just need votes to be anonymous and private (while still making the final result provable and public); we need votes to be so private that even the person who made the vote can't prove to anyone else what they voted for. [emphasis theirs]
This is the part I was saying doesn't seem so necessary.
I think that goes along with what the parent mentioned. If someone can prove how they voted, then Person A can buy Person B's vote and request proof that Person B voted that way. However, if Person B can't prove which way they voted and it is just based off trust then Person B can lie and still vote however they'd like.
It's a really nice property to have, though-- often on the path of authoritarianism is being threatened and having to pass various kinds of loyalty/political tests... if you could prove your vote this would just help that along.
Not really. If the vote was against you the entire community knows the majority are united against you and that power in numbers limits what punishment you can do. If the vote was for you then you are punishing your supporters more than your detractors.
Of course size and scale matter. China can still oppress Hong Kong even with a secret ballot because Hong Kong isn't large enough even united. (or are they?). However most cases are at least covered by secret ballots.
Like a vote-trading scheme where I can give you my vote on this issue I don't care about, to buy your support on some other issue you don't care about?
I've contemplated that too, but I'm not sure it leads to better results. I think good results come from amassing voters who are genuinely engaged on an issue, and entrenching a means for them to become well-informed before casting their ballot.
A system to deliver that, blocks the noise of political issues I don't care about (I simply don't participate, which is a good outcome since my participation adds little-to-negative value) and surfaces those I do. It provides me with expert analysis, arguments and counterarguments (something like StackOverflow to bubble the best content to the top?). And it makes more economical and efficient use of my attention.
I'm not advocating for any vote trading or vote buying. I think both would be terrible. I'm saying that both are incentivized in a traditional voting system but we just don't see it happening. Therefore, the fact that they're incentivized in a quadratic system doesn't mean it would actually be a problem. I'd rather be able to verify that I voted yes on prop 1234.
It's not just whether or not vote-trading schemes are a good thing or not, but the unfortunate issue that if voter secrecy is weakened to allow for vote trading, then abuses such as forced voting, blackmail or coercion also become viable.
I don't understand how the n value is even calculated in the first place. It never really said. It seems like a rich person only needs to buy one more vote than the poor person to win. I guess this works if the number of rich people is much much lower than the number of poor people.
This is also interesting mostly in a theoretical sense. The rich would never let any system like this go live.
According to the Austrian school N cannot be calculated. There are too many variables - and the people change their values in real time for various reasons (including irrational reasons).
The rich don't care though, because while they cannot calculate n, they can estimate it, and then go over by a bit just to make sure.
This is a fascinating collective decision making scheme. One potentially serious nitpick. In the "one dollar one vote" scheme, it makes a simplification that seems really bad. It's the same flavor of mistake as when you have the option of making a bet. If the expected return is positive, it says you should bet all of your money. In reality, people don't do this. Rational actors shouldn't even do this.
I'd love to see what an attempt at this same sort of number-of-votes-is-proportional-to-value comes to with a less simplified model of behavior. If I value outcome A at price $x and outcome B at price $y, I might not be able to afford $x^2+y^2, and this model doesn't say what I would or should do. A corresponding model that talked about how people allocate their finite money rather than a unit by unit spending description seems like it would better apply to reality.
It's simply not true that if EV is positive, you should bet all of your money. There's a classic formula called the 'Kelly criterion' to calculate how much of your money should be bet given your expected edge. The original paper (which came out of Bell labs, based upon noise over a transmission channel!) is a good read:
Can I check something - reading the wikipedia article on Kelly Bets it seems that one should take the expected chance of winning, double it and subtract 1.0 and use that as percentage of bet size
So when I win 3/4 times, that's .75 -> 1.5 -> .5 of my total wealth.
But this basically means never gamble till the odds are in your favour. (ie above .5 chance of winning)
Yes, although it is mathematically the ‘best’ way of increasing your bank, it is more aggressive than most people would be comfortable.
IIRC, at any point in time, you have a 50% chance of losing half of your wealth at some point in the future, when following Kelly staking. Most people choose some fraction of Kelly stakes in order to be less aggressive
I don't think this idea is actually implementable in a large-scale, real-world setting. One person, one vote democracy is pretty understandable to an average Joe who doesn't even remember what "squared" means. I think that a normal person would have no idea how much to spend on a particular decision, as the formulas would seem like black magic to them. Normal voting is pretty intuitive, quadratic is not. This problem is not that noticable for HN people, as our average intelligence is probably way above the societys', but before deploying this on a large scale, it has to be considered. I don't think that internal workings of democracy should be something that an average school child can't easily grasp.
part of the reason the so-caleld "average Joe" doesn't remember what squared means is becuase they don't really have to.
If this scheme were part of the world form the minute "Joe" is born, Joe would have to understand this.
education must improve. the current paradigm of education is reminiscent of an assembly line. if kids aren't manufactured goods, why is their education treated as such?
We tried quadratic voting for our team choosing a new name, and we did not find it to work well. I think the analysis that the scheme even converges makes simplifying assumptions that aren't well justified, particularly that everyone knows the marginal probability of each candidate winning (when that itself is behind a fairly inscrutable voting method.) Without that assumption I think it falls apart.
The optimal strategy is to vote maximally for your preferred most likely contender, and maximally against the nearest competitor, but if you don't know who those are, the system provides no means of discovery. So strategic voting is not just possible, it is critical to have any influence, but the evidence needed for optimal strategic voting is neither obvious, nor revealed by the system, (and from our experience I don't think it has any stable Nash equilibria.)
After a few days with the system, we finally abandoned it and switched to a condorcet election.
While reading I wasn't convinced this was going to work due to the collusion problem, until I read the comments on collusion which add an extra condition: "we need votes to be so private that even the person who made the vote can't prove to anyone else what they voted for."
However, this condition is not enough, it doesn't cover the case where someone is being watched while they are voting. The condition should be something like:
"we need votes to be so private that only the voter can know what he voted on"
I don't see many solutions to this, except the '19th century' way of voting at a voting station, or a voting machine that can read minds. Obviously it would be pretty strange inputting your vote through thoughts, especially since this system might never allow you to confirm what you voted on.
However, I guess even ballot voting could suffer from collusion since it's not fundamentally private. You could take a hidden camera into the voting box and record your vote, and afterwards get a payout.
I've always enjoyed the concept of exponential costs for incremental gains. I've had the benefit of only really utilizing them in strong-identity systems (games) but I've considered some of the drawbacks of using them in weak-identity systems and come to a few ideas:
1) A participation barrier can be used to prevent identities from participating until they've overcome something. A simple example would be an age barrier (identity must exist for some period of time before participating) which prevents spinning up multiple identities on-demand to try to increase voting power. Ideally, in practice there would be multiple barriers that would be naturally-occurring for a real participating identity but too expensive to create/maintain several identities.
2) Similar to (1), have an ongoing cost to maintaining identities. Something such as a "subscription fee" may serve as a deterrent as the value of one identity needs to be weighed against the cost of maintaining it. This can be made additionally effective if the issue being voted on recurs every period rather than one-time (i.e. revisiting regulation votes every cycle instead of just voting once and having the regulation remain until stricken). For the normal participant, the value of this subscription could be offset by access to a non-scaling benefit - i.e. access to private content/events.
3) While the article focuses on the economics in terms of dollars there's the very real question of allowing votes to be purchased with other forms of currency that either complement or replace traditional currency. This is common in MMOs where you can have multiple characters (weak identities) each with their own in-game currency that can be acquired from in-game activities and may or may not be exchanged with real-world currency depending on the stance the owners of the game take.
Suffice it to say there aren't really silver bullets to "general purpose quadratic payments with weak identities" but you could create some limited-purpose constraints that are particular to the problem/community and make some strides from there.
It seems like solving the Sybil problem (a prerequisite to this scheme having any use whatsoever) might be something better on which to focus attention first, as it has other useful applications, even in one-person, one-vote democracies.
Really great to see Vitalik working with Glen Weyl's ideas. Weyl's collection of "radical ideas" may actually become more than just thought experiments.
The main topics of interest here are how non “quadratic” voting converges to quadratic via influence peddling or subquadratic in the form of rigged/kabuki elections.
A bit of a tangent, but something that bothers me is the assumption in economics that the amount of money one is willing to pay for a good is equal to the utility provided by that good. And then it follows that if I am willing to pay €2 for a coffee and another person is only willing to pay €1 for that same coffee, then I value the coffee twice as much as the other person.
But to me that doesn't make much sense. What if I am a billionaire and the other person is very poor? It could very well be that the other person values the coffee a lot more than I do, but because I have so much more disposable income than they do I am willing to pay more for it. To me, the assumption should be something like the amount of money as a percentage of my total wealth that I'm willing to pay is equal to the utility of the good.
And because this assumption is so fundamental to economics, it determines the conclusions that the field reaches. For example, the definition of an "efficient market" or the optimal level of production of some good both embed this assumption that willingness to pay equals utility. And then one can imagine that policy decisions and such are influenced by this assumption. (And in fact the article itself mentions this problem: "Another challenge is that quadratic payments, being a payment-based mechanism, continues to favor people with more money.").
So I'm wondering if anyone has looked into an alternative formulation of economics with a different fundamental assumption (perhaps something closer to the one I proposed above). If so, do certain things that are determined to be "optimal" in classical economics turn out not to be optimal in this alternative formulation (and vice-versa)? Apologies if this is a bit of a naive question; Econ 101 is the most I've ever studied the subject.