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.
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.
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".
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)
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.
Here's a video that explains this idea, called "praxeology" in these circles. He explains it in the first five minutes: https://www.youtube.com/watch?v=TI5fjTz1Rbw
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]
[1]: https://evonomics.com/resolve-fights-reclining-airplane-seat...
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.
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.
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.)
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.
This seems to boil down to observing that it's good to have money.
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.
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.
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.
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.
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'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.
This is also interesting mostly in a theoretical sense. The rich would never let any system like this go live.
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.
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.
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)
What does this say about founding a startup?
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?
While it would be a regression in this aspect, I'm not sure this outweighs the potential benefits.
On arxiv: https://arxiv.org/abs/1809.06421
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.
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.
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.
