> Three art patrons each contribute [money] to the local public art museum. [...] They each expect to experience [money] worth of individual utility from enjoying the [...] art.
> [...] utility of saved lives is experienced only once by each of the cancer patients – the three contributors don’t experience that utility (other than feeling good about those lives being saved, but that’s not the kind of utility we’re trying to maximize).
This approach of intellectual unsoundness - i.e., accepting the social and individual utility of enjoying the arts, but denying any such utility for enjoying the saved lives – is present throughout the article. And I haven't started with the author comparing random cases of contributions that differ in multiple dimensions where using a ceteris paribus approach would immediately show that his arguments are shallow...
But in the part of the article you quoted above, the author (me) specifically acknowledges the utility of enjoying saved lives. But this is a critique of the quadratic funding mechanism, which is a public goods funding mechanism meant to maximize the utility each individual independently derives from enjoying public good.
The whole point of the article is to critique this assumption -- to point out that people's motives are sometimes altruistic (they derive utility just from knowing other people benefit), but the optimality of QF assumes this vicarious utility does not exist. As the article states "When individuals make contributions for purely altruistic reasons, they don’t directly experience the utility themselves. And yet the optimality of QF assumes that all utility is direct utility, benefiting the contributor only."
I'm willing to accept this statement of your's about QF as correct: "QF assumes that all utility is direct utility, benefiting the contributor only." This still does not exclude the utility of saving lives for the savior. If the act of saving a live is worth 10m units of currency to me, the utility that I derive must be at least 10m units of currency. This is the "direct utility benefiting the contributor"! You cannot claim that QF cares only about direct utility of the contributor, but then go on and set that direct utility to 0, claiming QF didn't care about it.
No one donates $100K to the opera because they enjoy attending opera $1M worth. It's absurd to accuse any opera organization of assuming that.
Someone buys a ticket to the opera for $100 because they enjoy attending opera >$100 worth. They donate $100K because they want other people to enjoy opera, or for personal advertising purposes, not charitable social purposes.
I think the article was going for a comparison between extrinsic motivation (which they seem to claim the original quadratic funding requires) and intrinsic motivation. It seems they just chose a poor example. The article attempts to quantize the expected reward for the extrinsic motivation ("They each expect to experience €6,000,000 worth of individual utility") while it fails to quantize the expected reward for the intrinsic motivation ("But in the selfish scenario, total utility is 3 times higher, because the utility is experienced independently by each contributor, whereas utility of saved lives is experienced only once by each of the cancer patients).
I believe, it has to do with their narrow conception of "experience". I don't know how any rational person could expect to "experience" €6,000,000 worth of art as my first criticism. Now, it would be fair to say that the implication that the wealthy benefactors expect that experience could be seen as a criticism of quadratic funding. But to roll with that ludicrous expectation for the sake of argument and then to fail to give a similar expectation of reward from the experience of saving 60 lives is not a fair argument.
If I can "imagine" the benefactor expecting €6,000,000 worth of experience for knowing the art is on display at the local museum, I could "imagine" the benefactor expecting some non-zero-euro amount of experience for knowing 60 people survived cancer.
If we quantify the "experience" in euros for the first scenario, it seems unfair not to quantify the "experience" for the second scenario. In this case it is about being consistent in argument, which the article fails to do.
the challenge is that measuring benefit is hard.
The numbers in the example are indeed impossible to measure. But QF is claiming *optimality* -- that it maximizes social welfare -- when certain assumptions hold. To show that QF does not maximize social welfare when these assumptions don't hold, it suffices to show a single hypothetical counterexample.
> that’s not the kind of utility we’re trying to maximize
Who is "we"? I read it as "the author applying the assumptions of QF", yet the whole point he makes there in the name of QF would contradict the previous statement of his that "QF assumes that all utility is direct utility".
The author makes no statement about the utility of enjoying the arts vs the utility of saving lives. They're making up hypothetical examples with specific properties that demonstrate problems with QF.
> They each expect to experience €6,000,000 worth of individual utility from enjoying the additional €9,000,000 of art.
> Net social welfare:
> Total Utility = 3 × €6,000,000 = €18,000,000
...just to go ahead and to deny any relevancy of the utility of saved lives:
> the three contributors don’t experience that utility (other than feeling good about those lives being saved, but that’s not the kind of utility we’re trying to maximize).
It’s a much simpler idea to just have citizens vote for what they want their tax money spent on, by voting for candidates who will represent their interests.
https://jonathanwarden.com/quadratic-funding-is-not-optimal/...
In the original paper, the authors acknowledge this is a problem: "...once we account for the deficit, the QF mechanism does not yield efficiency.
Why else would you dream up such a scheme except for the purpose of replacing the one we're using (e.g. the one where the scarcity of money is determined by bankers' willingness to issue loans)? Perhaps the author is right that QF is not optimal, but what we're doing now does not care whether a funded venture helps or harms the people, so I'd say the bar to clear is pretty low.
Note that I don't really disagree with your second. Just pointing out that your two options for how government got money is not complete.
I think your comment is operating under the assumption that the "folk theory of democracy" works: https://en.wikipedia.org/wiki/Folk_theory_of_democracy
It's a term from "Democracy for Realists", written by some democratic theorists. They disassembled the argument for it in the first half of chapter 1, and then spent the rest of the book refuting pretty much all the other competing academic theories that other democratic theorists actually believe in (scholars of democracy absolutely do not believe in the folk theory).
EDIT: Which is just to say that we need to improve the incentive structures (which QF takes a stab at doing, though there are other approaches). We need these experiments because we need to learn what actually works -- the old theories never actually did, and the prior assumptions that made this disconnect negligible are starting to fail.
But they apply to quite different settings and are not really the same thing. With Quadratic Voting, people pay for votes (with cost determined by a certain formula). With Quadratic Funding, people contribute to projects (with matching funds determined by a certain formula).
QV also makes many assumptions that rarely hold in reality, just like QF does. I may write an article about this someday.
Here's an explanation of Quadratic Funding from their website[1], which I guess they now refer to as "Plural Funding":
Plural Funding (also known as Quadratic Funding or QF) is a more democratic and scalable form of matching funding for public goods, i.e. any projects valuable to large groups of people and accessible to the general public.
“Matching funding” is a model of funding public goods where a fund from governments or philanthropic institutions matches individual contributions to a project. Plural Funding optimizes matching funds by prioritizing projects based on the number of people who contributed. This way, funds meant to benefit the public go towards projects that really benefit a broad public, instead of things that only have a few wealthy backers. In Plural Funding, [total funding] for a proposal is [the square root of each contribution to it → summed up, then squared.] Plural Funding strongly encourages people to make contributions, no matter how small, and ensures a democratic allocation of funds meant to benefit the public.
EDIT: formatting
Quadratic Funding is a mechanism where individuals voluntarily contribute funds for some public good (e.g. an open source software project), and then these are matched such that the total funding amount is equal to the square of the sum of the square roots of the individual contributions. Under certain assumptions, this formula results in an optimal outcome, where each individual contributes an amount that maximizes their individual utility (given what others are contributing), and total utility for society is also maximized.
Also this article is explicitly challenging these assumptions.
And when they're done, the proofs are recognized as being fully out of touch with with the reality we actually live in based on the fact that their assumptions are also out of touch, and nobody actually tries to use them to make decisions about how to do things in our very real and non-simplified society?
(Which is why no one should ever even be allowed to have that much money)
Well, yes, but those many more people getting more utility didn't contribute. If the same contribution was spread out over 10x the people each contributing $10, they'd get 10x the funding.
Their complaint here is really that ideal QF would also require assuming people actually get involved with it. I agree it has issues, but this isn't what I'd lead with. Coordination seems like a much larger threat to the concept.
Agree, coordination is a larger threat to QF. But this issue has been discussed extensively. In this article I wanted to point out all the other assumptions behind QF and what happens when they don't hold.
Setting aside the emotional content and looking only at the math, it’s not at all obvious to me that the project with 100 donors was somehow shorted.
It's not a good way to allocate funds, but I don't think it's a slam dunk to say it multiplied a larger group's money more than it did a smaller group's.
QF assumes that you can know for sure who is an individual. Yet how would you know that with crypto funding?
Let's say I'm malicious and I want to pillage a QF. What stops me from setting up a bogus social project/company, registering it, and then taking my $1000 and splitting it into 1000 wallets with $1 a piece which all contribute to my scam project?
If I know a QF fund is getting setup, it'd be pretty easy to create 1000s of wallets, vary the money in them, and have them all fund my scam. I can even automate some trading between these wallets to make the source of the funds look somewhat organic.
Pillaging these funds seems like it's almost a trivial endeavor assuming you can get your own scam company associate with them. And the more money you have, the easier it'd be to pillage.
It is, and in fact the authors point this out in the original paper:
"…if the size of this group is greater than 1/α and the group can perfectly coordinate, there is no limit (other than the budget) to how much it can steal."
> I have to say that the biggest flaw I see isn't theoretical, it's practical.
Exactly. The theory is fine -- given all these assumptions hold. In practice, these assumption don't hold.
For example, one of the assumptions is absence of sybil attacks, fraud, or collusion. Obviously, these assumptions may not hold.
You can defend against sybil attacks in various ways. But how do you stop people from colluding (e.g. I $10 to 1000 friends, tell them they can keep $5 if they contribute $5 to my project)? There are collusion-resistant forms of quadratic funding, such as COCM, but these do not have the desirable theoretical properties (such as optimality) that vanilla QF has.
It's funny that a cooky proposal originating from crypto, which is incredibly inefficient precisely because it has to defend against sybil attacks (unlike permissioned systems), assumes the absence of sybil attacks. Hilarious, really.
For example Gitcoin uses passport.xyz to determine if your account is considered legitimate.
I am far from denying that in our system equilibrium analysis has a useful function to perform. But when it comes to the point where it misleads some of our leading thinkers into believing that the situation which it describes has direct relevance to the solution of practical problems, it is time that we remember that it does not deal with the social process at all and that it is no more than a useful preliminary to the study of the main problem.
>instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge.
(In the same spirit, I'm trying to move beyond dissfests towards more collaborative convos on HN)
@warden I was encouraged to see "perfect knowledge" replaced by "sufficient knowledge" in at least once instance in your post.
We should encourage Glen & Michael to work on seeing if weakening their assumptions as above would produce proofs of more useful natures, as a prelim to solving the knowledge problem :)
(Alas collabs take work, & HN is primarily an entertainment & venting channel, due to its ephemeral design)
"If the wealth equality assumption does not hold, QF is anything but optimal. Consider these two examples:
Ten wealthy art patrons each contribute €1,000,000 to the local public art museum.
Total Contributions: 10×€1,000,000=€10,000,000
QF allocates: (10×sqrt(1,000,000))2=€100,000,000
Subsidy: €90,000,000
Total Contributions: 100×€100=€10,000
QF allocates: (100×sqrt(100 ))2=€1,000,000
Subsidy: €990,000.
Intuitively, I thought: Well, the "hundred lower‑income individuals" got there money 99x, while the "Ten wealthy art patrons" only got 9x. (1/11 for having 1/10 participants). Isn't that working as intended?
Especially if you have a progressive income/wealth tax.
I will update the article so it reads like this:
Ten wealthy art patrons each contribute €1,000,000 to the local public art museum.
Total Contributions: 10×€1,000,000=€10,000,000
QF allocates: (10×sqrt(1,000,000))²=€100,000,000
Subsidy: €90,000,000
Ten lower‑income individuals each contribute €100 to replace lead pipes in their neighborhood
Total Contributions: 10×€100=€1,000
QF allocates: (10×sqrt(100))²=€10,000
Subsidy: €9,000.
Given the assumption of wealth equality (and other assumptions), the QF paper proves that allocating more money to art maximizes social welfare, because if people contribute more to the art, it means art it has more utility.
But given the reality of wealth inequality, and the theory of diminishing marginal utility of wealth, the wealthy may contribute more to art simply because they can afford it, and because 1,000,000 may not have any more utility to them than 100 has to a very poor person.
Today, if I get 1000 people to give $10 to the local library or public sport place, I have $10.000. (1000xsqrt(10))² are $10.000.000.
For me, an obvious fix for potential exploitation would be to cap the individual contribution to 10k or 100k. However, as I said I know nothing about qf and this has prob. already been discussed to death.
However, compare these two problems: a) not enough people who can afford to do so engage in philanthropy, and b) philanthropic funding isn't quasi-democratically distributed. I have to imagine that (a) is a much, much bigger issue than (b).
I guess one could argue that because there isn't an analog of "a market" for public goods (c.f. "The Use of Knowledge in Society") somehow we aren't funding the important public goods "efficiently"? And maybe we should think about this more? Yet it's not clear that efficiency (in the economic sense) should be the goal or even applies. This is because markets are great at distilling people's the preferences for fungible goods they want to buy and fungible services they want to use when faced with multiple options for procuring some of each. But a) the vast majority of people don't have that same type of preference for which public goods should be funded, and b) public goods typically aren't fungible. (I.e., funding one scientist gives you a very different research output from funding another in the same subfield.)
Consider philanthropy funding as actions that terraform the future. The future is where all possibilities unfold, so shaping future landscape pays dividends to the worldview of those who materialize it.
I would propose that if (b) is miscalibrated and inequitable, it might affect everything, including (a), much more than we assume.
But also, I'm not trying to claim I know that one is more important, just that they're both quite important and very interrelated :)
But, to start chipping away… For the wealth inequality section, I gather the goal is to let people provide a signal based on how much they are willing to spend. Shouldn’t that be corrected for their wealth, because that shows how much they value the thing? If the art patrons are all 1B-aires, and the anti-lead-pipe folks are 100k-aires (just to make the math easier), we could do:
Art:
10*(sqrt(1M/1B)^2) = 1/100
Pipes:
100*(sqrt(100/100k)^2) = 1/10
Now we’ve got some measure of everybody’s preference, and can allocate the budget appropriately. Whatever the overall budgets is, 10x more for pipes than art seems… well, at least a lot closer to reasonable than ~100x more on art than pipes
But yes, that part does seem solvable with a correction like that even if my preferred fix would be removing the billionaires ;)
As soon as the quadratic decrease is more than my marginal tax rate, I’m better off buying an NFT from the cause I want to support than making a donation.
> So how about non-excludable goods that are rivalrous in nature? This intersection represents common goods such as fish, timber or coal. Everyone has access to these resources but there is an inherent competition when it comes to collecting them due to potential overuse or congestion.
These are excludable in many countries. There are often regulations which prevent you from making a living selling fish or timber. There is a significant financial and time hurdle which needs to be cleared to obtain a boat + license to fish commercially. In terms or logging and coal mining, you are excluded based on lack of access to land + equipment + license. Not everyone legally has access to these in all countries. Also, it's not even possible to obtain a loan to do these in most countries. It's literally impossible to get started if you do not have the financial means.
I would also question the 'non-excludable and non-rivalous' quadrant. Not everyone has access to clean air. Many people are trapped in urban centres with low air quality and cannot afford to leave. Some literally cannot leave because they may be in prison, on probation or it's a condition of bankruptcy. Clean air is rivalous since there are a limited number of jobs available in places where the air is clean. Privacy is certainly excludale; e.g. prison and clearly it is rivalous as we have to fight to protect it constantly.
So, if we focus on these boundaries, as honest and curious scientists & engineers, we might chance on new avenues
Sounds like a contradiction to me. Nothing about cryptocurrency should be considered a public good, even if wealthy donors are struggling to efficiently donate money to its development.
There is another method of funding public goods re-surfaced by crypto folks: DAC (Dominant Assurance Contracts) which is more like SiTG (Skin in The Game), and I think many blank check companies / SPACs use some elements of it
BTW, that’s why economists can’t predict sh*t: they trying to use simple curves / closed form solutions, instead of using ABM (Agent-Based Modeling) or even more advanced simulation methods
It's incredible how, whenever people try to come up with some centralized framework, ideology or plan to improve things, they make things worse and the cost falls on someone else's shoulders.
I've been feeling the effects of this deeply flawed philosophy in my life literally every day yet I had no say on it.
There are also issues plaguing the ecosystem like delayed or missing payments