I wonder about this kind of article. It is a big list of problems, so it seems like we’ll end up having a bunch of unrelated conversations here, which seems unfortunate.
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
gbacon · 1h ago
Regarding both perfect knowledge and equilibrium discovery, consider Hayek’s work on what he called the knowledge problem, beginning with “The Use of Knowledge in Society.” No person or entity possesses perfect knowledge of the current state, and no one has perfect knowledge of the follow-on simple or higher-order effects. Instead, apply the insight from public choice theory that state actors make self-interested choices. Cui bono?
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.
> Intuitively, this seems wrong: the art museum receives a far larger subsidy, yet many more people benefit from replacing the lead pipes, and the utility-per-individual is arguably much higher as well.
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.
jwarden · 1h ago
In the example in the article, many more people did contribute to the lead pipes (100 people vs. 10 for the art museum). And they still get only a fraction of the funding that the art museum gets.
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.
gs17 · 49m ago
But do we know the "ideal" funding values for the pipes and museum (and if we can, then why not use that)? It's only really "unfair" if we know that the pipes "deserve" a disproportionately larger multiplier. If the pipes deserve to be funded regardless of contributions (and they probably do), then the issue is using a system that could possibly fail to provide for them in the first place.
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.
sokoloff · 1h ago
But they got 99 shares of government contribution for each share they put up for a 100x multiplier while the art patrons got 9 shares of government contribution for a 10x multiplier.
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.
jwarden · 6m ago
Yes good point. We'd have to actually flesh out the assumptions about marginal utility of wealth for low-income vs. the high-income group (as well as assumptions about individual utility functions), to demonstrate that this outcome was not optimal. I didn't do that in this article because it gets too mathy.
However, the optimality of QF does assume wealth equality. When you drop that assumption and assume diminishing marginal utility of wealth, you can show that QF is not optimal.
But I think you are right that the example in this article doesn't necessarily show that clearly. The example leans heavily on intuition (or emotional appeal). I think I will try to improve that section.
sdenton4 · 49m ago
A core problem of capitalism is that it only solves the problems of people with money... This is more of the same.
Consider that any of those 100 people might have a kid who would be the next Einstein, if only they hadn't been lead-poisoned. But these hundred people also have rent to pay and food to buy, and can only set aside $100 to deal with the lead-pipes problem. The existing distribution of wealth is not a good measure of the importance of the problems that these different individuals are experiencing. And the existing distribution of wealth is thus not a great way to prioritize solving problems for maximum societal benefit.
spencerflem · 51m ago
Many people would consider fixing pipes a more important project despite the fact that the wealthy contributors could front a lot more cash for their pick.
sokoloff · 48m ago
Great. Now, suppose the 10 wealthy people are in favor of the pipes project and the 100 average people are in favor of an art museum.
Is the art museum or the pipes project more important?
efitz · 1h ago
It sounds like a kooky idea and neglects the fact that “the government” isn’t some magical source of money; it got that money from its citizens somehow (taxes or inflation).
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.
jwarden · 1h ago
Yep. QF basically assumes that subsidies are "free money", as discussed in the article:
In the original paper, the authors acknowledge this is a problem: "...once we account for the deficit, the QF mechanism does not yield efficiency.
taeric · 1h ago
Government can also get money through bonds, though? And government spending of these funds can be argued to go much more directly to economic growth for the region than most any other spending.
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.
sokoloff · 1h ago
Bonds are an exchange of cash now for more cash later in the other direction. Eventually, that “cash later” is taxed or inflated away (printed), so it’s a difference in timing more than category.
taeric · 1h ago
Fair. Still largely a different form getting cash now, though? Particularly if you account for the fact that governments can go belly up.
cleak · 2h ago
This looks interesting, but I have no idea what I’m looking at with the original paper. Could someone provide a simple summary that doesn’t rely on knowledge of Quadratic Voting?
bts · 2h ago
Quadratic Voting and Quadratic Funding have some ideas in common, but they refer to separate concepts. To learn more about these topics, I would probably check out the website for RadicalxChange. IIUC RxC is the main public body attempting to realize the theoretical benefits of QF and related ideas.
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.
So I make 1,000,000 separate donations in the amount of $0.01?
timerol · 1h ago
Both QF and QV rely on verifying identity, so that would be counted as one donation of $10,000. The entire point is letting numbers of people balance in some way against amounts of money, so allowing one person to count multiple times breaks the system
sokoloff · 1h ago
I used to think the employer drives to contribute to the company's preferred charity were bad before QF; they’re bound to get a lot worse with it, giving power to employers with lots of employees and a willingness to encourage them to donate as little as a penny.
jppittma · 26m ago
So I have to give it out and have people donate it on my behalf?
jwarden · 1h ago
Total funding in this case would be: (sqrt(.01) * 1000000)^2 = 10 trillion dollars.
nightpool · 1h ago
(10 billion, surely?)
jwarden · 1h ago
Oh right: (sqrt(.01) * 1000000)^2 = 1.0e10
jwarden · 1h ago
Here's a very brief summary of what Quadratic Funding is (which is distinct from Quadratic Voting):
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.
jovial_cavalier · 1h ago
a more plain-english explanation from Vitalik's blog:
> for funding public goods—especially in the cryptocurrency space.
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.
jovial_cavalier · 1h ago
I had always interpreted quadratic funding as being a tax rather than a subsidy. You donate $100 and the cause receives $100, then your next marginal $100 is discounted quadratically, and the government receives the difference. I think that just straight up resolves the first two issues.
sokoloff · 57m ago
I think that very quickly just changes the forms of donation to be “something that doesn’t count as a donation” (buying tickets or even just straight up NFTs).
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.
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
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.
https://www.kysq.org/docs/Hayek_45.pdf
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.
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.
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.
However, the optimality of QF does assume wealth equality. When you drop that assumption and assume diminishing marginal utility of wealth, you can show that QF is not optimal.
But I think you are right that the example in this article doesn't necessarily show that clearly. The example leans heavily on intuition (or emotional appeal). I think I will try to improve that section.
Consider that any of those 100 people might have a kid who would be the next Einstein, if only they hadn't been lead-poisoned. But these hundred people also have rent to pay and food to buy, and can only set aside $100 to deal with the lead-pipes problem. The existing distribution of wealth is not a good measure of the importance of the problems that these different individuals are experiencing. And the existing distribution of wealth is thus not a great way to prioritize solving problems for maximum societal benefit.
Is the art museum or the pipes project more important?
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.
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.
Here's an explanation of Quadratic Funding from their website[1], which I guess they now refer to as "Plural Funding":
[1] https://www.radicalxchange.org/wiki/plural-funding/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.
https://vitalik.eth.limo/general/2019/12/07/quadratic.html
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.
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.