In 1997, I got my Ph.D. in social science from Caltech. The topic that drew me into grad school, and much of what I studied, was mechanism and institution design: how to redesign social practices and institutions. Economists and related scholars know a lot about this, much of which is useful for reforming many areas of life. Alas, the world shows little interest in these reforms, and I’ve offered our book The Elephant in the Brain: Hidden Motives in Everyday Life, as a partial explanation: most reforms are designed to give us more of what we say we want, and at some level we know we really want something else. While social design scholars would do better to work more on satisfying hidden motives, there’s still much useful in what they’ve already learned.
Oddly, most people who say they are interested in radical social change don’t study this literature much, and people in this area don’t much consider radical change. Which seems a shame; these tools are a good foundation for such efforts, and the topic of radical change has long attracted wide interest. I’ve tried to apply these tools to consider big change, such as with my futarchy proposal.
I’m pleased to report that two experts in social design have a new book, Radical Markets: Uprooting Capitalism and Democracy for a Just Society:
The book reveals bold new ways to organize markets for the good of everyone. It shows how the emancipatory force of genuinely open, free, and competitive markets can reawaken the dormant nineteenth-century spirit of liberal reform and lead to greater equality, prosperity, and cooperation. … Only by radically expanding the scope of markets can we reduce inequality, restore robust economic growth, and resolve political conflicts. But to do that, we must replace our most sacred institutions with truly free and open competition—Radical Markets shows how.
While I applaud the ambition of the book, and hope to see more like it, the five big proposals of the book vary widely in quality. They put their best feet forward, and it goes downhill from there.
Their best proposal comes in section one: “common ownership self-assessed tax”, on which I’ve blogged before. There isn’t that much new in the book that isn’t in their previous articles. Its really just a self-assessed property tax; you declare a price at which you’ll sell each item, and then pay a fixed percent of that price per year as a tax. The authors try to put a socialist spin on this by calling it “common ownership”, suggesting that the tax revenue would go to help the poor. But actually the money could go anywhere, including going on average back to the same groups who paid the tax.
For property that is publicly known and visible, such as land, patents, or accident liability, this idea seems ready to go live, and I endorse it. For hidden property, like your furniture or cutlery, we still need to work out good ways to handle damage to property during a transfer period, and to tradeoff privacy and letting potential buyers see what they might buy. These problems seem solvable, but haven’t been clearly solved. The authors suggest arbitrary bundling of items, but it seems to me safer to set limits here. And for property like work that comes bundled with effort and complex effects on those who make the effort, there’s still a lot of fundamental work to be done before we have viable proposals to consider.
The second best proposal comes in the second section: quadratic voting. I’ve also blogged on this, and the book doesn’t say much more than were in prior articles. People would get an income of votes at some rate, can choose how many votes to spend on which side of each binary issue in each election, and the winner on each issue is the side with the greatest sum of square root of votes cast per person on that issue. Optionally, people might be allowed to buy votes for cash.
This is an intriguing idea, but there are obvious potential problems of collusion and agenda setting. The authors have some plausible ideas on these issues, and some theory and lab experiments have been done, but what this really needs is field trials, where real organizations try this across an interestingly wide range of time and topics. Maybe those will work great, but I’m not sure what more there is to say until we see such trials. I encourage interested groups to consider giving this a try.
The third best proposal is in the fourth section. The key proposal is to prevent big investors from encouraging collusion between two firms in the same industry via owning large fractions of both:
No investor holding shares of more than a single effective firm in an oligopoly and participating in corporate governance may own more than 1% off the market. … Savers can simply invest some of their money in many different institutional investors.
I’m not convinced there’s really that much of a problem here that needs solving, but this seems an admirably restrained and targeted fix for what could in principle be a big problem. So I can support it.
Section three proposes to reform immigration:
Our proposal, which we call the Visa Between Individuals Program (VIP), would extend this [H1-B] system so that an ordinary person could sponsor a migrant worker, albeit with some adjustments to reflect the differences in circumstances, and for an indefinite period rather than a renewable three-year period. We would allow people to sponsor one migrant worker at any moment in time. …
Anthony interviews Bishal … the two agree that Bishal will work for Anthony for one year in the United States for $12,000. Anthony will need to use his savings to buy Bishal a plane ticket. They agree that Bishal will reside in Anthony’s spare room. … What if Bishal cannot find work? Or he become ill … commits crime, or simply disappears? It is necessary to make Anthony responsible in such a case so the sponsors have good incentives to screen out migrants will will not contribute. … Anthony will be required to obtain basic health insurance for Bishal before he arrives. … Migrant workers must be permitted to work for below the minimum wage. … All other worker protection rules … would apply to them. … Localities should be allowed to put limited constraints on their residents’ use of the VIP program, akin to zoning regulation.
Given the usual (and reasonable) presumption that more immigration is efficient, I could support this as a gain over the status quo. But compared to other ways to promote immigration, it is far from clear that this is more efficient or would attract more political support. Compared to simple auctions (or transferable property), the authors emphasize how their proposal involves a personal connection, and that sponsors might be the same sort of poor low skill workers that feel hurt by immigrants. But other systems would surely result in personal connections, and I expect few low skill workers to actually want to be sponsors. Also, this artisanal process just doesn’t seem an efficient one for sponsoring and integrating immigrants; I expect that firms specializing in this role could do it better and cheaper.
The key problem is how to pay off potential losers, and this system isn’t obviously well targeted to them. We need better data on who would support what variations, or we need variations that would more clearly attract sufficient support. So far I don’t see much of a reason to think that this proposal would do better than obvious alternatives.
While one of the authors told me that the last section of the book has generated the most interest, alas intellectually it is also the least well thought out.
In the world we imagine, Facebook is open and honest about how it uses data and pays for the value it received with money. … Data workers will need some organization to vet them, ensure they provide quality data, and help them navigate the complexities for digital systems without overburdening their time. These triple roles, of collective bargaining, quality verification, and career development, are exactly the roles unions playing during the Industrial Age. … Once the union achieved a critical mass, it could approach Facebook and Google and threatened a “strike”. … Unions might find it optimal to share data between many different digital companies, rather than causing it to accumulate in one place. … Appropriate technological systems would have to be built for tracing and tracking the value created by individual users. … A fair digital labor market would require a new regulatory infrastructure adapted to it. … Require allowing trusted agents to whom they delegate to access data in appropriate formats.
This isn’t a crude summary of some other more detailed proposal and analysis; this is all they’ve got. As they clearly have no idea how to actually do this, we aren’t remotely ready to seriously consider such a proposal. Furthermore, the authors seem completely out of touch with reality in imagining that this could substitute for real jobs:
In a world where digital contributions were appropriately valued by society, many video gaming young men could convert their enjoyment of gaming into a productive skill. … It is not hard to imagine that the skills these young men have acquired in their life as gamers might help them earn a living if data were treated as labor.
Google and Facebook today make $80 and $20 per user per year in ads. So actually, yes, that scenario is very hard to imagine.
In sum, the data proposal is best forgotten, the immigration proposals needs political opinion data, the investment proposal is reasonable and ready to adopt but probably won’t make much of a difference, the voting proposal seems promising but needs concrete field trials, and the property tax proposal is ready to adopt in some areas, but needs some more work before it can be adopted more widely.
Overall, it is great to see a wider public becoming exposed to ambitious proposals for social reform based on solid social design analysis. I hope we’ll see a lot more of this.
Not quite. The declared value will be reservation price discounted by the ability to pay the tax. For the wealthy the declared value will be close to the reservation price, but for the poor it can be far apart.
The proposal discriminates against those people who set higher reservation prices (relative to perceived open market value) because they are more averse to risk or to change in their circumstances.
It discourages commitment to community, and the putting down of roots in a particular place, since to the extent that doing so raises reservation prices, these behaviours will now be taxed.
The folk who will benefit from the discrimination are those higher in trait openness, and perhaps those lower in trait agreeableness since they have thinner social networks: in other words, and speculatively, the people who like reading Robin Hanson.