Radical Markets

* Book: Radical Markets. By Eric Posner & Glen Weyl.

URL = [1]

Contextual Quote

"The authors propose fundamental changes to property that would, in theory, increase economic efficiency while also sharing wealth more equally. Their ideas have captured the imaginations of blockchain technologists in particular. That is because while it is hard to change real-world property law, it is easy to rewrite the rules governing ownership of crypto-assets. Thus, there is a fascinating possibility of architecting crypto-asset ownership schemes that are simultaneously more efficient and more egalitarian than the Common Law scheme governing the real economy."

- Matthew Prewitt [2]

Description

Simon de la Rouviere:

The book "explores the ways in which our current systems are inept at producing outcomes for collective good.

In the chapters they argue:

• New forms of property rights Common Ownership Self-assessed Tax that reduces the negative effects of monopolistic control on property.
• New voting systems that reduces the tyranny of the majority and allows minorities a greater voice.
• New migration proposals that allows any citizen to sponsor a migrant.
• New ways at looking at anti-trust in the economy and reducing its negative effects.
• New ways to think about our data that the tech giants collect, and finding ways to price this “labor” we are giving freely to machine learning AIs.

It’s a highly recommended read. Besides backing up the ideas with proper rigour, I found the vision the most enticing: looking at ways to change & add markets that reduce negative externalities and optimally produces collective good outcomes. The best decision for the individual is also the best decision for the whole." (https://medium.com/@simondlr/radical-markets-in-the-arts-13c27d3b7283)

2. Julien Carbonnell:

"Facing the post-democracy problems and the inability both of the Left and the Right politics to resolve it, Eric Posner, Law professor at the University of Chicago, and Glen Weyl, economist and researcher at Microsoft, co-written the book Radical Markets, Uprooting Capitalism and Democracy for a just society. They lean on a nineteenth century radical liberal philosophy to formulate a response to the contemporary apathy in democracy and stagnation of the economy. They defend the legitimacy of a market economy to organize society, but denounce both the monopoly on some markets and the entire absence of other ones. In a right-wing position, they argue markets must be strengthened, expanded and purified. And in a left-wing position, they ask for fairer social arrangements to solve inequalities.

As for them, anemic employment and low productivity growth result from institutional failure rather than changes in technology. So with appropriate institutional changes, we may be able to avoid the perils of large-scale unemployment and slow growth. Their solution is to radically expand markets. They demonstrate how a simple tax can reduce the incentive to abuse market power and limit competition, by converting the private property market into a kind of leasehold market. They describe an efficient market for public goods shared by many people and normally created by governments. They defend the vision of a more efficient and politically sustainable market in migrant labor. Argues for a limit on financial holdings that would break the stranglehold of institutional investors on the corporate economy. Globally, they demonstrate how market forces can advance equality and economic growth, while promoting public order and the spirit of compromise. " (https://medium.com/@julien.carbonnell/civil-society-futures-of-citizenship-and-democracy-through-digital-era-24e28c27276)

Proposals

Julien Carbonnell:

Common Ownership Self-Assessed Tax

COST "is a new property system, in which every citizen and especially corporation would self-assess the value of assets they possess, pay a roughly 7% tax on these values and be required to sell the assets to anyone willing to purchase them at this self-assessed price (no speculation, no auction nor overbid).

This tax would raise enough revenue to eliminate other taxes on capital (such as on inheritance, corporations, capital gains, property and so forth) significantly reduce income taxes and pay down much of public debt, while at the same time funding a large social dividend or funding critical public infrastructure. Beyond these economic benefits, a COST would create a healthier relationship to property, teaching us to detach from our material possessions and stop trying to exploit one another in commercial transactions, instead seeking to increase the value of common wealth and strengthening the bonds of community. All major private wealth (every factory, patent or plot of land) would be constantly for sale at a fair price and most of the value of these properties would be paid out equally to all citizens as a social dividend. With most value of assets accruing to the public, every asset would become cheaper to (partially) own, democratizing the control of assets and offering everyone new opportunities to start businesses or households."

Visas between Individuals Program

VIP "would tie together the interests of the working classes of rich and poor countries through sponsorship of visas and sharing of the gains from migration. So, migration would move from being one of the most divisive issues in wealthy countries to a widely popular source of growing middle-class income.

Native-born citizens sponsor visas for migrants, who in return share half of the increase in earnings they achieve by coming to wealthy countries with their hosts. Citizens select migrants to sponsor with whom they often have a personal connection, of heritage, religion, language or interests. Local communities regulate how many migrants their citizens can host and many citizens in search of opportunity move to cities that are open to migration. And while migrants would be much poorer than their native hosts and would likely be somewhat patronized by him, the VIP would begin to break down the barriers of nationalism of the wealth countries against the plight of poor countries."

Quadratic Voting

QV "is a system that would create a truly radical democracy. Every citizen would receive an equal annual allotment of “voice credits” that they could use to vote in a range of collective decisions. Every citizen could choose how many votes, up or down, she wants on any given issue or candidate, as long as she has enough vote credits to afford it.

This quadratic cost is the only one under which citizens have in theory an incentive to and in experiments in practice do vote in proportion to how important issues are to them. It is thus the only rule that leads to social decisions that produce the greatest good for the greatest number. By making collective institutions that are thus truly responsive to the general interest and not just the prejudices of the majority or special interest, QV could restore faith in and thus a greater role for public institutions. Political minorities could protect their most cherished interests at the ballot box without relying on whims of judges and compromises on sensitive issue could be hammered out transparently in the public square. The public sector, and organizations of all sorts governed by voting (from corporations to housing co-ops), could make decisions efficient in the best total interests of their stakeholders." (https://medium.com/@julien.carbonnell/civil-society-futures-of-citizenship-and-democracy-through-digital-era-24e28c27276)

Review

Dick Bryan and Akseli Virtanen:

"Associated with, and developing out of, a broadly Hayekian tradition are those who see that the integrity of market processes have been corrupted in various ways, and not simply by ‘the state’. Here, the outcomes of neoliberalism — extreme inequality, monopoly power, environmental destruction — are forcefully criticised, but not in the name of a critique of capitalism; rather in the name of obstacles to free expression in markets. Eric Posner and Glen Weyl’s Radical Markets is a recent case in point, and has acquired significant support from people involved in cryptoecnomics. They contend that the problems of the current era are about the specification of property rights, not capitalist markets per se. In particular, private property of all kinds, they argue, constitutes monopoly ownership and hence the propensity to monopoly pricing. Their alternative is to constitute economic relations via processes of auctions, designed so that people will reveal their ‘true’ interests. There is no higher notion of the social good than what can be revealed by efficient auction design; and especially the utilisation of prediction markets to elicit preferences.

Posner and Weyl don’t use the language of derivatives, but what they are effectively doing is to build call options into the pricing of property, with the aim to bring back ethical virtue and efficiency to market processes. We note this derivative dimension and will return to it later. Blockchain’s smart contracts — themselves derivative positions — articulate with this vision.

The analysis of Posner and Weyl is extolled by Vitalik Buterin, head of the Ethereum project, who summarises their book’s agenda precisely:

- "The general philosophy of the book, as I interpret it, can be expressed as follows. Markets are great, and price mechanisms are an awesome way of guiding the use of resources in society and bringing together many participants’ objectives and information into a coherent whole. However, markets are socially constructed because they depend on property rights that are socially constructed, and there are many different ways that markets and property rights can be constructed, some of which are unexplored and potentially far better than what we have today. Contra doctrinaire libertarians, freedom is a high-dimensional design space."

We can embrace this depiction as stated, while not also embracing some controversial views of Posner and Weyl (for example their rejection of a doctrine of human rights as an imposition on market freedoms; their idealisation of mid 19th century liberalism)." (https://medium.com/econaut/crypto-political-economy-dd91c6fcff7)

Discussion

Radical Markets and the Blockchain Movement: the RadicalxChange Movement

Dani Putney:

"To the uninitiated, the book explores the radical expansion of our markets by imagining the transformation of private property into a perpetual auction system for the public's benefit. Although the concept of radical markets is comprised of multiple tenets, two key points are quadratic voting, a process by which all citizens receive an equal number of votes that they choose to distribute, and data as labor, which calls for the distribution of revenue to the "laborers" who provide their data to companies.

Although Weyl did not intend to relate radical markets to blockchain technology, discussions have arisen within the cryptospace to investigate the intersection of these two realms. He was introduced to blockchain when Ethereum co-founder Vitalik Buterin referenced the book in a tweet, an action that spurred an ongoing exchange between the two.

"I didn't know who [Vitalik] was or anything about him, and I sent him my book manuscript because he was interested in reading it," Weyl told ETHNews. "He sent me about 20 pages of comments on it. They were fascinating."

The conversations between Weyl and Buterin eventually led to their collaboration with researcher Zoë Hitzig on a paper titled "Liberal Radicalism: Formal Rules for a Society Neutral Among Communities." Simply put, the research effort proposes a funding mechanism by which projects that offer the most public good are promoted and receive an appropriate amount of resources. Although the design could be applied to various examples, such as campaign finance and news media, the paper specifically references blockchain communities as a locus for the "practical application of the [liberal radical] mechanism."

With all the talk surrounding radical markets and liberal radicalism, plus the development of a subcommunity of crypto enthusiasts interested in the research, it makes sense for an organized movement to materialize. Thus emerges RadicalxChange." (https://www.ethnews.com/lets-get-radical-glen-weyl-radicalxchange-and-blockchain-technology)

Radical Markets and Ethereum

Jordan Daniell:

""Our premise is that markets are, and for the medium term will remain, the best way of arranging a society," authors E. Glen Weyl and Eric A. Posner explain in "Radical Markets." But the dilemma facing this position is that "while our society is supposed to be organized by competitive markets, we contend the most important markets are monopolized or entirely missing, and that by creating true competitive, open, and free markets, we can dramatically reduce inequality, increase prosperity, and heal the ideological and social rifts tearing our society apart."

Buterin's own review of "Radical Markets" makes it clear that, while there are strong parallels between the book's thought experiments and the continually developing Ethereum ecosystem, the former goes far beyond notions of a "decentralized revolution" by drastically rethinking how to arrange our civilization.

By radically expanding markets themselves into previously untouched areas of our lives, Weyl and Posner postulate how to make a better world. "Even if some of these proposals ultimately prove unworkable in testing," write the authors, "we hope that the Radical spirit behind our ideas will take broader root."

A number of ideas penned by the authors could be unsettling for some, especially when it comes to concepts of property, money, and markets. However, their courage to fully embrace new possibilities and fresh insights is more than redeeming. Buterin himself agreed that "the book does go to considerable lengths to explain why each proposal improves efficiency if it could be done."

In addition to endorsing "Radical Markets" for its "multifaceted and plentiful" intersections with Ethereum, Buterin further described three of its main selling points:

There is a focus on "mechanism design to make more open, free, egalitarian and efficient systems for human cooperation."

The fact that "blockchains may well be used as a technical backbone for some of the solutions described in the book."

The technical and social challenges addressed by the book are akin to those facing the blockchain community.

ETHNews had the opportunity to speak with Weyl about his inspiration for the book, the ideas therein, and why his work draws such strong correlations to Ethereum:

"I think that Ethereum is a fabulous platform for experimenting with our ideas because of the close philosophical alignment between their desire for a decentralized, just society and the detailed design we offer for how such a society might work ... The openness and creativity of the community and the endless possibilities for experimentation generally make [the Ethereum ecosystem] a perfect place for trying out these ideas. And because Ethereum and other blockchain communities lack central, trusted authorities, they desperately need rules that can maintain their egalitarian values absent such authorities. I know of no other comprehensive system of rules that offers that possibility other than 'Radical Markets.' So, in this case, I think both sides really need each other and fit together incredibly well."

In addition to "Radical Markets" being ideologically relevant to some aspects of Ethereum, the book comes at an ideal time to directly address some of the most pressing issues currently gripping our society in the 21st century.

"The arguments of both the Right and the Left had something to offer when they originated in the nineteenth and early twentieth centuries, but today their potential is spent," Posner and Weyl write. "No longer bold reforms, they box us in." In order to truly open up and explore new social possibilities, we need radical redesigns that create new paradigms, not just fix flaws in older ones." (https://www.ethnews.com/ethnews-exclusive-e-glen-weyl-on-radical-markets-ethereum-and-designing-a-better-society)

Formal rules for a society neutral among communities

Julien Carbonnell:

"In associating the pursuit of his reflection with Vitalik Buterin, co-founder of Ethereum and Bitcoin Magazine, and Zoe Hitzig, PhD student in Economics at Harvard, Glen Weyl take the relay on the Radical Market theory with Liberal Radicalism: Formal rules for a society neutral among communities. Here they propose a design for philanthropic or publicly-funded seeding to allow (near) optimal pro-vision of a decentralized, self-organizing ecosystem of public goods and extends ideas from Quadratic Voting to a funding mechanism for endogenous community formation. More widely, they offer a resolution to the classic liberal-communitarian debate in political philosophy by providing neutral and non-authoritarian rules that nonetheless support collective organization. Because near-optimal collective decision-making, under the theory of quadratic voting, may be feasible in practice, but relies on an assumption of a fixed set of communities and public goods, this extension paper propose a way to achieve this setting. From the observation that a simple private contributory system famously leads to the under-provision of public goods that benefit many people because of the free-rider problem, and a system purely based on membership will tend to suppress smaller organizations of great values, their solution is to apply the quadratic logic to the founding of a market. Replacing the traditional sum of the contributions made by funders as founding received by a provider, by the square of the sum of the square roots of the contributions made by the funders. Doing so amplifies small contributions, encourage more contributions and greater diversity in potential contributors, and confers a greater degree of influence on individuals in determining ultimate founding allocations. This system would lead to the optimal provision of founding of self-organizing ecosystem of public goods.

Suggesting modifications to all scales of political elections these proposals range from simple tweaks of existing laws to extensive re-envisioning of electoral systems. The Liberal Radicalism solves the key problem of funding under Capitalism by boosting the contribution of small donors, thereby effectively diluting the influence of the larger ones, responding at the same time to the question: How can regulatory bodies strike a balance between freedom of expression through contributions to campaigns for elected office, while restricting the undue influence of special interests ? Open Source communities, for example, are increasingly trying to address these limitations and provide founding for public goods provision through open source developments such as cryptocurrencies and crowdfunding. While such approaches have had some success, they ultimately push the problem of charitable founding in Capitalism. And the problem for decision taking and regulation under investors or other founders remains the same. The fit is even clearer with blockchain communities, where a large percentage of which is held by foundations or wealthy individuals. However, such a hierarchical structure seems both poorly attuned to the needs of the communities and, furthermore, antithetical to the principles of decentralized authority on which they were founded.

The founding of municipal projects and public works, make the city a fertile site for application of Liberal Radicalism, too, and these applications are among the most promising in terms of feasibility of self-funding. Even though they are democratic systems intented to represent the will of a constituency, the needs of very small groups cannot be heard. Some public goods are intensely important to a select few and the systems in place for communicating those needs and receiving the adequate funding are highly inefficient. Liberal Radicalism, as applied to urban public funding decisions, could allow communities at all scales to fund projects that would struggle to get funding under centralized systems. Community-level decision-making in urban planning only will confer economic development on the city the kind of diversity it needs." (https://medium.com/@julien.carbonnell/civil-society-futures-of-citizenship-and-democracy-through-digital-era-24e28c27276)

An alternative vision proposed by ECSA

Dick Bryan and Akseli Virtanen:

"What remains contested, and where ECSA has focussed, is the question of what we mean by ‘markets’ and their relations with ‘society’. Markets may be ‘great’, to use Vitalik’s term, but as they currently operate, they are fundamentally directed to serving the pursuit of individual profits. In the discourse of Posner and Weyl they can be directed to socially ‘fair’ (non-monopoly) profits; but individual profits nonetheless.

ECSA has designed markets so as to pursue goals other than individual profit-making: what is valued does not need to be connected to capitalist-defined profitability. Financially-framed options can be designed so as to reveal social value, but in a way differently from how they are embedded in Radical Markets.

In the hands of Posner and Weyl, well-designed markets move toward equilibrium (balance) and the collective good follows. ECSA disagrees: markets are innately volatile (as the older Hayek concurred) and any design of a cryptoeconomy must embrace volatility; not wish it away. Instead, ECSA sees potential in a cryptoeconomy to use tokens not merely as a means of exchange for optimal trading processes, but also as a unit of account: a mode of measuring; a mode of valuing, and a way of choosing which sorts of volatility to embrace and which to neutralize.

This opens up an entirely different, and more expansive — and more political — design space. It opens the possibility that things currently deemed desirable but unprofitable — for example care, art, research, affect, biosphere enhancement — can come to prominence as value-creating activities. They need not be seen as after-thoughts, to be ‘subsidised’ by the state because they are virtuous-but-unprofitable. In summary, if we measure differently, these value-creating activities can best be depicted as themselves producing a ‘surplus’ (a term we prefer to ‘profit’): they create more value in their output than they use in their inputs. But to do this we have to value both inputs and outputs in different ways." (https://medium.com/econaut/crypto-political-economy-dd91c6fcff7)