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Revolutionary ideas on how to use markets to achieve fairness and prosperity for all Many blame today's economic inequality, stagnation, and political instability on the free market. The solution is to rein in the market, right? Radical Markets turns this thinking on its head. With a new foreword by Ethereum creator Vitalik Buterin and virtual reality pioneer Jaron Lanier as well as a new afterword by Eric Posner and Glen Weyl, this provocative 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.
Lalley and Weyl (2016) propose a mechanism for binary collective decisions, Quadratic Voting, and prove its approximate efficiency in large populations in a stylized environment. They motivate their proposal substantially based on its greater robustness when compared with pre-existing efficient collective decision mechanisms. However these suggestions are based purely on discussion of structural properties of the mechanism. In this paper I study these robustness properties quantitatively in an equilibrium model. Given the mathematical challenges with establishing results on QV fully formally, my analysis relies on a number of structural conjectures that have been proven in analogous settings in the literature, but in the models I consider here. While most of the factors I study reduce the efficiency of QV to some extent, it is reasonably robust to all of them and quite robustly outperforms one-person-one-vote. Collusion and fraud, except on a very large scale, are deterred either by unilateral deviation incentives or by the reactions of non-participants to the possibility of their occurring. I am only able to study aggregate uncertainty for particular parametric distributions, but using the most canonical structures in the literature I find that such uncertainty reduces limiting efficiency, but never by a large magnitude. Voter mistakes or non-instrumental motivations for voting, so long as they are uncorrelated with values, may either improve or harm efficiency depending on the setting. These findings contrasts with existing (approximately) efficient mechanisms, all of which are highly sensitive to at least one of these factors.
We study the performance of the Quadratic Voting (QV) mechanism proposed by Lalley and Weyl (2016) in finite populations of various sizes using three decreasingly analytic but increasingly precise methods with emphasis on examples calibrated to the 2008 gay marriage referendum in California. First, we use heuristic calculations to derive conservative analytic bounds on the constants associated with Lalley and Weyl's formal results on large population convergence. Second, we pair numerical game theory methods with statistical limit results to computationally approximate equilibria for moderate population sizes. Finally, we use purely numerical methods to analyze small populations. The more precise the methods we use, the better the performance of QV appears to be in a wide range of cases, with the analytic bounds on potential welfare typically 1.5 to 3 times more conservative than the results from numerical calculation. In our most precise results, we have not found an example where QV sacrifices more than 10% of potential welfare for any population size. However, we find scenarios in which one-person-one-vote rules outperform QV and also show that convergence to full efficiency in large populations may be much slower with fat tails than with bounded support. The results suggest that in highly unequal societies, 1p1v or QV with artificial currency may give superior efficiency to QV with real currency.
Storable votes allow the minority to win occasionally while treating every voter equally and increasing the efficiency of decision-making, without the need for external knowledge of voters' preferences. This book complements the theoretical discussion with several experiments, showing that the promise of the idea is borne out by the data: the outcomes of the experiments and the payoffs realized match very closely the predictions of the theory.
Storable Votes and Quadratic Voting are voting systems designed to account for voters' intensity of preferences. We test their performance in two samples of California residents using data on four initiatives prepared for the 2016 California ballot. We bootstrap the original samples and generate two sets of 10,000 multi-elections simulations. As per design, both systems induce minority victories and result in higher expected welfare relative to majority voting. In our parametrization, quadratic voting induces more minority victories and achieves higher average welfare, but causes more frequent inefficient minority victories. The results are robust to different plausible rules-of-thumb in casting votes.
Since their introduction in 1932, Likert and other continuous, independent rating scales have become the de facto toolset for survey research. Scholars have raised significant reliability and validity problems with these types of scales, and alternative methods for capturing perceptions and preferences have gained traction within specific domains. In this paper, we evaluate a new broadly applicable approach to opinion measurement based on quadratic voting (QV), a method in which respondents express preferences by 'buying' votes for options using a fixed budget from which they pay a quadratic price for votes. Comparable QV-based and Likert-based survey instruments designed by Collective Decision Engines LLC were experimentally evaluated by randomly assigning potential respondents to one or the other method. Using a host of metrics, including respondent engagement and process-based metrics, we provide some initial evidence that the QV-based instrument provides a clearer measure of the preferences of the most intense respondents than the Likert-based instrument does. We consider the implications for survey satisfying, a key threat to the continued value of survey research, and reveal the mechanisms by which QV differentiates itself from Likert-based scales, thus establishing QV as a promising alternative survey tool for further political and commercial research. We also explore key design issues within QV-based surveys to extend these promising results.
Democratic institutions aggregate preferences poorly. The norm of one-person-one-vote with majority rule treats people fairly by giving everyone an equal chance to influence outcomes, but fails to give proportional weight to people whose interests in a social outcome are stronger than those of other people - a problem that leads to the familiar phenomenon of tyranny of the majority. Various institutions that have been tried or proposed over the years to correct this problem - including supermajority rule, weighted voting, cumulative voting, 'mixed constitutions,' executive discretion, and judicially protected rights - all badly misfire in various ways, for example, by creating gridlock or corruption. This paper proposes a new form of political decision-making based on the theory of quadratic voting. It explains how quadratic voting solves the preference aggregation problem, giving proper weight to preferences of varying intensity, and how it could be implemented as well as addressing concerns about its consequences for equity.
When administrative agencies regulate, they are legally required to quantify the costs and benefits of their regulations. Yet most agencies struggle at this task. This is in part because a large number of regulations provide benefits that are not traded in markets and cannot be easily priced. These types of benefits are difficult to assess in monetary terms, even though they are almost surely sizeable. Agencies typically try to price non-market benefits using contingent valuation studies, which are surveys that ask people how much they would be willing to pay without any real money actually changing hands. Unsurprisingly, contingent valuation surveys have proven to be inaccurate and unreliable. Instead, agencies should use quadratic voting (QV) to price nonmarket goods. Quadratic voting is a decision procedure in which voters use actual dollars to buy votes for or against a ballot proposition or candidate. Both the marginal cost of buying an additional vote and the marginal benefit of doing so -- the probability of casting the pivotal vote -- increase linearly with the number of votes cast. When marginal costs and marginal benefits are equal, individuals are likely to buy votes in proportion to their actual preferences. This leads to socially efficient outcomes. Quadratic voting is particularly suited to administrative regulation because agencies already have the legal authority to use quadratic votes as inputs to the regulatory process. Given the advantages of quadratic voting, and the fact that agencies could adopt QV without waiting for Congress, there is little reason for them not to act.
Quadratic Voting (QV) is a promising technique for improving group decisionmaking by accounting for preference intensities. QV is a social choice mechanism in which voters buy votes for or against a proposal at a quadratic cost and the outcome with the most votes wins. In some cases, individuals are asymmetrically informed about the effects of legislation and therefore their valuations of legislation. For instance, anti-corruption legislation is the most beneficial to taxpayers and the most detrimental to corrupt officials when corruption opportunities are plentiful, but government officials have better information than taxpayers about how many corruption opportunities exist. I provide an example of a setting in a large population where QV does not achieve approximate efficiency despite majority voting achieving full efficiency. In this example, a society considers an anti-corruption policy that protects taxpayers from corruption by deterring corruption. Officials know whether corruption opportunities exist, but taxpayers are uncertain about whether corruption opportunities exist. I present surprising experimental results showing that in one case where theory predicts QV will perform poorly and majority voting will perform relatively well, QV performs much better than expected and is about as efficient as majority voting.
Can mechanism design save democracy? We propose a simple design that offers a chance: individuals pay for as many votes as they wish using a number of "voice credits" quadratic in the votes they buy. Only quadratic cost induces marginal costs linear in votes purchased and thus welfare optimality if individuals' valuation of votes is proportional to their value of changing the outcome. A variety of analysis and evidence suggests that this still-nascent mechanism has significant promise to robustly correct the failure of existing democracies to incorporate intensity of preference and knowledge.The online appendix for "Quadratic Voting: How Mechanism Design Can Radicalize Democracy" may be found here: 'http://ssrn.com/abstract=2790624' http://ssrn.com/abstract=2790624.