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Public Goods Funding
TLDR: Because it’s easier to judge what’s good after the fact, most public goods in Utopia are funded via prizes. Impact certificates are sold to investors/patrons, allowing creators to reduce risk and blurring the line between non-profit and for-profit companies.
In my essay on funding basic income I wrote about how my conception of Utopia spends some, but not all, of the revenue from consumption taxes on redistribution via basic income. Where does Utopia spend the rest of the tax money?
Well, ultimately that will change year-by-year, and the specifics are probably best decided by futarchy. But I am quite confident that it makes sense to spend a lot of it at the government level (even at the scale of a world government), rather than give it back to the people to have them spend themselves. Why? Because individual actors are terrible at funding public goods.
Things like parks, roads, monuments, and churches are common goods, things that are rivalrous (only a limited number of people can use them) but difficult to exclude people from. But while it’s difficult to exclude people from common spaces or natural resources, it’s often possible to track who uses them. Thus a straightforward solution to funding the maintenance and protection of these goods is to add a tax to their use, such as through congestion pricing or land value taxes.
But public goods are harder. Unlike common goods, public goods are non-rivalrous in nature. One person’s use of a public good doesn’t diminish anyone else’s ability to use it. Information is one of the most central examples of a public good, including things like lighthouses or GPS satellites that provide information relevant to navigation, artworks that provide information on culture and the human condition, or scientific breakthroughs that improve our understanding of the universe. Civilizational security is the other primary example of a public good.
But public goods suffer from the free-rider-problem. If I think you’ll work hard to defend civilization, I might sit back and relax, without paying for the benefits. Philanthropy can only go so far. To ensure that science, art, navigation, standards, peace, stability, civic order, and lack of pollution all receive the resources that they deserve, we must depend on government in one form or another to fund them.
But with collected tax-dollars in hand, how should a well-designed technocracy go about funding public goods? What level of funding is right? How should money be allocated?
Efficiency is Hard
Two main problems plague government spending: misaligned incentives and lack of information.
In a marketplace, self-interested actors can use local signals to make wise decisions. If the price of salt goes up, a restaurant might use less, or rework their menu in response. It doesn’t matter why the price of salt went up — they simply respond to the incentive provided by the price. Inso doing, they reduce the demand for salt which helps avoid shortages. Meanwhile, a salt mine might ramp-up production to take advantage of the high prices, providing increased value to society in the process. In the areas where markets work well, they work really well, allowing for a distributed ballet of directing production to satisfying the balance of each person’s desires.
A politician or bureaucrat, on the other hand, has selfish desires that don’t necessarily pull the government towards the good of society. A special-interest lobbyist that works for the sugar industry, for instance, might offer to fund a politician’s next election campaign if they promote policies that favor domestic sugar producers, even if the average person in the country suffers marginally higher prices as a result. While each special interest lobby may only incur a little bit of drag on the average person, their collective weight impoverishes the country and entangles government in industrial competition.
Even a high-minded politician who swears to only think of the public good is in trouble. Lobbyists will distort their information landscape, such that it’s not even clear what would be good for the country. And even in the absence of lobbyists, it’s hard to predict the future, and there isn’t a clear signal about what’s helpful or costly to society.
Switching from policies decided by representatives to policies decided by the public can help. It’s hard for Big Sugar (or whoever) to take every voter out to dinner at a fancy restaurant and convince them of the virtues of high-fructose corn syrup. In theory the public will vote for whatever’s good for the public.
In practice, of course, voters are often uninformed, and easily swayed by propaganda, advertising, or other forms of manipulation. Furthermore, holding a referendum for literally every policy change is expensive, slow, and obnoxious. Some of these problems can be side-stepped by futarchy, but not all of them. Even a futarchy probably needs to appoint ministers who make judgment calls on limited evidence in a hostile information-landscape.
There’s been a lot of interest in the Effective Altruist sphere (and adjacent spaces) in the last decade about retroactive funding — giving money to people or groups that have contributed to the good of society after they’ve already done that thing. There’s more to the ideas than just that, but I want to start by observing that the basic idea here is that of a prize.
Imagine that you want to set up the olympic games to celebrate and demonstrate the peak of physical ability. You want to make sure that the best athletes from around the world come, but you aren’t sure who, exactly, the best athletes are. Not a problem! Simply allow a limited number of athletes to attend the games (ideally by bidding for spots in an auction, but alas, the real world isn’t so efficient) and then have them compete to win a large prize. Picking the best beforehand is very hard, but picking the best afterwards is trivial.
Prizes help spur people to do great things. Perhaps the most successful prizes in history are the Nobel prizes. How many extra hours of effort were invested in doing great things because of a dream of winning a Nobel prize? How many careers were shaped towards the public good? All the prize money has come from Alfred Nobel’s initial bequeathment of less than today’s equivalent of two hundred million dollars and some good investment decisions over the span of 122 years.
If the US government wanted to, the NASA budget alone could establish the equivalent of 127 new Nobel prize foundations in a single year. If managed like the Nobel prize, these foundations could last on their initial funding in perpetuity, meaning that a century from now there’d be 127 self-supporting prizes on par with the Nobel, and all it’d take would be one gap year for one agency.
But, I suspect that the Nobel prize is mostly valued because of its fame, not its accompanying purse. Nobel laureates receive less than a million dollars for winning, and this sum is divided if multiple people win the same category. Winners often donate their winnings to charity, which is a pretty clear sign that the money isn’t what’s at stake.
If all prizes were only motivating to people because of the fame attached, I wouldn’t advocate adding many more. There are only so many people who can be famous, after all. But I think prize money can be influential even absent any fame or recognition, especially if the prize pool is big enough.
One primary obstacle to funding public goods retroactively, such as through offering many large cash prizes, is that artists, inventors, and scientists often need money (sometimes a lot of money) up-front in order to be able to make something important. It might be cool to be recognized posthumously like van Gogh, but I’m sure most artists would rather be able to find patronage while alive and pay their rent. And so, with the exception of the already-wealthy person who’s willing to risk their savings, the prize-based approach might seem at first glance like it’d exclude most potential contributors from being able to afford to invest in their work.
Enter impact certificates.
An impact certificate is essentially a share of the credit for some amount of work. If I write a book, I naturally own all the shares of credit for my work. But if a patron wants to fund me, I might be willing to sell some fraction of the credit for that book in return for money-in-hand.
When a cash prize is awarded to someone’s work, the prize foundation should check who owns the impact certificates for that work. If Alice owns 70% of the shares and Bob owns the other 30%, then Alice gets 70% of the money, and Bob gets the remaining 30%. Very simple.
Of course, in order to prevent counterfeiting and other scams, there needs to be a well-established ledger (such as a blockchain or set of trusted institutions) where impact certificates are registered.
Because impact certificates can be used to redirect prize money towards people besides the immediate laborer, they allow laborers to sell an asset (the impact certificates) to investors up-front, and thus afford to do their work without taking on as much risk. This is similar to how book publishers offer contracts to authors that pay some money up front but take most of the profits from sales (and most of the risk).
I suspect that an important part of the recipe of impact certificates involves selling fixed-scope certificates, rather than open-ended or all-encompassing certificates. For instance, an inventor should sell impact certificates for specific inventions or for work done for a specific period of time, rather than certificates that take credit for all inventions that person develops. This ensures a continued motivation on the creator’s part to produce new goods, rather than being subservient to their first patron.
Utopian Public Goods Funding
As Vitalik Buterin says: it’s easier to agree on what was useful than what will be useful.
This is why, I think Utopia funds public goods retroactively, for the most part. This is done through a set of large, recurring prizes, many of which are funded by governments that specify the details by futarchy. Though the prizes are diverse, I expect them to typically fall in one of two categories:
Targeted prizes are offered for specific goods that are known to be valuable to the public, such as a cure for a specific disease or a televised spaceflight to the moon.
General prizes are offered to the best work in some category, evaluated either by expert judges or random members of the public, such as the best journalistic work in a given year, or the most influential biology paper in the last century.
Because there are more prizes, most prizes don’t work to be particularly famous, and often award money to the same work, year after year. For example, there might be an annual prize that awards a million dollars to the most important theory in physics. Each year the prize foundation randomly samples physicists and asks them what the most important theory is, and then gives money to whoever was responsible for that theory, even if they won each year for the past two centuries.
“Whoever was responsible” means whoever is holding the impact certificates for that work of public good. There are a few well-trusted (but privately run) impact certificate markets that allow prize-foundations to identify who holds the credit for various goods. And by financially rewarding certificate-holders, Utopia encourages investors to put money towards funding young artists, scientists, and inventors, using their local expertise to speculate on who will do the most good.
Utopian impact certificates can also be permanently “frozen,” preventing resale and signaling to prize-granters that the money they would have awarded should be redistributed to the other certificate-holders (or, if all certificates are frozen, to the runner-up). A patron of the arts who isn’t in it for the money can then freeze their certificates, credibly claiming to be the person who made the work possible, rather than an intermediary who was only funding the good as a speculative investment.
Since contributions to the public good are expected to be rewarded, there’s no difference between for-profit and non-profit companies in Utopia. Big businesses in Utopia that make profits through trade are also regularly on the lookout for opportunities to invest in public goods. Big research labs are often run by global corporations, and these labs usually spend significant quantities of money publishing and spreading their discoveries, rather than carefully guarding them as trade secrets.
Public goods prizes in Utopia exist for a wide range of things, including those that aren’t what we typically think of as public goods, such as beautiful building façades, online content, historical artifact/location/language preservation, journalism, and even memes. In general, by providing long-term, large-scale, distributed funding of public goods, Utopia encourages the best and the brightest to work on contributing to art, science, technology, and the betterment of everyone.