Tag Archives: Institutions

Understandable Social Systems

Brennan and Magness’ book Cracks in the Ivory Tower: The Moral Mess of Higher Education reviews many ways that colleges overpromise, and fail to deliver. It confirms (with Caplan’s Case Against Education) a picture wherein ordinary people are pretty clueless about a big institution in their lives. This cluelessness also seems to apply to many other life areas, such as medicine, charity, politics, etc. In each area, most people don’t seem to understand very basic things, like what exactly is the product, and what are the incentives of professionals?

That is, we each live in many complex social systems, such as political, transport, medical, religious, food, and school systems. Due to our poor understanding of such systems, we have low abilities to make intelligent personal choices about them, and even worse abilities to usefully contribute to efforts to reform them. This suggests a key criteria for evaluating social systems: understandability.

When we don’t understand our social systems, we can be seen as having little agency regarding them. They are like the weather; they exist, and may be good or bad, but we are too ignorant to do much about them. If a situation is bad, we can’t work to make it better. Some elites might have agency re such institutions, but not the rest of us. So a key question is: can we reform or create social institutions that are more understandable, to allow ordinary people to have more agency regarding the institutions in their lives?

One possible solution is to use meta-institutions, like academia, news media, or government regulators, that we may better understand and trust. We might, for example, support a particular reform to our medical system based on the recommendation of an academic institution. Our understanding of academia as a meta-institution could give us agency, even when we were ignorant of the institutions of medicine.

As an analogy, imagine that someone visits a wild life refuge. If this visitor does not understand the plants and animals in this area, they might reasonably fear the consequences of interacting with any given plant or animal, or of entering any given region. In contrast, when accompanied by a tour guide who can advise on what is safe versus dangerous, they might relax. But only if they have good reason to think this guide roughly shares their interests.  If your guide is a nephew who inherits your fortune if you die, you may be much less relaxed.

So here’s a key question: is there, at some level of abstraction, a key understandable institution by which we can usefully choose and influence many other parts of our social world? If we think we understand this meta institution well enough to trust it, that could give us substantial agency regarding key large scale features of our social worlds. For example, we could add our weight to particular reform efforts, because we had good reasons to expect such reforms to on average help.

Alas, academia, news media, and government regulators all seem too complex and opaque to serve in this key meta role. But three other widely used and simpler social mechanisms may be better candidates.

  1. Go with the majority. Buy the product that most other people buy, use the social habits that most others use, and have everyone vote on key big decisions. When some people know what’s best, and others abstain or pick randomly, then the majority will pick what’s best. Yes, there are many topic areas where people don’t abstain or pick randomly when they don’t know what’s best. But if we can roughly guess which are the problematic topics, then in other areas we may gain at least rough agency by going with the crowd.
  2. Follow prestige. Humans have rich ancient intuitive mechanisms for coordinating on who we find impressive. These mechanisms actually scale pretty well, allowing us to form consensus on the relative prestige of nations, professions, schools, cities, etc., and via these proxies, of individuals. Related ancient mechanisms let us form consensus on elite opinion, i.e., on what prestigious people tend to think on any given topic. Yes, elites are biased toward themselves, and to express opinions that make them seem impressive. Still, we can do worse than to follow our best.
  3. Embrace Winners. Nations, cities, firms, professions, teams, media, clubs, lovers, etc. often compete, in the sense that some grow at the expense of others that shrink or disappear. Often they compete for our personal support. And often we see judge that the competition is roughly “fair” and open to many potential competitors. In such cases, we may embrace the winners. For example, we may try many competitors, and stick with those we like best. Or we may go with the lowest price offer, if we can control well enough for quality variations.

Each of these big three mechanisms has limits, but they do seem to satisfy the requirement that they are very simple and many ordinary people can at least roughly understand why they work, and where they run into problems. Together they may cover a pretty wide range of cases. In addition, we can augment them with many other approaches. For example, we can just expose ourselves to choices and follow our intuitions on which are best. We can follow choices by those we know and trust well, those who seem to know more about a topic, and those who seem more honest in their evaluations. Together all these tricks may give us substantial agency re the social institutions in our lives.

Yet those examples of how badly most people misunderstand school, medicine, etc. suggest there is vast room for improvement. And so I look for ways to do better. Not just at designing institutions that actually work, in the sense of producing efficiency, equity, generality, robustness, evolvability, etc. Not just at designing meta-institutions with these features. And not just at gaining the support of majorities or elites, or at winning many fair competitions in the world. I seek meta-mechanisms that can also be simple and clear enough to their advantages be understandable to many ordinary people.

This is the context in which I’d like you to see my highest hopes for prediction markets. I offer them not just as mechanisms that actually work, producing and aggregating info at a low cost. After all, there may be other complex and subtle mechanisms that experts expect to achieve similar or even somewhat better results. But the problem in that case is that ordinary people may wonder how well they can trust such expert judgements.

No, I’m interested in the potential for prediction markets to serve as a simple understandable meta-institution, on par with and at the level of going with the majority, following prestige, and embracing winners. Simple enough that many ordinary people can directly understand why they should work well in many applications, and also to understand roughly where their limitations lie. Yes, not everyone can understand this, but maybe most everyone could know and trust someone who does understand.

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Best Cause: New Institution Field Trials

“Altruist” is not one of my core identities, though many identities that I cherish (e.g., “accurate”, “innovator”) have altruistic effects. But over the last decade I’ve met many who identify directly as altruists. If you are such a person, this post is for you. In it, I will make the case for a particular altruistic cause, a cause that combines two big altruism levers: innovation and institutions.

Innovation: If you care about helping people, you should care a lot about the future, because most of the people you could help live there. In addition, typical interest rates put less weight on future consequences, compared to consequences today, which means that all else equal you can buy future help at a much lower cost.

The main reason that our world today is better off than past worlds is innovation; we have accumulated more better ways to do many things. This strongly suggests that innovation is the main way that people today will help the future. Which suggest that this is how you should also try to help. In addition, there seems to be too little innovation today because many innovations are hard to own, and even when owned most of their value leaks out to folks who pay little for them.

Many steps are typically required for successful innovation. A problem must be perceived, solutions invented, trials test, and winners diffused out to new contexts. Usually a lot of adaptation detail is required to enable a simple elegant idea to actually be useful in complex contexts, and also to readapt solutions that worked well in some contexts to new differing contexts. The most effective way to help innovation is to subsidize the steps that are now currently neglected. Our world typically offers larger rewards for generating simple ideas, and for adopting into ordinary practice well adapted and tested solutions. Thus one can help most by subsidizing the neglected efforts to adapt and readapt, especially in contexts where it is hard to own or sell an innovation. Such as:

Institutions: We each make many choices in our lives. And you can help others by advising their choices. However, when people are directly subject to the consequences of their choices, they tend to have good incentives to figure out their best choices. You can help more by subsidizing the individual choices that tend more to benefit others. This can include the choice to collect more decision related info, when that info could benefit many others with similar choices.

Most individual choices are made within larger social equilibria over which each person has little personal influence. For example, we each drive on the right side of the road mainly because everyone else drives on the right. That is, we tend to take larger equilibria and systems as given when making our individual choices. Yes we can try to coordinate to change these systems, but coordination is hard, most of benefits go to others, and it is hard to own most systems.

Collecting info to advise an effort to coordinate to change equilibria is especially neglected, as we tend to neglect both info and coordination. Info collection efforts are especially neglected when it is hard to claim person altruistic credit for the info that one has contributed, either because that effort gets mixed up with the efforts of others, or because non-altruistic motives are plausible.

Each social equilibria can be thought of a combination of a set of visible and relatively formal rules, together with other less visible “cultural” factors that produce matching expectations and behaviors. That first more visible part we call “institutions” or “mechanisms”. Useful changes of social equilibria require not just changes in visible institutions, but also well-matching changes to local culture.

It is easier to change systems when the new system that one might want to create is already working well in other social contexts. In such cases, we must only work to adapt existing systems into our new context, via some combination of analysis and trial and error, and also work to coordinate to actually make this change. It is easier to work explicitly and analytically on the more visible institutional parts; for the less visible cultural parts one is forced more to rely on simple trial and error. It is hardest to change systems when the desired new system is not already working well somewhere, and so it must be invented, adapted, and tested before it can be applied.

Innovating Institutions: You can gain especially strong altruism leverage by combining these two levers, innovation and institutions. That is, you can help to collect and share info to allow innovation of shared social systems. As the most neglected step in the innovation process is context-specific adaptation and re-adaptation, that is the highest leverage place to help. As social systems are very important but hardest for individuals to own or choose, innovators neglected these the most. And as institutions are the visible part of social systems that one can actually work on, that is where visible efforts must focus.

Back in 1993, at the age of 34, I started a Ph.D. program to study institution and mechanism design, exactly because I had come to this conclusion, that institution innovation had a huge neglected potential. I spent many years studying this academic area, and I can tell you now with confidence: academics know many useful things about institutions, and have many good elegant simple ideas for institution change, ideas that they have explored in math and lab experiments.

Some say that while past social innovations were important, future ones are not, because there is little left to learn about social systems; we know most all worth knowing. But that’s just very wrong. The space of possible social systems is vast, and we’ve hardly explored but a tiny corner of that vast space.

I can also tell you with confidence: academics usually drop the innovation ball after they’ve extracted the academic rewards that they can from an institution idea. Academics can be rewarded for studying existing social systems, including both institutional and cultural elements. They can also be rewarded for proving theorems about new institution ideas, and for testing predictions of these theorems in highly-abstracted lab experiments. Sometimes even in simple well-controlled field experiments. But academics are not rewarded for further efforts to adapt promising ideas to messy social worlds, and so they do little of this.

Business people are often willing to take a social innovation that has mostly been adapted well and do the last few adaptation steps, if those last steps are cheap enough and if they think they can own something about it (e.g. software), or if they can gain direct value from its application. However, business people are far less eager to contribute to earlier steps of the innovation process. Thus it is the intermediate innovation steps, of adaptation and re-adaptation, that are neglected by both academics and business.

As charities claim to be altruistic, you might think they would step in to pay for these key high leverage missing steps. But while many charities pay for academic research, and some pay to apply mostly-worked-out new institution ideas in charity contexts, almost none pay for the neglected adaptation of social innovation ideas in other contexts. Charity patrons either don’t understand why that would be helpful, or don’t think that the audience they seek to impress with their charity efforts would understand. But if you really are a direct altruist, who cares more about helping than about getting others to think you are helping, then this cause might be the one for you.

While money can help, the key resource needed for institution adaptation efforts is actually real organizations willing to risk disruption and distraction to work on adapting promising institution ideas. This is where I’m stuck with decision markets. There’s lots of money for abstract academic work, and many businesses ready to apply mostly-proven mechanisms. But organizations willing to do trial and error to search for less disruptive variations, those are hard to find. If you have or can create such an organization, you are sitting on altruism gold, if only you will dig it up.

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Collusion In Quadratic Voting

Two weeks ago I posted on the idea of quadratic voting, where voters pay a cost to buy votes, a cost that goes as the square of the number of votes they buy. Under certain reasonable assumptions, this voting system should produce economically efficient outcomes! Since so many get so obsessed with the objection that the rich might buy more votes, I focused on a “voting quarks” variation, wherein everyone gets the same number of points to spend across many elections.

I mentioned that this system could make agenda-setting more important. And if we did not ensure anonymous voting, there could also be a problem with some paying others to vote certain ways. On reflection, however, what I most worry about is that collusive voting becomes a bigger issue under quadratic voting, relative to ordinary voting.

How strongly you care about an election outcome depends on how much of a difference it makes to outcomes you care about, and on your chance of being pivotal, so that the election turns on your vote. Under ordinary voting, how much you care influences 1) if you bother to vote at all, and 2) how much effort you put into getting relevant info. But under quadratic voting, we must also add 3) how many votes you buy.

Without collusion, i.e., with each voter choosing independently, then under ordinary voting everyone has the same chance to be pivotal. So then if voting were mainly done to influence election outcomes, the election outcome would become a weighted average, among those who care enough to bother to vote, of how well informed each voter is, times the sign of their preference on the election. Note that the weights satiate, however; once you care enough to bother and are well informed, it doesn’t matter if you care a lot more or get much better informed.

When a group of voters colludes to vote as a block, then their chance of being pivotal is roughly proportional to the number of votes that their block controls. This proportionally increases their collective interest in bothering to vote, and in getting info. So they have a stronger interest in getting themselves to vote, and in getting info about which way to vote. But, this effect satiates at the point where they will pretty surely vote and are pretty sure which way to vote. So the possibility of block voting does end up adding an additional weight favoring groups who can coordinate, but all groups who can coordinate above some level count the same.

Under quadratic voting, colluding groups acquire an additional advantage, because they also have a stronger group interest in buying more votes. And importantly, this advantage does not satiate, but continues to grow with the size of the group. So the election outcome much more strongly weighs the ability of people to form larger groups that coordinate to vote as a block. I’m not at all sure this would be a good thing.

Added 5a: I was wrong to say that collusion gains satiate once a group is sure to vote and sure how they want to vote. A group also gains from internal vote trading, and this gain continues to larger groups. This gain happens in both ordinary and quadratic voting.

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Trade Quarks, Not Votes

If you don’t care about some election today all you can do is abstain, but what if you could instead save your vote to have extra votes in a future election? Or what if you could transfer your vote from a topic where you care less, say mayor, to a topic you where care more, say president? Or what if you could trade votes with other people, like your next two cycles of mayor votes for one of their president votes? Or what if you could buy and sell votes for cash on an open market?

All of these options have intrigued people over the years. But they all have the same problem: they tend toward having each election decided by the few people who care the most about it. True, ordinary elections don’t reflect people’s strength of preference; people who care a lot have the same influence as people who care a little. But these alternate ways to collect, transfer, and trade votes all have the opposite problem; most everyone’s preferences may be ignored except for the few extremists who care the very most.

However, a simple yet amazing variation can allow collection, transfer, trading, and selling in the voting process, while having elections tend to be decided by a weighted average of how much each voter cares. This amazing variation is: voting quarks.

Hadrons are basic particles in physics that can fly around and smash into things. They are made out of quarks, but (in our world today) those quarks are always stuck inside hadrons, and can’t fly around by themselves. Quarks influence the world via the hadrons of which they are part.

By analogy, a voting quark is a part of a vote that can’t influence an election by itself; it must be part of a vote particle. And voting quarks must be formed into square arrays in order to make votes. So you can use one quark to make a vote of size one, or four quarks to make a vote of size two, or nine quarks to make a vote of size three, and so on.

The key idea here is that elections are won by which ever side has the most votes, with bigger votes counting for proportionally more; but what voters are given are quarks, not votes. For example, each election each voter might be given four new quarks. If no collection, transfer, or trading were allowed, this would be pretty boring, as the only useful option would be to convert those four quarks into one vote of size two to use in this election. (After which that vote, and those quarks, would be gone.)

But if quark collection was allowed, a voter could choose to instead save all these new quarks for future elections. Or they might use one quark this election to make a vote of size one, and save the other three for future elections. Or if they had collected at least five previous quarks, they might add them to these new four quarks to create a vote of size three to use in this election.

Abilities to transfer or trade quarks would work similarly; you’d move the quarks around as allowed by the rules, and then form votes from the quarks as desired to use in each election. The system might even not directly give voters quarks at all, but only sell them quarks for cash.

The main point is that in a system like this people have an incentive to vote in each election roughly in proportion to their strength of preference on that topic. Which allows elections to produce more economically efficient outcomes. And the wider the scope over which quarks can be moved, the wider the scope over which choices could be more efficient.

This point has been plausibly argued in a paper called “Quadratic Voting” by Steven Lalley and Glen Weyl. (Weyl has a related paper with Eric Posner.) They talk about this in terms of buying votes directly with cash, paying proportional to the square of the votes bought. This is an extreme version that I suspect most people will find hard to swallow, at least as the first change to accept. So I designed the above quark language to show how we might move there gradually, such as perhaps by first allowing collection, then transfer, then trading. And we might slowly increase the number of quarks given per election, to approach a more continuous voting.

Steven Levitt has commented positively on the quadratic voting idea, but Tyler Cowen criticized it for encouraging “intense preferences of minorities”. I find that a rather odd criticism, and agree with Eric Posner’s response.

I do have a concern though: this approach would require us to pay more attention to agenda setting. Once votes or quarks can be moved between elections, then every election not only decides an issue, it also creates resources that be used to decide other elections. So we’d want to try to ensure that issues in elections connected by quark moves are similarly important, or perhaps set relative quark prices between them.

Also, the act of introducing an election on some topic ends up being an implicit tax on the people who expect to win that election. They will have to use up quarks there than they can’t use elsewhere. If the status quo is already in their direction, then people who favor the status quo will regret holding an election on that topic, even if they expect to win. Factions may conspire to hold repeated elections that they expect to repeatedly lose, just to tax other factions.

This isn’t an overwhelming objection. We already must pay substantial attention to agenda setting even under ordinary voting. But this does up the ante a bit. So we should try this stuff out slowly, gradually, testing and observing as we go. And we may need to invent new ways to set agendas. But this looks pretty promising, so let’s get started!

Added 11a: OK, on reflection one only has to worry about the relative importance of elections when voters can collect or transfer quarks between them. If voters can instead only trade quarks between elections, their relative importance will be reflected automatically in the relative prices of quarks traded. Also Eric Posner suggests a general agenda mechanism:

Added 10Jan: Commenters are too hung up on money. Money is only relevant in the most extreme version I mentioned, where quarks are bought with cash. Consider instead the other options to only collect, transfer, or trade quarks.

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