It sounds like a kooky idea and neglects the fact that “the government” isn’t some magical source of money; it got that money from its citizens somehow (taxes or inflation).
It’s a much simpler idea to just have citizens vote for what they want their tax money spent on, by voting for candidates who will represent their interests.
I realize that no government today operates by spending money into existence with one hand and taxing it out of existence with the other, but I always assumed that QF was designed for use with that kind of system (likely a DAO responding to voters on some general purpose chain like Ethereum).
Why else would you dream up such a scheme except for the purpose of replacing the one we're using (e.g. the one where the scarcity of money is determined by bankers' willingness to issue loans)? Perhaps the author is right that QF is not optimal, but what we're doing now does not care whether a funded venture helps or harms the people, so I'd say the bar to clear is pretty low.
Government can also get money through bonds, though? And government spending of these funds can be argued to go much more directly to economic growth for the region than most any other spending.
Note that I don't really disagree with your second. Just pointing out that your two options for how government got money is not complete.
Bonds are an exchange of cash now for more cash later in the other direction. Eventually, that “cash later” is taxed or inflated away (printed), so it’s a difference in timing more than category.
In the long run, all government debt is going to be future taxes. There are many programs that the government spends on that are efficient and produce more growth than the taxes collected would have, and there are many that don't and produce less growth than leaving the money in the hands of the taxed. Sometimes this is due to government inefficiency, and sometimes because we decided it's what we want, like medicare for elderly who will never return the investment into their health.
I'm pretty heavy against "efficient" as a goal to look for in government spending. In particular, the first spend on anything will never be as efficient as later spending. That just isn't how it works. So, if you are trying to seed something with government spend, expect some inefficiencies.
It’s a much simpler idea to just have citizens vote for what they want their tax money spent on, by voting for candidates who will represent their interests.
It's a term from "Democracy for Realists", written by some democratic theorists. They disassembled the argument for it in the first half of chapter 1, and then spent the rest of the book refuting pretty much all the other competing academic theories that other democratic theorists actually believe in (scholars of democracy absolutely do not believe in the folk theory).
EDIT: Which is just to say that we need to improve the incentive structures (which QF takes a stab at doing, though there are other approaches). We need these experiments because we need to learn what actually works -- the old theories never actually did, and the prior assumptions that made this disconnect negligible are starting to fail.
I never heard of "quadratic funding" before today, but I did know about "quadtratic voting". Is "quadtratic funding" just a spin on "quadtratic voting" that makes a complete hash of everything?
The authors of the QF paper describe it as "an extension of the logic of quadratic voting." They involve similar formulas and both are theoretically optimal (or efficient), and have a single equilibrium. These properties are proven using somewhat similar math.
But they apply to quite different settings and are not really the same thing. With Quadratic Voting, people pay for votes (with cost determined by a certain formula). With Quadratic Funding, people contribute to projects (with matching funds determined by a certain formula).
QV also makes many assumptions that rarely hold in reality, just like QF does. I may write an article about this someday.
Comments
It sounds like a kooky idea and neglects the fact that “the government” isn’t some magical source of money; it got that money from its citizens somehow (taxes or inflation).
It’s a much simpler idea to just have citizens vote for what they want their tax money spent on, by voting for candidates who will represent their interests.
Yep. QF basically assumes that subsidies are "free money", as discussed in the article:
https://jonathanwarden.com/quadratic-funding-is-not-optimal/...
In the original paper, the authors acknowledge this is a problem: "...once we account for the deficit, the QF mechanism does not yield efficiency.
I realize that no government today operates by spending money into existence with one hand and taxing it out of existence with the other, but I always assumed that QF was designed for use with that kind of system (likely a DAO responding to voters on some general purpose chain like Ethereum).
Why else would you dream up such a scheme except for the purpose of replacing the one we're using (e.g. the one where the scarcity of money is determined by bankers' willingness to issue loans)? Perhaps the author is right that QF is not optimal, but what we're doing now does not care whether a funded venture helps or harms the people, so I'd say the bar to clear is pretty low.
Government can also get money through bonds, though? And government spending of these funds can be argued to go much more directly to economic growth for the region than most any other spending.
Note that I don't really disagree with your second. Just pointing out that your two options for how government got money is not complete.
Bonds are an exchange of cash now for more cash later in the other direction. Eventually, that “cash later” is taxed or inflated away (printed), so it’s a difference in timing more than category.
Fair. Still largely a different form getting cash now, though? Particularly if you account for the fact that governments can go belly up.
In the long run, all government debt is going to be future taxes. There are many programs that the government spends on that are efficient and produce more growth than the taxes collected would have, and there are many that don't and produce less growth than leaving the money in the hands of the taxed. Sometimes this is due to government inefficiency, and sometimes because we decided it's what we want, like medicare for elderly who will never return the investment into their health.
I'm pretty heavy against "efficient" as a goal to look for in government spending. In particular, the first spend on anything will never be as efficient as later spending. That just isn't how it works. So, if you are trying to seed something with government spend, expect some inefficiencies.
Sure, government spending is not purely an investment in future tax. Goverment is not purely a financial investment vehicle.
This is so obvious as to barely merit acknowledgement.
That's only true if you assume that governments last forever. They sometimes die with debt and their financiers take losses.
I think your comment is operating under the assumption that the "folk theory of democracy" works: https://en.wikipedia.org/wiki/Folk_theory_of_democracy
It's a term from "Democracy for Realists", written by some democratic theorists. They disassembled the argument for it in the first half of chapter 1, and then spent the rest of the book refuting pretty much all the other competing academic theories that other democratic theorists actually believe in (scholars of democracy absolutely do not believe in the folk theory).
EDIT: Which is just to say that we need to improve the incentive structures (which QF takes a stab at doing, though there are other approaches). We need these experiments because we need to learn what actually works -- the old theories never actually did, and the prior assumptions that made this disconnect negligible are starting to fail.
I never heard of "quadratic funding" before today, but I did know about "quadtratic voting". Is "quadtratic funding" just a spin on "quadtratic voting" that makes a complete hash of everything?
The authors of the QF paper describe it as "an extension of the logic of quadratic voting." They involve similar formulas and both are theoretically optimal (or efficient), and have a single equilibrium. These properties are proven using somewhat similar math.
But they apply to quite different settings and are not really the same thing. With Quadratic Voting, people pay for votes (with cost determined by a certain formula). With Quadratic Funding, people contribute to projects (with matching funds determined by a certain formula).
QV also makes many assumptions that rarely hold in reality, just like QF does. I may write an article about this someday.