Radical Markets: A Thought Experiment on Radical Change (Part 1)

written by two

When faced with economic inequality, uneven resource distribution, investment institutions monopolizing industries, and digital labor being exploited by ubiquitous algorithmic models, what will you do?

Will he challenge Arasaka Tower like V in "cyberpunk2077", or will he conceive a "radical" reform theory and try to implement it to make the world a better place?

The book "Radical Markets" is far from being a perfect solution to the above-mentioned real-world problems. It is more like a rough diamond that still needs to be polished. Although it has flaws, it is There is a lot of thinking and determination to try to solve problems everywhere.

As the author said: This is only a "thought experiment".

This time I read "Radical Markets" and I hope that I can join you in thinking about the era we live in today and what changes and practices can be made.

Book introduction

"Radical Markets" is a book co-authored by Eric Posner and E. Glen Weyl, published in 2018. The core argument of this book is to promote broader social welfare and equity through fundamental reforms of market mechanisms.

The starting point for writing is a series of new challenges in today's world: although the global economy has grown in recent decades and the gaps between countries have narrowed, inequality within countries has increased, and social and political divisions and divisions have increased. It is also getting more serious.

This book is divided into 5 chapters. In different fields, it proposes 5 "radical" solutions to 5 different problems that you want to solve. They are: private property, market mechanisms, investment, immigration policy, and data and labor.

about the author

• Eric Posner: Professor at the University of Chicago Law School, fellow of the American Academy of Arts and Sciences and member of the American Law Institute.

• Glen Weyl: Chief Economist of Microsoft, he mainly proposed Quadratic Voting (QV); he is also the founder of the social organization "RadicalxChange" [1] and Chairman.

From Sun Wen’s Equal Land Rights to Taiwan’s Practice: Tang Feng’s Recommendation for this Book

Tang Feng is a free software programmer and political worker who was born in Taipei and is currently the head of the Digital Department.

The proposals in this book are of special significance to readers in Taiwan. Some of the concepts have influenced Taiwan’s thinking on democratic governance, and some practices have even been implemented in Taiwan. Take the "common ownership self-assessment tax system" mentioned in Chapter 1 "Property rights are exclusive rights" as an example. It is actually an extension of the "equal land rights" proposed by Sun Wen. The "square voting method" in Chapter 2 "Radical Democratic System" is a solution to the traditional system that cannot truly reflect the differences in group preferences under one person, one vote, thereby making the discussion of public issues more quality.

Since its inception in 2019, the Taiwan Presidents Cup Hackathon has used the square voting method to select the qualifying teams; this method is suitable for various collective decisions and highlights the qualitative differences in voting. The concept of "data and labor services" in Chapter 5 is even more similar to long-established traditions such as cooperatives and mutual aid societies.

The enlightenment that Taiwan’s experience has given the world is that we can test it in real life and turn these theories into practical and usable tools.

Introduction to readers

@twone : the World game player, core contributor of Uncommons

Lead readers say

This book is the fourth book in the "Cryptopunk Classics Shared Reading" series at Raw School. It also cites a lot of economic theories, models, and thoughts that combine law, politics, and sovereign state relations.

When I first read this book, frankly speaking, it was not an easy book to get into. It includes complex thinking from various ideological factions and political positions, and the so-called "radical" solutions proposed by the author also make people disagree.

But the more you understand this book, you will find that the world is complex. Since everyone has seen these problems, how to respond and try to solve them is up to us as humans living on this planet. An inescapable responsibility.

Now that the author of this book has attempted to develop his own theory so that the world might improve its well-being, what do we think about these issues? From our own perspective, is there anything we can do?

This is my biggest thought after reading this book.

Also for you who are studying together.

Let’s start from “radical”: fundamental changes

The word "radical" has the same origin as "root", so radical not only means "radical" but also "thorough".

What is "radical" is that the spirit of social change generated by radicalization can make people jump out of the old thinking model framework and be able to better hold the scalpel to cut the crux of the problem; what is "thorough" is that it can no longer Relying on the method of treating the symptoms rather than the root cause requires understanding the underlying logic of social operations and innovating through changes in the market mechanism.

After reading the whole book, I feel that this book is not particularly radical, but rather hopes for thorough reforms to better solve problems such as inequality, inefficiency, and monopoly, so as to make the economy and the world better.

From history to modern times, from mercantilism to free trade, the authors traveled through time and space, drew on past theories and practices, and proposed a new type of "fractional ownership" between private ownership and public ownership - through Common Ownership Self-Assessed Tax ( COST) or Harberger tax, as well as mechanisms such as Quadratic Voting (QV), are designed to solve problems such as private property hoarding and inefficiencies in market and voting mechanisms.

Political Spectrum Test: Understand your knowledge of basic issues

The political spectrum, also known as political coordinates, is a tool used to measure an individual's political stance.

This book uses the theories of a large number of political economists and philosophical radical groups as arguments, including Adam Smith, the Marquis deCondorcet, Jeremy Bentham, John Smith John Stuart Mill, Henry George, Léon Warlas, and Beatrice Webb. These perspectives and theoretical viewpoints cover right-wing liberalism and left-wing egalitarianism, including the five solutions mentioned by the author in the book, all of which require readers to think about their perspectives.

Therefore, before entering the actual chapters of this book, it is recommended that everyone conduct a political coordinate system test.

Understanding our own judgment and understanding of some issues can better help us read this book and clarify the author's line of thinking.

Always remember that you do not need to accept all the theories in the book, you only need to have your own judgment and think from his perspective.

Theory is gray, but the tree of life is evergreen.

You can also build your own theoretical system.

Selling Rio: A Thought Experiment

Economically speaking, Brazil is the most unequal country in the Western Hemisphere. The Brazilian phenomenon can also be found in rich countries where inequality is rising. The economies of these rich countries are also stagnating, and political conflict and corruption are on the rise.

Many had held out hope that developing countries such as Brazil would eventually follow the path of the United States and become developed countries. As time went on, however, this optimistic belief was challenged, and concerns began to emerge that things might be moving in the opposite direction. Traditional reform strategies—whether increasing taxes and redistribution, promoting marketization and privatization measures, or improving the capabilities of governments and experts—seem to be ineffective in addressing problems of inequality, stagnation, and political and business corruption. .

In the case of Rio, poverty, tight control over land, and political struggle are portrayed as interconnected issues. The existence of slums demonstrates the limitations of redistribution policies and the insufficiency of property rights system reforms, and these problems also deeply affect the health of the political and business environment. The control of urban centers by the wealthy has led to a waste of public resources and inaccessibility of services, while also exacerbating social inequality and political corruption.

If none of the existing methods can effectively solve the existing problems in Rio, then let us think about it together: Suppose the entire city of Rio is auctioned and sold indefinitely.

How does this affect how we think about urban management and ownership?

Property Rights Transformation: Creating a Competitive Market through Incomplete Public Ownership

"The justification for private property predates capitalism. At least in Aristotle, who realized that what people care most about is what they own."

In the first chapter, we will explore how to promote more effective circulation and use of property and optimize the investment and allocation efficiency of private property.

Here are 3 questions to think about:

• Question 1: How much would you pay to sell something you own?

• Question 2: To what extent do your belongings belong to you? (eg rights of use, ownership)

• Question 3: To what extent would you accept a world without personal belongings?

Private property is monopolistic in nature, that is, the owner can hold the property without using it effectively, which also prevents others who can use the property more effectively from acquiring the property. But extreme public ownership will lead to the "tragedy of the commons."

Therefore, the author proposes a new form of property rights to achieve an optimal compromise between public ownership and private ownership—common ownership self-assessed tax (COST), also called Harberger tax. It encourages property owners to pay taxes on their property at its assessed value, and must sell the property at that price to any buyer willing to pay.

The COST of wealth is also the cost of (holding) wealth. “Public ownership” refers to the tax adjustment of traditional private property. Among the rights that constitute private ownership, the two most important "batons" are "right to use" and "right to exclusive". With COST, both rights are partially transferred from the owner to the public at large.

COST challenges the traditional concept of private property and proposes a more flexible and dynamic property rights framework. Under this framework, property is no longer a permanent private property, but a social resource whose use and distribution should reflect broader social interests and principles of fairness.

Example: Anna’s house

Anna's situation: Anna owns a house that she loves very much. But there may be someone who values ​​the house more than Anna does and is willing to pay more for it.

COST tax mechanism: Under the COST mechanism, Anna needs to set a price for her house, which is also the basis for her to pay taxes. The tax rate is set based on the probability that the asset may change hands, which is assumed to be 30%.

Effects of setting the price: If Anna sets the price of the house higher than she is actually willing to accept (reservation price), she risks benefiting from the higher price. But at the same time, she also needs to pay more tax (30% tax rate) based on this higher price, which means that her additional benefit is exactly offset by the additional tax.

Find the balance: In order to lose neither money nor the house, Anna will eventually set the price to her reservation price—the price she truly thinks the house is worth. This way, only those who are truly willing to pay more than that price will buy the house, and Anna won't pay more in taxes by setting a price that's too high.

Discussion and thinking about COST

• Who sets the tax rate? : How to ensure the accuracy and fairness of property value assessments?

• Maintaining a sense of security and social stability: How to deal with social stability problems caused by frequent property changes that may be caused by taxes?

• Definition of property and money? : This chapter does not have a clear definition of what is an "asset" and what is a "currency return from sale", and the examples given are all production materials such as land and houses. But if it is something like virtual currency, do you need to use COST? ? If it is not used, then as long as you do not hold any physical assets and exchange them for stocks, virtual currencies, etc., can you avoid the imposition of COST?

• Handling of personal items: For items that are of great significance and emotion to an individual, will COST have design loopholes (assuming that in extreme cases, someone maliciously purchases it at a high price?)

• Putting aside the resistance at the practical level, can COST help to break up detachment (reduce people’s dependence on items)?

System Design: Application of Quadratic Voting (QV)

"In market transactions, people can communicate their preference for goods and services by paying more or less. This is why many economists believe that the price system can achieve efficient results but voting cannot."

Here are 2 questions to think about:

• Question 1: Do you think quadratic voting leads to better decisions to some extent? Or is there a better solution?

• Question 2: What do you think of the application of quadratic voting in blockchain? (eg combined with the current application of quadratic voting in the community or DAO; funding public goods, etc.)

Traditional voting methods often can only express a single dimension of "yes" or "no", ignoring the fact that people's level of concern for different issues varies greatly.

Quadratic Voting (QV) solves this problem through a mathematical square rule: the cost a voter pays for each vote increases with the square of the number of votes they purchase. This means that although voters can purchase multiple votes in order to express a strong preference for a certain issue, the increase in cost will quickly exceed the increase in the number of votes, thus inhibiting the incentive to buy unlimited votes. This mechanism design makes it expensive to express strong preferences. Therefore, only people who really care about a certain issue will choose to invest more votes on that issue. This design makes the voting results more truly reflect the true feelings of social members. Preferences and priorities.

How QV works

In a quadratic voting system, voters not only vote for options but also purchase additional votes based on how strongly they feel about an issue. However, the cost of voting increases with the square of the number of votes purchased. To put it simply, if you want to cast 1 vote, you may only need to pay 1 unit cost; but if you want to cast 4 votes, you need to pay 16 unit costs; and so on. This means that while increasing the number of votes can increase support for an option, the cost will also increase significantly.

The introduction of QV theoretically provides a possible solution to the collective action dilemma, the free-rider problem and the tyranny of the majority in democratic decision-making. It attempts to establish a more dynamic and flexible voting system to make the decision-making process closer to the actual needs and preference intensity of social members, thereby improving the fairness and effectiveness of policies.

There is already a QV voting tool developed by " RadicalxChange[2] ":

RxC QV[3]

At the application and practical level, QV has been used in blockchain communities and organizations such as Ethereum and Gitcoin; and Taiwan's Presidents Cup Hackathon also uses the QV square voting method to select the qualifying teams.

Little easter egg: the political coordinate system everyone tested after reading together

After taking the test, many students discovered that they are left-wing liberals, lol, but there are also our right-wing liberals! 🎉

But maybe every problem can be fought

Student 1: Should economic individualism/collectivism refer to taxation and redistribution of benefits? 🤔 The former is low taxes and low benefits, while the latter is high taxes and high benefits

Student 2: Taking the current situation as the starting point and history as the line, change to the left, maintain the status quo or even go back to the past and move to the right?

Student 3: But to be honest, I think it depends on where you stand. Sometimes I switch between left and right thinking.

References

[1]

"RadicalxChange": https://radicalxchange.cn/about

[2]

RadicalxChange: https://radicalxchange.cn/about

[3]

RxC QV: https://quadraticvote.radicalxchange.org/

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