Archive for the 'Economics' Category

Improving democracy

Monday, August 15th, 2011
An overview of how democracy can go wrong, even when everyone has good intentions

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Election algorithms

Top left: We should reevaluate our choice of election algorithms.

Using simple plurality causes high levels of tactical voting and strategic nomination, and frequently produces results not desired by the majority.

A familiar example of tactical voting is declining to vote for your favorite third-party candidate, and instead voting for the "lesser of two evils", because you "don't want your vote to be thrown away".

A familiar example of strategic nomination is funding a weak opponent in the hope of splitting your main opponent's vote.

Simple plurality also entrenches two-party systems. This makes attack ads an effective strategy for politicians. The resulting polarization makes reasonable debate and compromise difficult.

I am a fan of instant round robin (Condorcet) methods. I especially like the beatpath (Schulze) method, since its independence of clones property suggests resistance to strategic nomination.

All election methods violate some intuitive criteria (Arrow). And all election methods sometimes admit tactical voting (Gibbard–Satterthwaite). But simple plurality is especially bad, and we should stop using it.

Moral heuristics

Top right: We should reevaluate our moral heuristics, upon realizing that our heuristics are motivated by a desire for (and often fail to create) prosperity, welfare, and happiness.

Moral heuristics serve us well in everyday life, where we are confronted with the need to make decisions quickly and with incomplete information. But the same heuristics can become counterproductive biases when applied to questions of policy. Examples include omission bias, as seen in the trolley-switch problem, and direct-effect bias, seen in the trolley-footbridge problem.

We should take care that we do not come to treat our moral heuristics as ends in and of themselves. (For more on the role of heuristics in consequentialist ethics, I suggest reading Siskind · Baron · Bennis+ · Bazerman+.)

Removing bad information

Top center: We should reevaluate our protections for freedom of speech, upon realizing that our protections are motivated by a desire for (and fail to create) effective democracy.

Protection for freedom of speech is motivated by a desire to ensure governments are not immune from criticism, to keep the powerless from feeling silenced, and to increase access to truth. In some cases, it is not clear that the protected speech furthers any of these goals.

Perhaps freedom of speech should limited in cases where the speaker has wide reach and says things that are demonstrably false, as an expansion of libel law. Or perhaps there should be limits on spending large amounts of money to amplify political speech. Other criteria that might be worth considering are intent to mislead, the speaker's power or incumbency, and whether the medium and timing make it possible to reply.

On the other hand, additional restrictions might not be worth the effort. The undesirable speech would probably become less effective, but not disappear completely. Any ambiguities in the law would create problems for both courts and speakers.

Adding good information

Center right: Perhaps the best way to combat incorrect information is with correct information.

The CFTC should stop discouraging the creation of economic prediction markets. Betting on unemployment, for example, serves legitimate hedging and transparency interests. Political discourse would improve if we had transparent predictions on topics other than the fate of large companies.

Policy experiments should be more common. Just as we require clinical trials for new medications, we should run field experiments for new policies when possible.

More government data should be open. Organizations like MySociety, Code For America, and Wolfram Alpha have done amazing things to help us visualize, interpret, and use the information available so far.

History and technology

Some advances in technology have weakened democracy by amplifying the problems highlighted in the chart.

First, increased interconnectedness is requiring democracies to operate at unprecedented scale. Advances in transportation and communication and warfare impel us to make some important decisions at the US federal level.

Increased distance and heterogeneity tests our individual capacity for empathy and altruism. Large scales magnify the incentives for concentrated interests to attempt to influence policy.

Second, the tools of subversion are improving. Advances in psychology and statistics allow for extremely manipulative advertising. Instant polling shifts focus from outcomes to opinions, and from policy to strategy.

But new tools that could strengthen democracy are also available, if we choose to use them.

Increasingly deep understanding of cognitive biases improves our capacity for reflection. Our experience running financial markets gives us ideas about how to create effective prediction markets.

And crucially, we have computers: computers to implement the voting algorithms invented as part of modern social choice theory, computers to run the advanced statistics that make field experiments reliable, and computers to allow citizens to make creative use of open government data.

Improving incentives for web advertisers

Wednesday, August 10th, 2011

When users install ad filters out of a desire to avoid unpleasant ads, they usually end up blocking all ads. This does little to incentivize individual sites to clean up their ads, because from the perspective of any web site owner, users decide whether to block ads mostly based on their experiences on other sites.

As more users turn to ad filters, debates about ad filtering are becoming increasingly polarized. A pro-ad faction screams “blocking ads is like stealing from web sites”. An anti-ad faction screams “showing me ads is like kicking me in the groin in the hope that a penny will fly out of my pocket”.

A better way?

What if a future version of Adblock Plus only tried to block bad ads by default? The immediate result would be negligible, because most ad networks today are somewhere between bad and terrible. But some users would feel more comfortable enabling the blocks, and web site owners would have a harder time blaming visitors for missed revenue.

Current Adblock Plus first run page

Ad filter set:
e.g. animations, sounds, interstitials
[?]e.g. plugins, scripts that block parsing
Proposed options and defaults

“Block distracting ads” would block ads that animate, ads with bright pink, gigantic ads, <audio> ads, ads that use absolute positioning to cover other content, and plugins.

“Block slow ads” would block ad scripts that do not use async or defer, any ad that uses more than 5 sequential or 10 total requests, any ad content that hasn't finished loading after 500ms, and plugins.

Note that these are all things that can be detected by the client, which already has a filter set that distinguishes ads from non-ads. Upon blocking an ad through one of these heuristics, the entire ad network should be blocked for a period of time, so that Firefox does not waste time downloading things it will not display. The filter set could also specify ad networks known to specialize in distracting ads, or ad networks that are slow in ways the heuristics miss.

Blocking manipulation

The heuristics above would block ads that interfere directly with your web experience, but what about ads that harm you in slightly subtler ways? Maybe activists would be inspired to curate subsets of existing filters, focusing on their causes:

Ad filter set:
[?]e.g. non-evidence-based medicine, “Free*”
[?]e.g. appeals to feelings of inadequacy
[?]e.g. sexual puns, gratuitous cleavage
Ad filter set:
e.g. lingerie, “adult dating”
e.g. action films, appeals to fear
e.g. junk food, tobacco
[?]e.g. toys, nag coaching

These would block almost every ad network today, assuming the curators err on the side of over-blocking when a network carries multiple types of ads. I can only name one ad network that demonstrates the slightest bit of competence at keeping out scams and one ad network that actively gathers feedback from viewers about individual ads.

With improved incentives, more ad networks would try to do the right thing.

I look forward to a future where advertising is a truly low-transaction-cost way to compensate free content providers.

I look forward to innovators and creators once again having a way to connect with people who might genuinely stand to benefit from their work, without having their voices drowned out by screaming scammers.

Let’s give musicians an alternative to copyright

Friday, December 10th, 2010

Submitted to the US Department of Commerce in response to their call for comments on Copyright Policy, Creativity, and Innovation in the Information Economy.

Let's allow musicians to choose to give up their monopoly on distribution rights. In return, let's give them money in proportion to the popularity of their works, starting with money the government and ISPs would have spent on copyright enforcement.

Copyright is a poor mechanism for encouraging creation

The premise of copyright is that the monopoly rent of a work is a good proxy for the benefit to society of the work's existence. This is no longer the case, at least for recorded music.

Copyright limits the societal benefit of the work's existence, because:

  • People who can't afford recorded music don't get to enjoy it.
  • People often can't listen to songs before purchasing them, so they purchase too few songs or the wrong songs.
  • People are denied the joy of sharing music with their friends.

The portion of the societal benefit that is apparent in the monopoly rent is very low, because:

  • Transaction costs form a large portion of the purchase price.
  • Promotion costs are high in order to overcome consumer reluctance to spend money on an unknown.

Because of copyright, most of the potential societal benefit of a new song goes to deadweight loss and transaction costs. Only a tiny portion makes it to the musician.

Copyright harms society

Since the rise of the Internet, copyright has begun to have negative externalities that go beyond musicians and listeners:

  • Government resources are spent on copyright enforcement.
  • A hidden tax is levied on internet connections as ISPs are forced to filter, forward notices of infringement, and respond to subpoenas.
  • User-generated content is at risk from fraudulent takedown notices.
  • Popular infringement, combined with sporadic-but-harsh enforcement of copyright laws, diminishes respect for all laws.

Attempts to enforce copyright through DRM software create additional problems:

  • DRM conflicts with fair use.
  • DRM disadvantages open-source software.
  • DRM anti-circumvention laws conflict with free speech among software developers.
  • DRM legitimizes infringement in the minds of users who find they cannot listen to purchased music on a new device.

Copyright is becoming increasingly inefficient and harmful. Let's try an alternative, and let musicians experiment with a wider range of promotion models.