This kind of thing could be made more sophisticated by making fines proportional to the harm done
I was thinking of this. Small funders could then potentially buy insurance from large funders in order to allow them to fund projects that they deem net positive even though there’s a small risk of a fine that would be too costly for them.
I take it that Harsimony is proposing for the IC-seller to put up a flexible amount of collateral when they start their project, according to the possible harms.
There are two problems, though:
This requires centralised prospective estimation of harms for every project. (A big part of the point of impact certificates is to evaluate things retroactively, and to outsource prospective evaluations to the market, thereby incentivising accuracy in the latter.
This penalises IC-sellers based on how big their harms initially seem, rather than how big they eventually turn out to be.
It would be better if the IC-seller is required to buy insurance that will pay out the whole cost of the harm, as evaluated retrospectively. In order for the IC-seller to prove that they are willing to be accountable for all harms, they must buy insurance when they sell their IC. And to ensure that the insurer will pay out correctly, we must only allow insurers who use a standard, trusted board of longtermist evaluators to estimate the harms.
This means that a centralised system is only required to provide occasional retrospective evaluations of harm. The task of evaluating harms in prospect is delegated to insurers, similar to the role insurers play in the real world.
(This is my analysis, but the insurance idea was from Stefan.)
Although, the costs of insurance would need to be priced according to the ex ante costs, not the ex post costs.
For example: Bob embarks on a project with a 50% chance of success. If it succeeds, it saves one person’s life, and Bob sells the IC. If it fails, it kills two people.
Clearly, the insurance needs to be priced to take into account a 50% chance of two deaths. So we would have to require Bob to buy the insurance when he initially embarks on the project (which is a tough ask, given that few currently anticipate selling their impact). Or else we would need to rely on a (centralised) retrospective evaluation of ex ante harm, for every project (which seems laborious).
I love the insurance idea because compared to our previous ideas around shorting with hedge tokens that compound automatically to maintain a −1x leverage, collateral, etc. (see Toward Impact Markets), the insurance idea also has the potential of solving the incentive problems that we face around setting up our network of certificate auditors! (Strong upvotes to both of you!)
(The insurances would function a bit like the insurances in Robin Hanson’s idea for a tort law reform.)
I was thinking of this. Small funders could then potentially buy insurance from large funders in order to allow them to fund projects that they deem net positive even though there’s a small risk of a fine that would be too costly for them.
I take it that Harsimony is proposing for the IC-seller to put up a flexible amount of collateral when they start their project, according to the possible harms.
There are two problems, though:
This requires centralised prospective estimation of harms for every project. (A big part of the point of impact certificates is to evaluate things retroactively, and to outsource prospective evaluations to the market, thereby incentivising accuracy in the latter.
This penalises IC-sellers based on how big their harms initially seem, rather than how big they eventually turn out to be.
It would be better if the IC-seller is required to buy insurance that will pay out the whole cost of the harm, as evaluated retrospectively. In order for the IC-seller to prove that they are willing to be accountable for all harms, they must buy insurance when they sell their IC. And to ensure that the insurer will pay out correctly, we must only allow insurers who use a standard, trusted board of longtermist evaluators to estimate the harms.
This means that a centralised system is only required to provide occasional retrospective evaluations of harm. The task of evaluating harms in prospect is delegated to insurers, similar to the role insurers play in the real world.
(This is my analysis, but the insurance idea was from Stefan.)
Although, the costs of insurance would need to be priced according to the ex ante costs, not the ex post costs.
For example: Bob embarks on a project with a 50% chance of success. If it succeeds, it saves one person’s life, and Bob sells the IC. If it fails, it kills two people.
Clearly, the insurance needs to be priced to take into account a 50% chance of two deaths. So we would have to require Bob to buy the insurance when he initially embarks on the project (which is a tough ask, given that few currently anticipate selling their impact). Or else we would need to rely on a (centralised) retrospective evaluation of ex ante harm, for every project (which seems laborious).
I love the insurance idea because compared to our previous ideas around shorting with hedge tokens that compound automatically to maintain a −1x leverage, collateral, etc. (see Toward Impact Markets), the insurance idea also has the potential of solving the incentive problems that we face around setting up our network of certificate auditors! (Strong upvotes to both of you!)
(The insurances would function a bit like the insurances in Robin Hanson’s idea for a tort law reform.)