Retroactive funding impact quantification and maximization

This post is inspired by question 2 (source).


  • The impact of retroactive funding is its impact premium over that of proactive funding.

  • Funding decentralization covers a range of fields more efficiently than its centralization.

  • Impact competition among funders and calibration training can mitigate biases.

  • Retroactive funding participants should enjoy others’ impact.

The counterfactual impact of retroactive funding is the additionality that it provides to the proactive financing landscape. Retroactive funding motivates actors who can afford to take risk to do so. The impact is the sum of the differences between the retroactively funded projects’ impact (irp) and the alternative investment impact of the risk takers (irta) minus the impact of the funders’ alternative investments (irfa).

The impact is positive when the projects do more good than the total that their organizers and funders forgo.

In other words, retroactive funding is beneficial when organizers and buyers forgo relatively unimpactful alternatives and vice versa. For example, if someone works on a painting for the local museum instead of taking a gender studies course and the potential painting buyer gives up a charity donation, the impact is negative. If the risk-taker mitigates gender-based violence instead of going skiing and the potential funder forgoes buying a TV, the impact should be positive. Thus, retroactive funders should be interested in maximizing their impact.

Funders interested in maximizing their impact should be experts in their fields. Then, they will be able to express interest in the most impactful set of projects which also have possibly interested organizers. Decentralization of funding can cover a comprehensive set of fields more efficiently than its centralization, since developing a network of well-connected experts can take more time than gaining the same participation on a platform beneficial to these experts’ organizations. However, unsupervised specialists can be more biased than managed professionals. Thus, retroactive funding should use a bias mitigating mechanism. Impact competition among funders can function in this capacity efficiently.

In reality, funders can choose certificates based on their expected value growth rather than impact. This motivates strategic insights sharing. For example, a funder can notify a small group of potential organizers about their interest, subsequently purchase a large proportion of certificates, and only later share a thorough impact analysis with a wider audience. Prima facie, this favors forecasting experts. However, also people able to bias forecasts can benefit. Since biased allocation of resources decreases total impact, prediction inaccuracies should be mitigated. For example, relevant calibration training should be motivated.

The possibility of speculation can influence subjective wellbeing of project organizers and funders. Their wellbeing premium (wpo and wpf) should be added to the impact sum. Then,

The impact is positive when

The change of wellbeing of organizers and funders is significant relative to the other factors if a project influences a large number of these stakeholders. For example, participants can be enthusiastic about any counterfactually positive impact, including directly negative impact that serves as a learning opportunity. In this case, a structure that optimizes for retroactive funding participants’ wellbeing should be set up.

As of 2022-06-22, the certificate of this article is owned by brb243 (100%).