This whole structure of certificates of impact seems to derive its main benefit from allowing market mechanisms to work in the altruistic domain. When I’ve thought about trying to access these market mechanisms, the main problem has appeared to be anchoring the value so that expectations work properly. For instance the value of stock in the stock market is anchored by the profits that the firms will eventually make.
You don’t spend much time addressing this problem. I’m not sure if you mean to include it in the note at the end of things you are setting aside, but at least to my mind it seems relevant to the question of whether such a system could work properly if we arrived there.
My previous attempts to solve this problem had involved anchoring by (occasional, stochastic) explicit external evaluation, but this turns up other difficulties. If I understand it correctly, you’re thinking instead of anchoring to how much people really value things. The issue with this is that values can fluctuate over time, so I don’t know that it’s really well-founded. If the amount its value today comes apart quite a bit from how its expected to be valued tomorrow (and this will continue), I’m not sure how it would stabilise.
What I’m particularly worried is how people would value old certificates. It seems plausible that people would have little interest in certificates from 80 years ago, and expect future interest to continue to drop off. Do you envisage some mechanism to counteract this? Old certificates would by their nature be irreplacable, so we might hope that possessing them achieved some cachet like possessing old artwork has in the world today. But I don’t feel confident that this would work.
A philanthropist (or funding agency) gives certificates value by their efforts to acquire certificates.
I.e. rather than funding a bunch of research that it thinks looks promising, the NSF tries to purchase research output. People may buy certificates (or hire researchers in exchange for a fraction of their certificates) because they expect the NSF to buy them later.
The expectation is that the NSF won’t subsequently resell all of these certificates. Doing so would be an explicit preference reversal (unless the value of the certificates grew faster than the NSF’s rate of return, in which case other donors have decided that the NSF funded good things, and the NSF might decide to sell them).
ETA: this subsumes the proposal of occasional, stochastic valuations. A funder interested in tying the value of certificates to some explicit benchmark X can periodically buy certificates at a value determined by the benchmark X.
Yes, I see how you can get short term value from this. But how do you get a long-term stable state? How do you envision funding agencies or philanthropists making decisions about how to value different certificates? (Particular interest in this question for old certificates, because I think it makes many of the problems more salient.)
Summary: the value of certificates is generally not fixed but will change over time. But this seems like a feature, not a bug. And If everyone stopped using the certificates system, the funders who are left with the certificates should be happy with that outcome as well, for the same reason they are happy making a grant which they can’t later unwind.
Suppose in 2000 a funder buys some certificates that (they think) represent lives saved in 2000. They are happy with that investment, and just to keep the certificates indefinitely; it is not clear that those certificates will ever change hands again after 2005. If a funder had the opportunity to “undo” their earlier funding opportunities and get back the money, how often would they take it?
When valuing certificates at different times, the idea is for a funder to consider how many dollars they would pay to do a good deed in 2000, vs. a good deed in 2005. This is a question that funders already face, when choosing whether to invest or do a good deed now. Allowing them to answer the question with the benefit of hindsight (and allowing speculators to bet on what their answers will be) seems like a bonus.
It seems like the main concern is if they don’t think of selling certificates as unwinding their original good deed, i.e. if they aren’t using the certificates system. If they are using the system, then the overall transaction is just a straight-up loss for them. If they aren’t using the system, then it’s not really our business how they interact with it (adding people who sometimes buy certificates but who don’t value them can’t do any harm, it just drives up the value of certificates and benefits the users of the system).
If a funder did decide to unload their life-saved-in-2000 certificate, the idea would be for someone else to step up to buy them for the reduced price. If people interested in saving lives in 2000 are actually using the certificates system, then the price can’t fall far before someone will become very interested in buying it.
In fact it’s quite likely that the value of certificates for realistic interventions will vary hugely over time as more information is revealed about how good they were. This happens on top of the overall discount rate between good-in-2000 and good-in-2005, and seems like a further bonus.
I agree with your general point about changing value of certificates as we get more information being a feature (this is the kind of thing I meant by tapping into market mechanisms).
Suppose in 2000 a funder buys some certificates that (they think) represent lives saved in 2000. They are happy with that investment, and just to keep the certificates indefinitely; it is not clear that those certificates will ever change hands again after 2005.
OK, I see you’re envisaging a less liquid market than I was. Though there are certainly some situations where I’d expect people to sell long after the fact. For instance if someone dies 40 years later and the certificates pass to their next-of-kin who doesn’t value the work, they might well seek to sell them.
In order to understand whether this is a state which would be desirable, I’m trying to picture what the world would look like today if we’d been using these since, say, 1800, and there were lots of old certificates lying around. I haven’t been able to provide myself with a stable picture of this, which makes me somewhat sceptical.
If a funder had the opportunity to “undo” their earlier funding opportunities and get back the money, how often would they take it?
I think this would happen a lot as people gained information. Then funding gives you an option value of cashing out, whereas not funding wouldn’t necessarily give you the chance of retroactively buying the thing (people would also fund more high-variance things). Of course that doesn’t mean that people would want to sell the certificates, because information that made them want their money back would also tend to drop the going price for the certificates.
My point is that the existence of future funders who don’t care much about “Lives saved in 2000” can never drive down the value of such a certificate, it can merely drive up the value of certificates that the future funders care about.
If the market becomes illuiqid (once the funders who care about lives saved in 2000 are gone), this shouldn’t be troubling to the funders left with the certificates, since that just means they are assuming responsibility for the things they funded (as in the status quo).
That said, I don’t see why there is any problem with valuating the old certificates, aside from skepticism about whether anyone in 2000 cares enough about the good deeds done in 1800 and would actually honor certificates.
This whole structure of certificates of impact seems to derive its main benefit from allowing market mechanisms to work in the altruistic domain. When I’ve thought about trying to access these market mechanisms, the main problem has appeared to be anchoring the value so that expectations work properly. For instance the value of stock in the stock market is anchored by the profits that the firms will eventually make.
You don’t spend much time addressing this problem. I’m not sure if you mean to include it in the note at the end of things you are setting aside, but at least to my mind it seems relevant to the question of whether such a system could work properly if we arrived there.
My previous attempts to solve this problem had involved anchoring by (occasional, stochastic) explicit external evaluation, but this turns up other difficulties. If I understand it correctly, you’re thinking instead of anchoring to how much people really value things. The issue with this is that values can fluctuate over time, so I don’t know that it’s really well-founded. If the amount its value today comes apart quite a bit from how its expected to be valued tomorrow (and this will continue), I’m not sure how it would stabilise.
What I’m particularly worried is how people would value old certificates. It seems plausible that people would have little interest in certificates from 80 years ago, and expect future interest to continue to drop off. Do you envisage some mechanism to counteract this? Old certificates would by their nature be irreplacable, so we might hope that possessing them achieved some cachet like possessing old artwork has in the world today. But I don’t feel confident that this would work.
A philanthropist (or funding agency) gives certificates value by their efforts to acquire certificates.
I.e. rather than funding a bunch of research that it thinks looks promising, the NSF tries to purchase research output. People may buy certificates (or hire researchers in exchange for a fraction of their certificates) because they expect the NSF to buy them later.
The expectation is that the NSF won’t subsequently resell all of these certificates. Doing so would be an explicit preference reversal (unless the value of the certificates grew faster than the NSF’s rate of return, in which case other donors have decided that the NSF funded good things, and the NSF might decide to sell them).
ETA: this subsumes the proposal of occasional, stochastic valuations. A funder interested in tying the value of certificates to some explicit benchmark X can periodically buy certificates at a value determined by the benchmark X.
Yes, I see how you can get short term value from this. But how do you get a long-term stable state? How do you envision funding agencies or philanthropists making decisions about how to value different certificates? (Particular interest in this question for old certificates, because I think it makes many of the problems more salient.)
Summary: the value of certificates is generally not fixed but will change over time. But this seems like a feature, not a bug. And If everyone stopped using the certificates system, the funders who are left with the certificates should be happy with that outcome as well, for the same reason they are happy making a grant which they can’t later unwind.
Suppose in 2000 a funder buys some certificates that (they think) represent lives saved in 2000. They are happy with that investment, and just to keep the certificates indefinitely; it is not clear that those certificates will ever change hands again after 2005. If a funder had the opportunity to “undo” their earlier funding opportunities and get back the money, how often would they take it?
When valuing certificates at different times, the idea is for a funder to consider how many dollars they would pay to do a good deed in 2000, vs. a good deed in 2005. This is a question that funders already face, when choosing whether to invest or do a good deed now. Allowing them to answer the question with the benefit of hindsight (and allowing speculators to bet on what their answers will be) seems like a bonus.
It seems like the main concern is if they don’t think of selling certificates as unwinding their original good deed, i.e. if they aren’t using the certificates system. If they are using the system, then the overall transaction is just a straight-up loss for them. If they aren’t using the system, then it’s not really our business how they interact with it (adding people who sometimes buy certificates but who don’t value them can’t do any harm, it just drives up the value of certificates and benefits the users of the system).
If a funder did decide to unload their life-saved-in-2000 certificate, the idea would be for someone else to step up to buy them for the reduced price. If people interested in saving lives in 2000 are actually using the certificates system, then the price can’t fall far before someone will become very interested in buying it.
In fact it’s quite likely that the value of certificates for realistic interventions will vary hugely over time as more information is revealed about how good they were. This happens on top of the overall discount rate between good-in-2000 and good-in-2005, and seems like a further bonus.
I agree with your general point about changing value of certificates as we get more information being a feature (this is the kind of thing I meant by tapping into market mechanisms).
OK, I see you’re envisaging a less liquid market than I was. Though there are certainly some situations where I’d expect people to sell long after the fact. For instance if someone dies 40 years later and the certificates pass to their next-of-kin who doesn’t value the work, they might well seek to sell them.
In order to understand whether this is a state which would be desirable, I’m trying to picture what the world would look like today if we’d been using these since, say, 1800, and there were lots of old certificates lying around. I haven’t been able to provide myself with a stable picture of this, which makes me somewhat sceptical.
I think this would happen a lot as people gained information. Then funding gives you an option value of cashing out, whereas not funding wouldn’t necessarily give you the chance of retroactively buying the thing (people would also fund more high-variance things). Of course that doesn’t mean that people would want to sell the certificates, because information that made them want their money back would also tend to drop the going price for the certificates.
My point is that the existence of future funders who don’t care much about “Lives saved in 2000” can never drive down the value of such a certificate, it can merely drive up the value of certificates that the future funders care about.
If the market becomes illuiqid (once the funders who care about lives saved in 2000 are gone), this shouldn’t be troubling to the funders left with the certificates, since that just means they are assuming responsibility for the things they funded (as in the status quo).
That said, I don’t see why there is any problem with valuating the old certificates, aside from skepticism about whether anyone in 2000 cares enough about the good deeds done in 1800 and would actually honor certificates.