On further reflection, you might want to try Who Gets What and Why by Alvin Roth. Audiobook available. Don't recall how much of an explicit stress he places on information flow but he does give a good sense of market organization, and how it promotes or inhibits market functioning. The key importance of information flow is at least implicit in this.
Phishing for Phools by Ackerlof and Shiller can be read as counterargument and is a nice read. Slightly heterodox, not fully developed. Audiobook is available.
Economics for the Common Good By Jean Tirole is not bad as a an overview of various aspects about the debate of the moral value of economics written by one of the major figures in academic economics.
Slouching towards utopia which you mention is not very well written in terms of style, at least to my tastes, but makes several interesting points and provides a solid economic history, well informed by (the left wing of) mainstream economics
Wonderful resource and a great read.
A few responses:
Information flow is a key feature of a lot of mainstream economics and I've done some work in this area, so maybe I could point you in the right direction given a more particular question.
Seems from your characterization of his argument that Robert Wright gets the relationship between wealth and zero sum games backwards. Plus sum games trivially increase wealth but higher wealth may promote conspicuous consumption which is a negative sum games in terms of wealth, so this direction seems dubious.
Very curious about the apparent paucity of writing on the relationship of moral progress and personality psychology.
I appreciate this post a lot. Very thought provoking and the examples make it very concrete and useful.
I wonder to what extent one should prefer a proposal that hasn't been evaluated by other grantmakers to one that has been and was rejected (ceteris paribus). This would depend on how what fraction of rejections are due to:
proposer was bed (everyone should reject)
proposal was bad (likely it was improved after previous rejection)
project not a good fit for grantmaker (likely better fit next time)
everything great but grantmaker ran out of money
For example, if all are due to 1, previous rejection is very strong negative signal, while if all are due to 4, previous rejection is not a negative signal at all. Maybe 3 can be a positive signal, but I am not sure.
This comment starts out nitpicky but hopefully gets better
"If each team has an uncorrelated 50% chance of succeeding, and with three teams, the probability of being the sole group with a vaccine is therefore 12.5% - justifying the investment. But that means the combined value of all three was only 37.5% of the value of success, and if we invested on that basis, we would underestimate the value for each"
There's something wrong with this calculation. I don't think it makes sense to sum marginal values in this way. It's like saying that if the last input has zero marginal value then the average input also has zero marginal value. But if we lower inputs based on this, the marginal value will go up and we will have a contradiction.
You want the expected value of trying to develop each vaccine, which requires an assumption about how others decide if to try or not. Then, it won't be obvious that all three try, and in the cases they don't , the marginal value of those that do is higher.
I think you're right that we should be careful with counterfactual thinking, but cooperative game theory won't solve this problem. Shapley value is based on the marginal contribution of each player. So it's also counterfactual.
Instead, I think the natural solution to the problem you outline is to think more clearly about our utility function. We sometimes talk as if it's equal to the sum of utilities of all present and future sentient beings and sometimes as if it's equal to the marginal contribution attributable to a specific action by EA. neither is good. The first is too broad and the latter too narrow. If we think EA is about doing good better, we should care about converting people and resources to our way of doing good and also about to be transparent and credible and rigorous about doing good. So if we cooperate with others in ways that promote these goals, great, otherwise, we should try to compete with them for resources.
Thank you for the comment, I learned a lot from it. Would appreciate to hear what you think about my responses.
I think the first point about consumption smoothing is critical. My reading of the literature is almost the opposite - that although the poor find ingenious ways to save, their ability to smooth consumption is very limited. I wonder why that is. Maybe it's because Portfolios of the Poor focuses on Bangladesh, India and South Africa which are much more developer financially than some other countries. But we will need to think about this some more.
The point about debt is very important and well taken. We will need to consider not just income but wealth more generally. I've corrected the question.
Regarding idiosyncratic shocks, our thought was that family level income/consumption/wealth data allows us to measure the frequency of idiosyncratic shocks. In addition, an Organization like GiveDirectly must in any case have direct communication with potential recipients to be able to transfer the money, which implies family illness may be observed.
Regarding systematic shocks, out thought was that it is easier for the donor to convert cash to goods than for the affected people. So if what they need in a drought is grain and not cash, the donor could accommodate this quite easily.
My guess is that there will be a chance of crowd-out and for givers who are at their hard limits on their charitable giving the crowd-out will be 100%. I would not expect a very good rule of thumb to exist.
That said, there may be things you can do to minimize it (just off the top of my head):
Make your request unique so that it doesn't bring to mind other places people are donating to
Make a case that giving to your cause can make other giving more effective
Make your request at times where people get fewer requests (e.g., not around the holidays)
One time requests tied to a specific event like a natural disaster are more easily absorbed without offsetting reductions
Giving small perks people might value a lot might help them slot this giving separately from other forms of giving and thus not feel the need to offset it
On further reflection, you might want to try Who Gets What and Why by Alvin Roth. Audiobook available. Don't recall how much of an explicit stress he places on information flow but he does give a good sense of market organization, and how it promotes or inhibits market functioning. The key importance of information flow is at least implicit in this.
Phishing for Phools by Ackerlof and Shiller can be read as counterargument and is a nice read. Slightly heterodox, not fully developed. Audiobook is available.
Economics for the Common Good By Jean Tirole is not bad as a an overview of various aspects about the debate of the moral value of economics written by one of the major figures in academic economics.
Slouching towards utopia which you mention is not very well written in terms of style, at least to my tastes, but makes several interesting points and provides a solid economic history, well informed by (the left wing of) mainstream economics
Wonderful resource and a great read. A few responses:
I appreciate this post a lot. Very thought provoking and the examples make it very concrete and useful.
I wonder to what extent one should prefer a proposal that hasn't been evaluated by other grantmakers to one that has been and was rejected (ceteris paribus). This would depend on how what fraction of rejections are due to:
For example, if all are due to 1, previous rejection is very strong negative signal, while if all are due to 4, previous rejection is not a negative signal at all. Maybe 3 can be a positive signal, but I am not sure.
Does anyone have a sense of the answer?
First two points sounds like a valid application of Grossman-Stiglitz 1980
Thanks David, this made me think quite a bit.
This comment starts out nitpicky but hopefully gets better
"If each team has an uncorrelated 50% chance of succeeding, and with three teams, the probability of being the sole group with a vaccine is therefore 12.5% - justifying the investment. But that means the combined value of all three was only 37.5% of the value of success, and if we invested on that basis, we would underestimate the value for each"
There's something wrong with this calculation. I don't think it makes sense to sum marginal values in this way. It's like saying that if the last input has zero marginal value then the average input also has zero marginal value. But if we lower inputs based on this, the marginal value will go up and we will have a contradiction.
You want the expected value of trying to develop each vaccine, which requires an assumption about how others decide if to try or not. Then, it won't be obvious that all three try, and in the cases they don't , the marginal value of those that do is higher.
I think you're right that we should be careful with counterfactual thinking, but cooperative game theory won't solve this problem. Shapley value is based on the marginal contribution of each player. So it's also counterfactual.
Instead, I think the natural solution to the problem you outline is to think more clearly about our utility function. We sometimes talk as if it's equal to the sum of utilities of all present and future sentient beings and sometimes as if it's equal to the marginal contribution attributable to a specific action by EA. neither is good. The first is too broad and the latter too narrow. If we think EA is about doing good better, we should care about converting people and resources to our way of doing good and also about to be transparent and credible and rigorous about doing good. So if we cooperate with others in ways that promote these goals, great, otherwise, we should try to compete with them for resources.
Thank you for the comment, I learned a lot from it. Would appreciate to hear what you think about my responses.
I think the first point about consumption smoothing is critical. My reading of the literature is almost the opposite - that although the poor find ingenious ways to save, their ability to smooth consumption is very limited. I wonder why that is. Maybe it's because Portfolios of the Poor focuses on Bangladesh, India and South Africa which are much more developer financially than some other countries. But we will need to think about this some more.
The point about debt is very important and well taken. We will need to consider not just income but wealth more generally. I've corrected the question.
Regarding idiosyncratic shocks, our thought was that family level income/consumption/wealth data allows us to measure the frequency of idiosyncratic shocks. In addition, an Organization like GiveDirectly must in any case have direct communication with potential recipients to be able to transfer the money, which implies family illness may be observed.
Regarding systematic shocks, out thought was that it is easier for the donor to convert cash to goods than for the affected people. So if what they need in a drought is grain and not cash, the donor could accommodate this quite easily.
My guess is that there will be a chance of crowd-out and for givers who are at their hard limits on their charitable giving the crowd-out will be 100%. I would not expect a very good rule of thumb to exist.
That said, there may be things you can do to minimize it (just off the top of my head):