Is crowdfunding unfair?

Compared to what?  Letting experts decide how the rest of us should allocate our own resources to research?


Grim said...

I don't know that it's unfair, but it does come up with some strange decisions. The author of the webcomic The Oatmeal recently decided to make a card came called "Exploding Kittens." He and his friends thought they could do it for $10,000, so that's what they set as their goal.

Currently has been pledged almost four million dollars.

The decks were going to cost $35 each -- which is right out of sight for a card game! -- so that means that people have essentially pre-ordered a hundred thousand decks of one of the most expensive card games in history.

Why? Well, nobody knows if it's a very good game. It actually sounds pretty dull to me. I suspect that if the game had gotten its $10,000 investment and then gone on the market in bookstores and gaming stores nationwide, it probably wouldn't have sold a hundred thousand copies ever. I could be wrong about that, of course, but it's hugely expensive and the description of the gameplay suggests it's much more simplistic than, say, Uno (whose decks cost like $5).

Meanwhile, those science projects aren't getting $3.5M in pledges, though many of them are for potentially lifesaving inventions. A card game about exploding kittens for $35? You bet.

Texan99 said...

Right. If you let people spend their own money, they may spend it on stuff we don't approve of.

Grim said...

Well, if you're coming at it from the perspective of 'folks with money,' that's fine -- you can do what you want with your money. If you want to spend it on a $35 game no one has ever played, that's your lookout.

But she's coming at it from the perspective of 'folks who need funding.' Were I the head of a laboratory or other grant-seeking institute, should I direct my staff to expend time and resources on crowdsourcing, or on grant writing? Probably grant-writing, because crowdsourcing seems to be about popularity rather than quality (whereas the market is often the acid test of quality, at the crowdsourcing level you're still talking concepts, not delivery); and because granting agencies are interested in giving money to science, whereas crowdsourcing is proving to be chiefly interested in exploding kittens.

Texan99 said...

Of course she is! It's the perennial complaint of people who would like to get their mitts on other people's money: how to take the decision away from the people whose money it is, and give the discretion to people who would like to spend it on their behalf. Because their ideas are so superior!

I often feel this way about how other people spend their money. I'm perfectly certainly I have better ideas.

Grim said...

Well, her real complaint is about the effect of popularity on outcomes. That's a standing complaint on the left, even where there aren't monetary or property issues at stake at all.

It's another sort of "privilege" complaint, in other words. The money issue is to the side -- she's not talking about seizing anyone's money, just about whether it's better to ask for grants or to go to the crowd. It's probably more effective to ask for grants, but she also has a privilege concern about the way the crowd operates. In this case, that concern is pointed at the way the crowd directs its money; but she has exactly the same concern about how they direct their attention, approval, etc.

I think the fairness issue is somewhat silly. I also think the crowdfunders are acting a bit irrationally, even according to ordinary market principles. Once the game hit $10,000, or $20,000, it was going to get made. A rational actor in a market who wanted the game would wait for it to be made and see how the reviews went. If it's popular, the price will come down because a lot more copies will get made. If it's not popular, the price will come down because used copies will be for sale on eBay. Either way, market analysis suggests you stop donating once the project has sufficient initial investment, and wait for the market to do its work.

What's going on instead is that they're heaping money on this thing, and it isn't because of its market value. It's a sign of approval for The Oatmeal. His popularity isn't unfair -- he's earned it, clearly -- but the way the crowdsourcing is going is motivated by popularity and approval, not by market fundamentals.

Texan99 said...

"she's not talking about seizing anyone's money"--If she's limiting herself to grants from private organizations, I agree. If the grants are from taxpayers, hogwash.

I agree there's a standard complaint on the left about the effect of popularity on outcomes, as befits an elitist philosophy of people who feel they know best and want to get into a position to impose their better knowledge on the rest of us.

Markets just keep track of what we all value. They don't tell us what to value. We have to work that out for ourselves--or we can delegate the decision to our betters, if that's the kind of system we prefer. For myself, I'd say that if I valued what these people thought was the best way to spend my money, then I'd ask them, and they should wait until I do before they arrogate the decision to themselves. Except for money that they earned, of course; they're free to allocate that however the like.

Grim said...

Well, fair enough.

Is it your opinion, then, that the government should not be in the business of grant-making? That's a surprising position, because often citizens don't know what the government needs.

For example, consider Project Minerva. It's a DOD grant-writing project. If you were to crowdsource the kinds of projects it gives out, you'd never get any money for them because the average citizens aren't deep enough in the weeds to know what the DOD's long-term requirements are. (Leaving aside the problem of security clearances, it also just takes years of doing stuff to come to understand how the stuff works and how it's developing and what you'll need next.)

Markets are supposed to outperform command economies because of a superiority of local information in decision making. But in this case, people with the local information are at DOD. Putting it out to crowdsourcing would mean taking on something like the efficiency of a command economy, by putting distant people without the local information in charge of the decision.

Texan99 said...

If we grant that a particular government function really is one that ought to be entrusted to government and not to the private market--and defense is an example I can agree on--then I have no problem with the DOD handing out grant money to achieve the ends that it sets for itself, in those limited areas where it really was impossible for anyone outside the DOD to understand the rarified need in question. I would hold those categories to a minimum, not only to limit government (and the tax burden), but because experience tells me that tightly controlling that kind of research and inquiry is not a good way to ensure the maximum progress over time.

The progressives who would like the world to run on taxpayer-funded grants normally don't have in mind a career of defense research. They just think that the smart, trustworthy people work generally for the government, and should be in charge of spending all the money in all kinds of areas of research, so the money would go to the "right" areas. Really, the money should go to whatever area of research they'd personally be interested in pursuing. And in this they may be being fairly consistent, because there are hardly any areas of life they wouldn't just as soon turn over to a benevolent government, rather than leave it in the hands of that nasty private sector.

If it were up to me, in contrast, the number of functions turned over to the government would be quite limited, and tax revenues would be extracted from people only for those limited purposes. Research in all other areas would have to compete for private funds by convincing the people whose money it was that it was a good use of their money.

Grim said...

To put a twist on the question, there was a proposal from the anthropologists to have the DOD block grant the money to experts at the National Science Foundation, lest evil military men direct the course of noble academic research. That strikes me as a loser on both grounds: it's public funding of research and it's being directed by distant people who don't understand the local information.

So you end up with three possibilities:

1) People who own the money, but are distant and lack the local information necessary;

2) People who don't own the money, but have the local information;

3) People who neither own the money nor have the local information.

Of these, 1 may be superior morally for those who value private property without regard to market efficiency; 2 is going to be superior in terms of outcomes, and for those who value markets because of efficiency of production. 3 is plainly bad.

Texan99 said...

The people who own the money always have the local information about what they value.

There will always be a would-be elite out there who would like to override the resource-owners' judgment on that score, because the elite know best. And who knows? They may be right; maybe we'd all be better off under a benevolent dictatorship with them in charge. But for some of us, the choice is that people should be in charge of their own resources, even if we feel they don't make good use of their freedom. For one thing, we can't be sure we're right that the Powers That Be really know better. For another, they're notorious for becoming corrupt over time, even if in the early stages they make a convincing show of Doing What's Best for the Rest of Us.

Grim said...

Sometimes I've thought it would be great if the tax forms came with a checklist of programs you were willing to support. "For DOD, check here! For welfare programs, check here!" If you didn't check the box, they couldn't spend your money on those programs. If programs couldn't get funded, they'd have to stop.

But of course they'd just 'borrow' the money and spend it anyway.

Texan99 said...

A cafeteria plan--that would be nice.

E Hines said...

Is it your opinion, then, that the government should not be in the business of grant-making? That's a surprising position, because often citizens don't know what the government needs.

Nearly absolutely, that's my opinion. If us citizens are too stupid to know what the DOD's long-term requirements are[,] perhaps government should get out of the way of our education--vouchers, charter schools, all the other alternatives to the local public schools (which competition would vastly improve, so the local taxpayers could start getting their money's worth (enough digression)--and, yes, grants and other subsidies to colleges and universities, we could get eddicated enough.

I'm also not convinced we don't know what government needs all that broadly. We just don't agree with what the politicians and bureaucrats think we should agree government needs.

There are projects worth doing that will take taxpayer money to guts up. Getting into space in a serious way, for instance, national defense, paying our national debt, come to mind. If crowdfunding can't make those (I recall a couple of stinking rich guys wanting to increase taxes on the rich because government needs the money, but they refused, or ducked the question, to make donations to the Treasury, even in addition to the higher taxes they wanted--all stinking rich guys--to pay), then let government make their case directly to us for a plebiscite-approved tax for the specific project.

But if I want to drop a dime on a weak deck of cards instead of a nickel on shutdown costs for Warthogs, or to send third tier HHS officials on all expenses paid trips to exotic locales, well, it's my money.

Aside from that, crowdsourcing is new and sexy, and everyone wants to take part. If it's viable, it'll settle out into a steady source of funds, sort of like IPOs. If it's not, it'll fade like the fad it will have turned out to be.

Eric Hines

Grim said...

If us citizens are too stupid to know what the DOD's long-term requirements are...

Nobody said you were too stupid. I said you don't have the right security clearances, and you don't have the right experience. Education won't fix that. Working in the field for a long time would, but we can't expect most Americans to work in defense for long years.

E Hines said...

I didn't mean to imply that that was your meaning. I was keying off the phrase being what the Left means so often when they say ordinary citizens just don't know or just don't understand.

Education won't fix lack of experience, but most folks can understand why we ought fund this system, but not that one, or how to choose between two worthy systems of which we can afford only one. When it comes to weapon systems, clearances and field experience do matter. But those are only a few of the myriad projects DoD gets itself involved in, and there are a potful of us vets running around the country who can offer informed opinions.

Eric Hines