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Certificate of impact

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casebash (2020) Making impact purchases viable, Effective Altruism Forum, April 17.

Leong, Chris (2020) Making impact purchases viable, Effective Altruism Forum, April 17.

micklat10

Sorry for the late reply.

How do impact certs reduce transaction costs?

1. project risk has many constituents. one of the main project risks is the risk of funding the wrong person. Donors mitigate against this risk by vetting the entrepreneur. This imposes two costs: the first is the vetting cost, and the second is the opportunity cost of rejecting projects whose entrepreneurs fail the vetting filter. Impact certs shift more project risk from donor to the entrepreneur. Where the entrepreneur is capable of assuming this risk, the two costs are eliminated - both the vetting cost and the vetting-false-negative cost.

2. Shifting risk from donor to entrepreneur also improves the entrepreneur's incentives. So funders don't need to hedge against the cynical entrepreneur risk (by vetting and rejecting possibly good projects).

3. it is easier to explain why a project had impact in practice (in case it did) than to convince someone else that a project is reasonably expected to have an impact. Lower effort on convincing the donor is again a reduced transaction cost.

Yes, you still need impact assessment, but impact assessment after the fact is easier than a-priori expected impact assessment. 
 

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In late July, a group of authors, in collaboration with Vitalik Buterin,Buterin, proposed a model called retroactive public goods funding.[3] The model consists of a decentralized autonomous organization (DAO), called "the Results Oracle", which funds projects with high social value. The funding is done retrospectively rather than prospectively, by assessing the value of the project after it has been completed. Once the Results Oracle evaluates a project, it can send the reward to the person or group responsible for the project, or, alternatively, it can use the funds to establish a price floor for a token associated with the project. As the authors note, rewarding via a project token effectively creates a prediction market for the amount of funding the Results Oracle will decide to allocate to the project, and allows the same project to be funded multiple times or by other sources besides the Results Oracle.

OnIn this model, altruistic work receives some or all of its funding after completion rather than beforehand. Once an individual or organization completes work with a positive social impact, they can apply for a certificate of impact. They can then sell this certificate to another organization or individual. Following the sale, the new certificate holder can claim credit for the impact of the project,project's impact, and the organization that carried out the project must acknowledge that they have sold its impact.

Recently, a number ofsome related funding models have been proposed.

In early May 2021, the organization Noora Health—which implements educational programs for mothers of newborns in South Asia—launched a non-fungible token (NFT) which may in some respects be regarded as a certificate of impact. The auction opened with a list price of $2.5 million, and computer scientist and tech entrepreneur Paul Graham—a long-time supporter of the organization—placed the winning bid of ETH 1337, at the time worth $5.23 million.[1][2] A difference between this use of NFTs and certificates of impact as conceived by Christiano is that those bidding in the NFT auction are payingpay for the prospect of future impact, whereasimpact. In contrast, an impact purchase is a transaction involving the transfer of past impact.

In late July, a group of authorsauthors, in collaboration with Vitalik ButerinButerin, proposed a model called retroactive public goods funding.[3] The model consists of a decentralized autonomous organization (DAO), called "the Results Oracle", thatwhich funds projects considered to havewith high social value. The funding is done retrospectively rather than prospectively, by assessing the value of the project after it has been completed. Once the Results Oracle evaluates a project, it can send the reward to the person or group responsible for the projectproject, or, alternatively, it can use the funds to establish a price floor for a token associated with the project. As the authors note, rewarding via a project token in effecteffectively creates a prediction market for the amount of funding the Results Oracle will decide to allocate to the project, and allows the same project to be funded multiple times,times or by other sources besides the Results Oracle.

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Charlie_Guthmann20

When you say transaction costs, I assume you are referring to more than just money - but it’s confusing to me if this is actually cheaper (monetarily) in the short run assuming that the donors don’t just dole out money based on what felt right (or do output based finance rather than outcome). Like they still need to pay evaluators to decide payouts and potentially they have opened themselves up to more criticism or even legal disputes if they had established clear guidelines. I agree the process as a whole is a lot smoother though

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micklat10

I love this idea both as a donor and as an entrepreneur. For smaller projects, transaction costs of funding can dominate and this lowers those costs when the entrepreneur is risk tolerant.

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Charlie_Guthmann
When you say transaction costs, I assume you are referring to more than just money - but it’s confusing to me if this is actually cheaper (monetarily) in the short run assuming that the donors don’t just dole out money based on what felt right (or do output based finance rather than outcome). Like they still need to pay evaluators to decide payouts and potentially they have opened themselves up to more criticism or even legal disputes if they had established clear guidelines. I agree the process as a whole is a lot smoother though
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micklat
Sorry for the late reply. How do impact certs reduce transaction costs? 1. project risk has many constituents. one of the main project risks is the risk of funding the wrong person. Donors mitigate against this risk by vetting the entrepreneur. This imposes two costs: the first is the vetting cost, and the second is the opportunity cost of rejecting projects whose entrepreneurs fail the vetting filter. Impact certs shift more project risk from donor to the entrepreneur. Where the entrepreneur is capable of assuming this risk, the two costs are eliminated - both the vetting cost and the vetting-false-negative cost. 2. Shifting risk from donor to entrepreneur also improves the entrepreneur's incentives. So funders don't need to hedge against the cynical entrepreneur risk (by vetting and rejecting possibly good projects). 3. it is easier to explain why a project had impact in practice (in case it did) than to convince someone else that a project is reasonably expected to have an impact. Lower effort on convincing the donor is again a reduced transaction cost. Yes, you still need impact assessment, but impact assessment after the fact is easier than a-priori expected impact assessment.