sbehmer
Posts 3
Comments32
Hi Sanjay, thanks for the comments.
On fiduciary duty: good to hear your thoughts on this. It looks like I drew the wrong conclusion from the evidence. Would you agree with the following statement instead:
Fiduciary duty seems to be an obstacle, and could be significantly raising the costs of shareholder activism. That said, it doesn't seem to make the costs prohibitively high. Significant shareholder activism still seems to be possible under current laws and norms, at least on climate change.
That seems right to me given the evidence. I should say that it's not just the New York City Pension Fund who has been active on climate change. They were joined in their activism campaign by CALPERS and CALSTRS, two of the largest public pension funds in the world.
Good question, and I haven't been very clear on this partially because I don't know much about it.
That said, I do think it's common for nonprofits to have lots of money invested in the stock market. This is what philanthropic foundations do. Examples include the Bill and Melinda Gates Foundation ($38B in assets) or the Ford Foundation ($16B). Universities are other examples of nonprofits with huge investments in the stock market (the Harvard Endowment is $53.2B).
Within EA, I think the two major foundations are Good Ventures (which funds Open Philanthropy's recommendations) and FTX Foundation. It looks like Good Ventures had $3.4B in assets in 2020, and it was growing at around $1B a year before then, so it may be significantly higher now (I haven't been able to find more current data). I also haven't been able to find data on FTX since it's so new.
Based on the information provided in the post, I would guess that Good Ventures' existing investments are enough to engage in impactful shareholder activism.
Maybe another commenter with more knowledge about this stuff could chime in and correct any mistakes I'm making.
Thanks for the comment! I tried to address this capital funding concern with the following paragraph in the post:
For reference, a fund of $10B (which I would expect to be around the amount that Open Philanthropy or FTX already have invested) in the S&P 500 would give about a .025% stake in each of those companies. This would be enough to engage in proxy battles but not to use proxy access. However, if you chose to skew your investments toward smaller (and presumably especially influential) companies, then you could potentially acquire much larger percentages of those companies and use more effective engagement strategies.
So the idea is that existing EA investment funds already probably have around a .02% stake in many large companies like Exxon, which means that they wouldn't have to invest any more money or change their portfolio to follow this strategy.
Thanks! Both the Atkinson article and the Sen interview are very interesting. I would like to see some actual data on the teaching of welfare economics/public economics. People seem to agree that it's declined, but I'm not sure I would agree that it has "disappeared" (anecdotally, I know many people who were exposed to models of optimal redistribution during undergrad. Some of these people were exposed through a required course, and others chose to take a public finance elective). My impression that welfare economics teaching is more common at European universities is also just based on anecdotal evidence. Some actual data would be helpful.
I agree that this is an important topic. Economic welfare analysis is a widely used method for cause prioritization, and a lot of it looks very different from the kind of cause prioritization work that 80k or Open Philanthropy would do. So it's useful to look into why that is.
That said, a lot of the economics literature goes beyond the simple "maximize surplus" approach that you highlight. The main subfield to look at is public economics (or a narrower subfield called public finance). That's where you find professors who understand welfare economics the most. Since at least the 1970s, mainstream public economists have studied optimal policy using social welfare functions which capture the idea of diminishing marginal utility from wealth (James Mirlees' Nobel prize-winning work on optimal redistribution is a good example. Atkinson and Stiglitz's textbook, first published in 1980, is a great resource for learning this kind of stuff. And here are a few examples of papers published in the last few years). Roughly, those papers adjust WTP by a factor to account for differing marginal utilities, as you suggest in your google doc.
Many economists who most directly influence public policy are public economics or public finance professors (as an example, all 5 professors from the University of Chicago who served on the Council of Economic Advisors in the past 12 years were from public economics), so narrow "maximize willingness to pay" thinking shouldn't be a problem for them.
However, many economists outside of public economics often do engage in the simple "maximize WTP" thinking that you're talking about. Unfortunately, more sophisticated welfare analysis often isn't a standard part of graduate school curricula (let alone undergrad courses), so a lot of economists don't know about it. These economists could be having negative impacts in a number of ways:
- They directly influence policy. The main channel for this, I would expect, is macroeconomics policy. It may also impact development policy, but from what I've heard development economists rarely do any sort of formal welfare analysis (they don't even consider consumer surplus), and instead just look at ad-hoc objectives like increasing health or output.
- They teach welfare analysis poorly to students. This leads to more economists who don't know any welfare analysis beyond willingness to pay.
I'm not sure how big this negative impact is, but if it turned out to be big, I think the solution would be on the education side. Basic concepts in welfare economics, including optimal redistribution, should be a part of standard graduate and undergraduate economics curricula. Interested students should be informed that if they want to learn more they should take a public finance elective. From what I hear, this is fairly common at European universities, but not at American ones.
This seems like a very good initiative. It's great to see this cause area moving forward.
Now, like some of the other commenters, I'm having some trouble understanding what kind of work IIDM includes. I agree with the earlier comment which said that the framing of IIDM so far has emphasized improving decision-making a lot more than improving institutions. The original 80k article focused mainly on the possibility of correcting cognitive biases (the kind that people would learn about in cognitive science or psychology classes). There was no mention of the large body of academic work relating to institutional design (this would mainly be learned in political economy or political science courses). Until reading the comments on this post, I was under the impression that IIDM was focused only on "how do we improve decision-making within the current political system" rather than "how can we reform the political system to work better". So, for example, I thought that EA-funded organizations working on voting reform wouldn't fall under IIDM.
If you want IIDM to include institutional reform, then I think that should be made more clear. At least for me, one thing that would have helped is if a different name was used for the overall cause area (like improving institutions) and then within that cause area you have IIDM, which is focused only on improving decision-making within a given institutional structure.
However, I'm pretty unsure of how much overlap there is between these two cause areas, so I'm not sure that it's even worth having the institutional reform people in your working group. Does someone working on constitution design have much to contribute to a discussion on how to teach civil servants to better deal with uncertainty? At least in the academic world, these two fields are fairly separate (from what I can tell). Maybe it would better to have these mostly operate as two separate cause areas.
What is the LTFF's position on whether we're currently at an extremely influential time for direct work? I saw that there was a recent grant on research into patient philanthropy, but most of the grants seem to be made from the perspective of someone who thinks that we are at "the hinge of history". Is that true?
This looks great and thanks for posting! One question: how come those other organizations working in this space, who as you note have a track record of success in other countries, haven't expanded to countries like Malawi? In other words, why is lead exposure reduction in Malawi neglected by other actors?
Thanks, this is a very good comment. I mostly cited that article for the literature review, which includes a few papers that argue for a causal connection between learning economics and free-riding. However, I looked into it more today, and it seems like the entire body of work is inconclusive on this question. Here's a more recent literature review on that.
I'll edit that part of the post to be more accurate.
On your point about activism on issues other than climate change: When you say "short to medium term", what kind of time scale are you thinking of? I would guess that you mean "the next ten years or so", but I want to make sure. Sometimes around here people use "medium term" to mean the next hundred years.