I recently read Radical Markets: Uprooting Capitalism and Democracy for a Just Society by Glen Weyl and Eric Posner. They acknowledge the problems in today’s free markets and the need for a reconceptualization of markets. Weyl and Posner believe that instead of reigning in markets, institutions should expand it.
Radical Markets argues for new mechanisms to reduce the negative externalities of the market economy by better aligning incentives between individual good and the collective: to create a market that fosters truly free and open competition.
I respect the book’s skepticism of conventional wisdom around liberal reform. However, I find their views around monopolies and property rights reductionist, impractical and incorrect. Static monopolies are bad, but creative monopolies are good.
Weyl and Posner miss this differentiation because they believe the market economy displaced the moral economy. Institutions sought to fix the problems of the market economy through planned economies, which has been insufficient and created more problems. However, the moral economy never went away, but instead became embedded within the market economy.
I don’t want to get into too much depth around my criticisms around Radical Markets. Not many people have read the book yet.
I take Radical Markets less seriously as the handbook to solve capitalism’s problems. For me, Radical Markets is a reflection of possible business models native to the blockchain and the experimental spirit of the crypto community. After all, Weyl and Posner desire to leverage game theory and mechanism design to create more egalitarian, distributed systems.
The most exciting business model in Radical Markets was Harberger Taxes, or COST (common ownership self-assessed tax). Harberger Taxes are a taxation scheme designed to increase market efficiency and reimagines property rights. Inspired by Georgist theories, Harberger Taxes attempt to strike a balance between common ownership and private ownership. A Harberger model creates an incentive for the property holder to price at the value they are willing to pay to keep it. This exchanges allocative efficiency (societal utilization of assets) for investment efficiency (private speculation of assets).
As the world becomes increasingly automated, human creativity and intellect will be at the center of economic production. I don’t think there are particularly compelling models to capture value. Most models don’t—they are non-profits—and the ones that do rely on highly inefficient and centralized.
Harberger Taxes are ideal for assets ought to be owned (or already are) in common, particularly intellectual property. They can be applied to intellectual property (IP) economies where intellectual property are held as non-fungible tokens representing Harberger licenses. License holders would pay a license issuer to retain their license, and the license issuer can distribute them to all participants in the ecosystem (collective good).
In a Harberger Model with software licensing, a company that forks and modifies an open source code (the commons) must pay a tax if they make it proprietary. If it goes back to the commons, that tax appears. This model could also be extended to the general creative commons and other forms of intellectual property. With tax, it can fund creators of games, and also enable the ability to allocate and trade digital collectibles. Again, ownership can be very specifically encoded the blockchain via non-fungible tokens. This would allow discriminating the pricing per fan too.
A similar idea to Harberger Taxes would be Quadric Voting: a proposal in voting systems that allow minorities to express their values in stronger ways, as opposed to one-vote-one-person systems that could oppress minorities through the tyranny of the majority. For long-tail markets, this would be known as compression funding utilizing token bonding curves to fund niche projects.
Even more meaningful applications of this technology would be transforming the pharmaceutical industry and patents. The development cycles (10-15 years) and costs ($2.5bn) are absurd as a result of closed source development. Token Bonding Curves and Non-Fungible Tokens can create a clear pricing model and a safer collateralized, transparent funding model by creating economic incentives for open-sourcing IP.
Radical Markets has opened up a new design space for business models native to crypto in a way that is nascent and exciting. If you’re building in this area, I would love to brainstorm ideas and potentially support you as an investor.
I recommend reading the works cited in this article as most of the ideas here are a synthesis of those thoughts.