Lewis Carroll Invented Retroactive Public Goods Funding In 1894
Retroactive public goods funding is one of those ideas that’s so great people can’t stop reinventing it.
I know of at least five independent inventions under five different names: “social impact bonds” by a New Zealand economist in 1988, “certificates of impact” by Paul Christiano in 2014, “retroactive public goods funding” by Vitalik Buterin a few years ago, “EA loans” by a blogger who prefers to remain anonymous, and “venture grants” by Mako Yass. These aren’t all exactly the same idea. Some are slightly better framed than others and probably I’m being terribly disrespectful to the better ones by saying they’re the same as the worse ones. But I think they all share a basic core: some structure that lets profit-seeking venture capitalist types invest in altruistic causes, in the hopes that altruists will pay them back later once they’ve been shown to work.
Upon re-reading some old SSC comments, I found a gem I’d missed the first time around: Julie K says that the actual first person to invent this idea was Lewis Carroll (aka author of Alice in Wonderland) back in 1894. She quotes from his book Sylvie and Bruno:
Mein Herr was again speaking in his ordinary voice. “Now tell me one thing more,” he said. “Am I right in thinking that in your Universities, though a man may reside some thirty or forty years, you examine him, once for all, at the end of the first three or four?”
“That is so, undoubtedly,” I admitted.
“Practically, then, you examine a man at the beginning of his career!” the old man said to himself rather than to me. “And what guarantee have you that he retains the knowledge for which you have rewarded him—beforehand, as we should say?”
“None,” I admitted, feeling a little puzzled at the drift of his remarks. “How do you secure that object?”
“By examining him at the end of his thirty or forty years—not at the beginning,” he gently replied. “On an average, the knowledge then found is about one-fifth of what it was at first—the process of forgetting going on at a very steady uniform rate—and he, who forgets least, gets most honour, and most rewards.”
“Then you give him the money when he needs it no longer? And you make him live most of his life on nothing!”
“Hardly that. He gives his orders to the tradesmen: they supply him, for forty, sometimes fifty, years, at their own risk: then he gets his Fellowship—which pays him in one year as much as your Fellowships pay in fifty—and then he can easily pay all his bills, with interest.”
“But suppose he fails to get his Fellowship? That must occasionally happen.”
“That occasionally happens.” It was Mein Herr’s turn, now, to make admissions.
“And what becomes of the tradesmen?”
“They calculate accordingly. When a man appears to be getting alarmingly ignorant, or stupid, they will sometimes refuse to supply him any longer. You have no idea with what enthusiasm a man will begin to rub up his forgotten sciences or languages, when his butcher has cut off the supply of beef and mutton!”
“And who are the Examiners?”
“The young men who have just come, brimming over with knowledge. You would think it a curious sight,” he went on, “to see mere boys examining such old men. I have known a man set to examine his own grandfather. It was a little painful for both of them, no doubt. The old gentleman was as bald as a coot——”
This is retroactive public goods funding! The forgetfulness is a distraction - the university wants professors who will accomplish great things in forty years of service. So they promise to reward them at the end of the forty years if they pass a certain bar.
Instead of trying to predict which professors will pass the bar themselves, they defer to tradesmen - profit-oriented businesspeople - on the assumption that these people have better-aligned incentives and more skill at managing risk.
The only step Carroll missed is the ones where the tradesmen financialize their role and sell bonds based on the professors’ future winnings on the free market.
Subtract a certain 19th-century eccentricity, and I think this is as close to any of the other reinventions of retroactive funding as they are to one another.