Radical Solutions for Equality and Efficiency in Cities

With trust in many democratic institutions waning and increasing concentrations of power stifling the democratic process, we need to re-think how we set up and maintain our governance structures to ensure inclusiveness, equality, and efficiency. This article proposes three options cities and municipal authorities should consider as ways to improve equity, distribution of resources, and service delivery to their denizens.

Preface: A Call to Action

This article summarizes our recently released Handbook for Radical Local Democracy (available here). This work is rooted in a simple belief: we think cities and regions need to adopt new “social technologies” (i.e. policy mechanisms that allocate scarce resources) to address some of today’s most pressing challenges.[1] Our Handbook illustrates how three particular social technologies—Quadratic Voting, Quadratic Finance, and Self-Assessed Licenses Sold via Auction—can be put into practice in cities around the world. These mechanisms can make improvements in policy areas as diverse as micromobility (bikes/scooters), participatory budgeting, election funding, and parking—just to name a few.

This work is not merely academic. We are working to develop software platforms for the mechanisms discussed in this article, in partnership with Polco in the United States, as well as Democracy Earth, CONSUL, and others globally. We encourage readers who work in urban policy to get in touch with us for a demonstration ahead of our pilot program later this year.

Introduction: New Social Technologies for Today’s Challenges

Good governance requires a balance between public and private power. Public power can be fair and democratic but, if abused, it can seriously impede individual freedoms (e.g., urban renewal projects of the 1950s and ‘60s in the United States displaced more than 300,000 people, mostly people of color [2]). Private power can be flexible and efficient, but private actors with excessive power can distort the political process itself for their own ends (e.g., Citizens United and the broader struggle for campaign finance reform in the United States).

The politics of the past century have consisted of a long tug-of-war between public and private power—a transition from the New Deal Era to Reagan-era neoliberalism in the United States, with similar trends in many other developed countries. Traditional debate about the role of the public and private sectors too often ignores the dimensions of concentration. What we need now is a fresh perspective that addresses inequitable concentrations of power, wherever they arise.

History offers some clues: During the industrial era, technological disruption placed immense strains on society and hastened the need for new ways of governing. The resultant reforms included the expansion of democracy toward universal suffrage; regulations to end child labor; the rise of unions; the rise of antitrust law; and the beginnings of the welfare state.

These new modes of social organization helped society accommodate and adapt to radical changes in technology. These changes were not “pro-government” or “anti-government”. Rather, they were social innovations based on democratic values. Their common feature was that they pushed power outwards, away from sites of highly concentrated public or private power, and into the hands of individuals and communities. They enabled new, more responsive, and more genuinely democratic institutions able to support technological progress while also maintaining an open and free society. They served as a counterweight against the tendency of new technologies to generate concentrations of power in either government or private industry—and the corresponding tendencies of those concentrations of power to push societies toward anti-democratic modes of government.[3]

By mixing and balancing public and private power in new ways, while empowering communities, the reformers of the first part of the 20th Century bolstered civil society and helped the United States navigate—however imperfectly—many of the challenges that pushed other societies into totalitarianism.

We need similar social innovations today. In recent years, “social technologists”—those of us who think about how policy mechanisms can better allocate resources—have been developing new ways of striking an attractive balance between public and private power. A few of these ideas are the subject of this article. While the mechanisms may be unfamiliar, the values and the way of thinking behind them should not be.

Technology 1: Quadratic Voting

Quadratic voting (QV) is a twist on normal voting procedures which allows voters to express their wishes with more precision.[4] It lets voters trade some of their overall voting power for the right to “speak louder” on the issues they deem most important. The process is simple: voters receive a certain number of “voice credits” which they can allocate across a set of ballot issues and the cost to cast a certain number of votes is the square of the amount of votes. Two votes? That’ll be four voice credits. Three votes? Nine voice credits. And so on.

A growing body of academic work and real-world cases [5] indicates that quadratic voting captures more precise and usable information than simple voting. QV also furthers equality and dignity by giving small minorities with strong preferences the possibility of prevailing democratically against an apathetic majority.

We have begun testing out QV in the real world. For example, in 2019 the Democratic Caucus of the Colorado House of Representatives used quadratic voting to decide which spending bills to prioritize [6]. Following this experiment, we have begun working with public agencies and private companies to bring quadratic voting to life around the world [7].

Quadratic Voting pilot launch in the Colorado State Legislature in April 2019 (Source: Wired Magazine)

One of the greatest risks with QV is the potential for “agenda gaming” because users allocate credits across a menu of options, the process by which that menu is shaped really matters. This concern suggests that QV may be more appropriate for traditional elections (e.g., many candidates running for mayor or president) and less appropriate for citizen referenda on particular topics.

We think QV can be applied in almost any decision-making setting where intensity of preference matters. To get started, here are a few examples that cities could consider:

Small group decisions by town councils, corporate boards, or cooperatives: Instead of taking simple up-down votes on a series of issues, collect the issues on a single ballot and present this ballot to the voting members. After all the issues have been discussed and debated, have the voting members vote privately, and submit their votes simultaneously. (If there are rules such as bylaws governing how decisions need to be taken, simply conduct a quadratic vote, and then “endorse” the results through a conventional majority vote per the bylaws.)
Public elections: QV can be used in any public election where citizens are choosing among several options. Several cities and states in the United States have begun using ranked choice voting (RCV) for many types of elections [8]. We think that QV provides a slight improvement over RCV because it allows citizens to express the intensity, not merely the order, of their preferences. QV would reduce political polarization in voting for city, state, and national leaders, as it more accurately represents the preferences of citizens.

Vote Distribution in the Colorado Quadratic Voting Pilot (Source: Democracy Earth)

Technology 2: Quadratic Finance

The funding of public goods is a foundational problem in economic policy, especially for local governments. A 2018 paper [9] by Vitalik Buterin, Zoe Hitzig, and Glen Weyl proposed a new mechanism design for funding public goods, which a popular economics blog referred to as “quite amazing and a quantum leap in public-goods mechanism design”[10]. Put simply, Quadratic Finance (QF) uses a new kind of funding formula to solve both the “information problem” (the government may not know how much of a certain good to provide) and the “free rider” problem (individuals often have incentives to contribute less than is optimal) which are inherent in many public good situations.

“Quadratic Finance advances equality because it grants the largest matches to the most-widely shared preferences, while still allowing small minorities to benefit from smaller matches.”

We think that QF can improve upon current funding methods in any setting where a city wants to elicit participant preferences about specific dollar amounts (i.e., participatory budgeting) or wants to administer a public matching fund for a particular purpose. Here are a few ideas that cities can consider:

Infrastructure investments or repairs: QF has the potential to replace central analysis of infrastructure investment needs. A city or other authority could post a detailed list of possible infrastructure spending projects on a public portal. Citizens could then make pledges to the proposals that most appealed to them. The public budget would be allocated as a quadratic finance matching fund to the pledges.
Journalism: By allowing citizens to decide which journalistic outlets they most wished to support, the government could subsidize journalist outlets without “picking winners” (or undermining journalism’s ability to be critical of politicians).
Campaign finance: A matching fund could be set up to subsidize candidates’ campaigns. The quadratic financing mechanism would ensure that candidates with a very narrow base of support – such as those with a small number of wealthy backers – would receive minimal public financial support, whereas those with a wider support base of small-scale donors would receive greater levels of public financial support for their campaigns. For instance, New York City currently administers a small matching fund for public elections, which we think could be further improved if it were funded according to QF [11].

Technology 3: Self-Assessed License Sold via Auction

The Self-Assessed License Sold via Auction (SALSA) license system solves the “black market” and “holdout” problems that are likely to develop when a city government allocates scarce resources according to a first-come-first-served or regular auction method [12]. For instance, the Wall Street Journal reported in 2011 that New York City food cart permits were sold for just $200 to permit-holders, who in turn commanded prices in excess of $10,000 in the private market [13].

Under a SALSA system, potential license-holders bid at an initial auction and then hold their license with a self-assessment value posted publicly online. The holder pays an annual (or monthly, or weekly) fee to the city, as a percentage of their declared value (similar to a property tax). In addition, new potential holders can claim a license by simply declaring a higher value in the online marketplace (current holders would have the options to match the higher bid in order to hold on to their license). Because the threat of forced sale may reduce incentives to make long-term investments, SALSA can implement an “investment fee credit” and/or simply lower the fee assessed so that license-holders capture the returns to any long-term investments they make [14].

In this sense, SALSA resembles a continuous auction. SALSA advances efficiency by allocating licenses to those who value them most, but it also furthers equality: new entrants with productive ideas can’t be blocked by “lazy” license-holders, and the increased revenue from the SALSA fee can fund progressive social services.

Cities committed to social equity may be concerned that using SALSA will exclude low-income groups because it allocates resources via ability-to-pay. To remedy this, cities can also choose to set some licenses aside or scale-up bid amounts for lower-resource, historically-disadvantaged groups if ability-to-pay generates undesirable outcomes.

We think SALSA can improve equality and efficiency in almost any domain of urban life where cities need to allocate a scarce public resource. Below we will discuss in depth two of our favorite examples:

1. Long-Term Street Parking: Many municipalities offer long-term resident-only parking permits, which allow residents to park for longer periods of time than standard public parking (e.g., two-hour parking). Unfortunately, residential parking permits are frequently either free [15] or cheap [16]. This mechanism runs the risk of allocative inefficiency: for a fixed number of parking spaces/permits, an arbitrarily low fee is unlikely to allocate the permits to those who value them most. We recommend that municipalities use a SALSA mechanism — open to residents and non-residents alike — to improve allocative efficiency. It’s easy to imagine, for instance, that non-residents who work in a given municipality may value a parking space more than a resident who already has one car and has just purchased a second one.

Policymakers may have social equity concerns. Many low- and middle-income families rely on affordable parking to support themselves economically, so policymakers may worry that a SALSA will simply allocate parking permits to a city’s wealthiest residents. To address this, policymakers could set geographic quotas for the permits: i.e., permits allow the holder to park within a certain two-block area of the city, ensuring that households in the area will be most likely to bid. And, insofar as people of similar income levels tend to live near each other, low- and middle-income households will largely be bidding against similarly-situated households for permits.

2. Micromobility (bikes and e-scooters): Cities across the world are facing regulatory challenges related to micromobility (i.e., bikes and scooters that provide “last mile” mobility solutions). Implementing a fixed cap on the number of vehicles allowed would risk an undersupply problem (i.e., how can a municipality know exactly how many scooters its citizens demand?). However, because micromobility companies are often well-funded and pursuing network effects, cities that do not regulate supply risk becoming flooded with unused vehicles taking up valuable public space and making urban life unpleasant [17]. Some cities are considering “dynamic caps,” whereby the number of vehicles each company can deploy expands and contracts according to the “usage rate” of the vehicles[18]. We think that a SALSA mechanism could further enhance the effectiveness of a dynamic cap. Under our proposed solution, companies would purchase vehicle licenses at auction from the city and then would engage in the self-assessment and exchange process that we have described in detail above — the firms could reallocate vehicle licenses among themselves in an online marketplace and would pay a yearly holding fee based on their self-assessed value. The dynamic cap would be based on the city’s overall usage rate, rather than the usage rate of any one particular company.

A BIke-Share Supply Problem in China (Source: The Atlantic/Reuters)

Conclusion: Join the Movement

We hope this article has inspired you to brainstorm more ideas and applications for the mechanisms we have discussed. We firmly believe that the best policy ideas are produced by engaged citizens who understand the challenges of their cities firsthand. For democracy to function, everyone needs to have a voice, and everyone needs to be encouraged to engage with civic processes that allow collaboration across difference.

To revitalize democracy, we desperately need updates to our basic mechanisms of collective decision-making and resource sharing; that is what our ideas strive to achieve. If you’re interested in learning more about how QV, QF, and SALSA can restructure urban life or in joining our movement, please get in touch! More information is available at RadicalxChange.org or reach out at info@radicalxchange.org to get connected.

Matt Prewitt (@m_t_prewitt) is the President of RadicalxChange Foundation (@RadxChange). Paul Healy (@Paul_A_Healy) is a student at Yale Law School and member of the Governance team at RadicalxChange Foundation.

[1] This article and the associated Handbook draw heavily (but not exclusively) from Eric A. Posner & E. Glen Weyl, Radical Markets (2018).

[2] Katie Pierce, Lab Report: Mapping the Displacement From 'Urban Renewal', CityLab (Dec. 18, 2017), https://www.citylab.com/equity/2017/12/lab-report-how-urban-renewal-displaced-thousands/548621/.

[3] See generally Eric A. Posner & E. Glen Weyl, Radical Markets (2018).

[4] Steven Lalley & Eric Glen Weyl, Quadratic Voting: How Mechanism Design Can Radicalize Democracy (Dec 24, 2017), 1 American Economic Association Papers and Proceedings, https://ssrn.com/abstract=2003531.

[5] David Quarfoot et al., Quadratic Voting in the Wild: Real People, Real Votes (unpublished manuscript) (Mar. 21, 2016). https://ssrn.com/abstract=2755844.

[6] See, e.g., A New Way of Voting That Makes Zealotry Expensive, Bloomberg (May 1, 2019), https://www.bloomberg.com/news/articles/2019-05-01/a-new-way-of-votingthat-makes-zealotry-expensive.

[7] E.g., The Presidential Hackathon in Taiwan allows citizens to vote on which technology initiatives receive government grants via QV. Official site of the Taiwan's 2019 Presidential Hackathon, https://presidential-hackathon.taiwan.gov.tw/en/. In addition, the technology companies Democracy Earth. PolCo, CONSUL, and deora are building QV platforms for citizen engagement.

[8] FairVote, Where Ranked Choice Voting Is Used (visited Jan. 17, 2020), https://www.fairvote.org/where_is_ranked_choice_voting_used.

[9] Vitalik Buterin, Zoe Hitzig & Eric Glen Weyl, Liberal Radicalism: A Flexible Design For Philanthropic Matching Funds (unpublished manuscript) (Dec. 2018), https://ssrn.com/abstract=3243656.

[10] Alex Tabarrok, The Liberal Radicalism Mechanism for Producing Public Goods, Marginal Revolution (Sep 27, 2018), https://marginalrevolution.com/marginalrevolution/2018/09/liberal-radicalism-mechanism-producing-public-goods.html.

[11] New York City Campaign Finance, https://www.nyccfb.info/program/how-it-works.

[12] Eric A. Posner & E. Glen Weyl, Property Is Only Another Name for Monopoly, 9 Journal of Legal Analysis 51–123, (Spring 2017); Anthony Zhang & Glen Weyl, Depreciating Licenses (unpublished manuscript) (2019), https://anthonyleezhang.github.io/pdfs/ownership.pdf.

[13] Prices for Food-Cart Prices Skyrocket, Wall Street Journal (Mar. 9, 2011), https://www.wsj.com/articles/SB10001424052748704758904576188523780657688

[14] See page 68 onward in Eric A. Posner & E. Glen Weyl, Property Is Only Another Name for Monopoly, 9 Journal of Legal Analysis 51–123 (Spring 2017), https://academic.oup.com/jla/article/9/1/51/3572441.

[15] E.g., Boston Considers Charging for Residential Parking Permits, NECN (Jun. 29, 2019) https://www.necn.com/news/new-england/Boston-Considers-Charging-for-ResidentialParking-Permits-486985971.html.

[16] E.g., Request a Residential Parking Permit, City of Cambridge MA, https://www.cambridgema.gov/iwantto/requestresidentparkingpermit.

[17] For a rather extreme example, see, e.g., Alan Taylor, The Bike-Share Oversupply in China: Huge Piles of Abandoned and Broken Bicycles, The Atlantic (Mar. 22, 2018), https://www.theatlantic.com/photo/2018/03/bike-share-oversupply-in-china-hugepiles-of-abandoned-and-broken-bicycles/556268/.

[18] Polina Marinova, Lime Investor Sarah Smith: It’s ‘Inevitable’ That E-Scooters Are Coming to Every Major Market, Fortune (Feb. 7, 2019), https://fortune.com/2019/02/07/%20lime-funding-sarah-smith-bain-capital-ventures/