Blockchain Ethics

Class 8 Reading Responses [Mechanism Design]

Mechanism design theory is an economic framework for how businesses can achieve their optimal outcome based on how markets and politics and society intersect. As we consider governance and voting mechanism being discussed in the blockchain community, we can further explore other larger philosophical questions around the role that it might play in restructuring markets. Specifically, Vitalek points out that “markets are socially constructed because they depend on property rights that are socially constructed, and there are many different ways that markets and property rights can be constructed, some of which are unexplored and potentially far better than what we have today.” Again, a new generation of markets would rely on how society decides to attribute value and this time it may not come from a top-down approach, but rather the opposite. So how do we go about creating more open, free and efficient systems for human cooperation? A part of this will come down to incentive structures, which allow the “invisible hand” to play a role in balancing things out. Some common examples of decentralized institutions from game theory and economics land are (i) assurance contracts, and (ii) prediction markets. An assurance contract is a system where some public good is funded by giving anyone the opportunity to pledge money, and only collecting if the total amount pledged exceeds some threshold. Prediction markets would allow people to bet on the probability that events will happen, potentially even conditional on some action being taken. As I map these incentive structures to the “god” metaphors, I would say that the Singularity god might be a good way to make these mechanisms come to life. AI would be a perfect fit tool for running these incentive structures at scale. There might also be room for the “non-Ai stuff” to be beneficial here as well. In parallel to the theories of mechanism design I also appreciated YGGDRASIL, the god of spooky entanglement. This one is key to all future technology developments that are going to cause systemic change. We have to be more aware and think ahead of potential consequences and externalities.

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Hi all,

So I usually shy away from 3 things: religion, money, and politics. But our reading on metaphors has convinced me that I do somewhat have my own apart from the traditional conceptions of god and religion. As for the most believable god (as in the god that I believe occurs on a quotidian basis ), it would have to be a tie between Moloch and the Uruk machine. I have firsthand seen the aftermath of the Uruk machine in my community from L.A. and overall in my peers manifested in their mental health. A lot of technocracy has to do with the Uruk machine and I think we see it time and time again with the failed implementations of blockchain around the world where designers are disconnected from the communities they are trying to improve. However, I must say that Moloch also poses a threat. Time and time again, I have told my peers that a big part of my drive is derived from a self-ordained goal that I put above me and everything else (including my life). Unfortunately, this goal was only ascertained in extreme conditions during my childhood that I was forced to think in the long-term and disregard all short-term pleasures and vices. I recognize that it is human tendency to seek comfort, hence “stick to what they know” and not question where the thoughts in their head originated from because that would uproot their very own reality! But that’s the point. Questioning where your assumptions come from and uprooting your foundation to add another layer of adhesive is the only way to prove to yourself that your reality is your own. Moloch takes advantage of people’s tendency to look at short-term rewards and facilitates a cycle of people capitalizing on short-term benefits at the expense of someone else’s loss rather than cultivating a communal effort that would reward in the long-term. Moloch is very real in my eyes as well. The Stack, on the other hand, sounded pretty weak to me. Even the article acknowledged its temporal nature as the Stack is likely to change form as technology improves. Any further extrapolations of the idea I believe are merely rip offs of The Singularity.

Mechanism design has lots of flaws. Firstly, complex economic mechanisms like combinatorial auctions fail to model common real world phenomena like collusion among designers and auctioneers or between auctioneers and participants. On the other hand, increased marketization might not be worth the mental transaction cost. For example, Uber may seem to be a potential replacement for owning vehicles but the variable cost does not allow for ongoing precise valuations, but if they opened it up to drivers to set prices then they would have to calculate given varying parameters. An alternative, as suggested by the Vitalik at RadicalXChange, is to perhaps let drivers choose the A.I. that automates the calculations and best fits given their experiential expertise. However, this brings up the idea of legibility. In order to properly communicate with their target audience, this technocracy (designers of the mechanism) must be aware of their grandiose language and formalisms. Unfortunately, as many of the articles this week pointed out, technology solutionism is generally the ideology that majority of blockchain startups and communities like effective altruism and human systems preach to their audiences. Fundamentally, mechanism design fails to view social dissent as important as technical failure and as an integral part of the initial design process. These technocracies need to have open democratic conversations while being held publicly accountable for their actions. Much of the empirical techniques and optimization tools taken from cs, economics, and data science are used outside of the public eye, but it is critical that the communities are brought into the conversation because social systems are always flawed and isolation from the problem or the environment in which it resides cannot hope to solve it. At least the good part, is that we now how to optimize efficiently, but now we need to incrementally optimize to allow for social conversation and help revise the scope (sometimes reinforcement algorithms look at a specific time frame), “coding assumptions” that have real-world manifestations unforeseen by the select elite devs, etc. As for properly implementing this ideology, I am at a loss. At first, after reading about the Uruk Machine, I was made aware of the irony in mass movements providing epistemic solutions, thus I thought perhaps a decentralized global network that could get as much representation as a movement but instead would provide individual inputs. Then, I read the tidbit about technocrats in RadicalxChange communicating with each other regularly, but their interactions with communities limiting transmittance of the crucial dispersed information by their choice of medium (e.g. surveys, preferences, etc.). Therefore, there must be some way to amalgamate the vital information efficiently (decentralized network?) but without traditional techniques.

Thanks yall for reading :slight_smile: This week’s readings were quite philosophical, which I enjoyed and helped me realize who I should be talking to more of for more project.

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I found these readings fascinating, and will do my best in this response to tie together ideas from the previous two respondents, but with different readings than I believe their posts are directly responding to.

I’d like to consider this in relation to Joi Ito’s piece we read in Wired “The World Is Complex. Measuring Charity Has to Be Too”. This piece also questions how we attribute value. It is easier to measure value, success, or the payoff of contributions (such as charity) when metrics are simple. Joi proposes instead measuring a variety of attributes and how they work together, such as biologists do. Attributing value, or measuring success, is then a much more complex problem, as it must consider systems or interrelated components rather than a discrete property. Joi also points out that growth and efficiency are points of focus in how we commonly assess systems, but this focus is flawed - is the system healthy? Is it flourishing? Again, these concepts may be less straightforward to measure, but they may be the more important things to value, and hence value the measurement of.

This is all important to consider, and I hope Joi can be a part of changing how we place value - but will this too be a “top down” approach? Joi is influential enough to write for Wired, and works with enough wealthy people to need to study the effectiveness of charitable contributions. Does it require influential people like Joi, who can create top-down change, to then inspire bottom-up approaches?

I’d like to better understand this concept of “social dissent” as an important part of the “initial design process”. In connection to the above comments about top-down vs bottom-up, I am understanding the “initial design process” (in mechanism design) as coming from the top-down and “social dissent” as coming from the bottom-up. It therefore seems like an interesting idea that this initial design from the top, must consider the qualms from the bottom. What does this mean in the technical world of blockchain? I think we can see this concept in the mechanism design within our country’s constitution (or at least what I interpret): The founding fathers designed mechanisms for free speech and the right to protest, to allow for social dissent.

On another point of failure of mechanism design in the “initial design process” that really spoke to me in “How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance?” was the inability of tech solutionists and “blockchain missionaries” to understand the contexts in which they were deploying solutions. In many cases, they seemed to be taking assumptions from their worlds into the new worlds they were designing for. An example was using smart contracts to handle property rights in places without formal institutions to successfully allocate property rights, they were implicitly assuming that there could be a way to enforce their smart contracts, or handle disputes. But such would again require formal institutions! Techno solutionism will never be enough on its own in a world of humans.

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What I took from this week’s readings is that as we attempt to use blockchain-backed technologies to improve on existing systems of the world, we need to make sure we step out of our ivory tower every once in a while. Refusing to do so puts us at in the realms of technocrats as described by E. Glen Weyl in Why I’m not a Technocrat and techno-colonialists described by Brett Scott in How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance? who fail to see the trees in the forest. While Vitalik Buterin’s belief described in On Radical Markets that markets and clean incentive alignments are better than politics, bureaucrats and ugly hacks is valid, I came out of these readings more convinced that it’s not okay to ignore the “messiness” of organic human relationships. Keynesian planning tried to use a finite set of parameters to model the economy but it couldn’t take into account for messy politics, social engagement, persuasion and democratic conversation, proving Charlie Goodhart’s statement that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Joi Ito’s The World is Complex, Measuring Charity Has to be Too brings forth a possible lense to which view mechanism design that optimises for resiliency and robustness instead of just growth. I think that that mindset forces mechanism design to consider the messiness of humanity because it is a reason why the types of statistical models that technocrats love to use fail.

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The readings this week help to explain why bitcoin and blockchain are not for the faint of heart. The decision to start learning about this technology requires a lot of courage because it requires a willingness to rethink everything you’ve ever known about society and how we relate to each other. Chris Skinner’s acronym (PEST) sums up why Bitcoin is so important and why it’s so scary to many people. Each of these areas (Politics, Economics, Society, & Technology) are complex subjects on their own, and putting them all together in one big package amplifies the complexity. The use of the God metaphors is a way to explain how the different factors work together. The Human Colossus god directly applies to Bitcoin because Bitcoin is potentially 1 single currency that anyone in the world could use, which allows all the economies and markets in the world to function as a combined entity. The Uruk Machine is what is causing the disturbances related to social unrest in Hong Kong. Yggdrasil is a very apt metaphor for our ultra-connected world; social media posts can go viral instantaneously. Egregore definitely applies to the crypto community, especially with its decentralized nature. It is very important to be aware of all these forces when deploying cryptocurrency technology. Everything is connected, and external forces have an impact of the overall nature of an entity. This week’s literature review explains why we have to be sensitive to the big picture if we want cryptocurrencies to be accepted in society.

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Some brief thoughts on disinhibition as it relates to blockchain:

I’ve been doing a fair bit of reading recently on mis/disinformation and its propagation online. A major factor in the most prolific re-distributors of misinformation is the disinhibition effect online – whether anonymous, pseudonymous, or identified, users have a freedom of movement and information that is liberating, and generally an excellent thing. But taken in the context of Bitcoin specifically (or potentially zcash), we can think about the disinhibition the same was as we might at the 2016 voting booths. Polls leading up to the election did not capture the volume and concentration of Trump supports, and—broadly speaking—one of the lines of thinking here is that there is a social pressure not to engage baser instincts when you’re talking to someone (being polled) but when alone in the voting booth with no one watching all bets are off. The same might be true of the radicalizing effects of crypto, particularly for right-wing sentiments and libertarianism.

Let’s take the example of buying cocaine. Without a crypto + silk road world, you’d have a dealer, part of a larger supply chain, to whom you’d bring anonymous currency (cash) or other barterable goods / value stores (jewelry, car, sexual services, etc.) and obtain cocaine. In this exchange there are a handful of challenges, not the least of which is potentially driving by a school zone, church, or other socially pressuring location that would remind you that in this social contract, what you are doing has been deemed wrong. Contrast this to an online transaction, where the same anonymity (roughly yes, pseudonymity) enables a similar exchange without experiencing those same social pressures. Personally, I’ve never bought from silk road or a similar market, but I might expect that the delivery of the goods via post or courier is the source of some anxiety, and any hand-off might be a fulcrum of tension.

This is all to say that on top of the political and economic pressures outlined in the incentives of mechanism design, looking backwards to the foundations of social engineering and psychological aspects of incentives merits some deeper investigation.

I’ll also take a minute to note my perspective on 20th century capital ‘M’ Modernist urban planning, since it has come to be a relevant topic here! Technocracy is a constantly changing beast, and while historically it was a practice of supremacy and dominance, it persists in less obvious forms. I’m a bit critic of Carl Steinitz recent work for exactly this reason. Steinitz was an early Geographic Information Systems (GIS) research at MIT, working with raster data representations of different conditions and doing some interesting graphics work (see SYMAP). But recently he has been working on a collaboratively layer process called “geodesign” that uses an online platform to get stakeholders to envision zoning or use maps, then combine the different desires into a single outcome. The problem here is the these processes happen in short periods of time (2-3 day workshops at dear expense) so there is not a lot of time for any heuristic property to kick in, and additionally who makes it into that room rarely represents the city being designed on to. This is the technocratic challenges of today – not just the information and technology, but who is in the room. Blockchain here has a lot of potential, but at the same time, (clearly) a lot of work to do.

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