Undergraduate winner of the Exceptional Research Award

Quadratic Funding under Incomplete Information

Luis Mota Freitas

This thesis explores the properties and limitations of the quadratic funding mechanism, a public goods provision mechanism that has been considered in contexts such as global public goods provision and donor coordination. This thesis shows that quadratic funding is not efficient under incomplete information, and proposes and uses two numeric measures to calculate the size of this mechanism’s inefficiency in a variety of situations. A reviewer praised the professional style of the research, the timeliness of the topic choice and that the thesis identifies an important drawback of the quadratic funding mechanism.

This research is related to our research direction profile on global priorities research.

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Researcher profile

Luis 1

Luis Mota Freitas

Luis studied a Bachelor's degree in Economics after reading about it on the 80,000 Hours website, as it seemed like a good way to develop a useful toolkit for thinking about how the world works. During his studies, he became interested in global priorities research, so after he graduated he joined the Global Priorities Institute as a Predoctoral Research Fellow. He's currently applying to PhD programs in Economics, and hopes to use his career to do academic research that will further understanding of foundational aspects for doing good in the world.

Researcher profile

What was your thesis topic?

My thesis centered around a mechanism for providing public goods known as quadratic funding. The paper that originally introduced this mechanism shows that, given certain assumptions, this mechanism can be used to achieve the best level of funding of public goods from a social perspective. One of the assumptions made by this paper is that individuals have complete information about each other’s preferences, that is, that everyone knows how much everyone else values the public goods. In my thesis, I evaluate the performance of this mechanism when individuals are uncertain about each other’s preferences. In contrast with the results for the paper introducing this mechanism, I find that the funding level that this mechanism provides when uncertainty is present is generally not the socially best one, and that the socially best outcome will only occur in this new setting under some very specific assumptions. I also compare it to a relatively simple funding rule under uncertainty, and show that this simple funding rule often leads to a funding level that is better than the one provided by quadratic funding.

In what ways do you think your topic improves the world?
 
Quadratic funding has gained attention due to its perceived potential to solve problems like helping donors coordinate to fund the opportunities that they collectively prefer, matching charitable contributions, and funding global public goods. It has already been used by some platforms, in applications such as funding open-source software and matching donations to charity. My results show that, given uncertainty about how much others value the public good, quadratic funding might not be a good solution. These results help us understand the limitations that quadratic funding might have in practical applications, and in which situations these problems might make this mechanism a bad solution.

 

In what ways have you changed your mind since you finished writing it?

I have become skeptical about quadratic funding as a viable solution to the challenges mentioned above. I also learned more about the literature on mechanisms for public goods provision, which helped me understand some insights of the existing literature. In particular, it helped me understand the most promising directions for thinking about public good provision mechanisms that solve the limitations presented by quadratic funding.

 

What recommendations would you make to others interested in taking a similar direction with their research?

Some potential applications of quadratic funding that I mentioned above, like donor coordination or donation matching, still lack a definition that allows us to clearly distinguish them from the traditional public goods provision problem. A promising step in finding a solution to these problems is coming up with such definitions in a formal model, so we can think about what the best solution to these particular problems might look like, and what makes them distinct from problems already discussed in the academic literature.

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