In spite of the collapsed connectivity of all things, it's a little hard to explain why I'm filing this one under the general category of epistemology... In a sense, economics is a kind of reality underlying the real world, and the epistemic purpose of philosophy is to understand real world to improve it, but this is also a kind of 'business proposal' to make the world a better place. Another reason is that the various aspects of this proposal stick out into various other fields of endeavor in weird ways. Ergo:
The working title of this new economic model is "reverse auction charity shares". Of course it can be mutated and improved in many ways, but I think this label captures the essential features. One way to think of it is as a different kind of stock market that allows for small donors to have some deeper visibility into what they are donating for and how their donations are used. A large donor is in a position to shop around for charities and can negotiate the size and conditions of each donation to satisfy various goals, but right now the smaller donors are much more limited in their options.
Interestingly, there has been some evolution in the direction of this proposal, since many organizations that are soliciting for charities these days do try to target the donations for specific campaigns or objectives, but there is still very little visibility there. The current situation for small donors is more like a form of email marketing. As a result of signing up for mailing lists or based on prior donations, you (if you're like me) receive a steady flow of solicitations for one thing or the other--but the organizations persist in acting like it's a sellers' market, while the goal of this proposal is to change it more to a buyers' market of the same sort the large donors already have.
First, the key term "projects" needs to be defined. For this proposal, projects should be taken quite broadly. This basic mechanism can be used for many purposes such as developing open source software, publishing Web magazines, supporting political campaigns, a class action lawsuit, or various other goals. The basic idea of a project is some defined unit of work that can be accomplished if enough people want to donate to pay for it.
The "charity shares" part is relatively easy to explain. There would be 'virtual shares' in 'donation ownership' of each project. Though the shares would not confer real ownership, the donations would be publicly recognized (if the donor wished) on the webpage recording the donations to that project. This would actually be a view into a donor database for those donors who wanted to be publicly recognized for their association with a particular project. A large project might have thousands of donations, but I think there will be more interest for relatively small projects that are easy to understand. Those smaller projects will also give better visibility to their donors, giving them more significant recognition and a larger feeling of accomplishment for their donation.
From the perspective of a charity stock market (presumably implemented as a website), the donors would be able to shop around for the kinds of charities they want to support, and then buy shares in those projects. The projects would not actually commit and begin work until enough donors had purchased shares, but the funding status of the project can be visible to all of the donors at all stages of the process. The charity stock market can also be visualized as a kind of database search, where the prospective donors are indicating their goals and the website is recommending the kinds of projects that are available to meet those goals, including such factors as how close those projects are to committing.
There are other possible inducements for these virtual shareholders. For example, the donors can help evaluation the results of the projects that they support, considering several dimensions of success. Another obvious wrinkle is to offer shareholders opportunities to invest in similar projects as they appear. From a marketing perspective, there are possibilities such as matching shares from corporate sponsors and donor pairing or various other approaches.
The "reverse auction" part is a bit harder to explain. It is based on the timing constraints, which are always important, while adding a kind of 'viral' incentive for donors to recruit more donors. Essentially if the donors can recruit more donors, they would still accomplish the goal that they already felt strongly enough to donate to--but at the same time they would drive down their own cost for accomplishing that goal. The essential idea here is to align the incentives to maximize participation.
The approach would be to sell excess shares beyond the initial allocation while cutting the share prices to reflect the additional support. A proposed project budget might call for 1,000 shares at $50 each. There would also be a target date regarded as the closing of the auction. However, by selling extra shares, the per share price would go down, even though the project was already committed for implementation. The donors would be motivated to seek more donors from their like-minded friends, perhaps selling another 1,000 shares while driving the per share price down to $25. If the final limit on shares is 2,000 shares, then selling out completely would be a strong reason to expedite the implementation (and to consider creating additional similar projects).
There are various possible mechanisms to handle the declining share prices for the earlier donors, but I think the simplest one is to use a kind of 'charity brokerage account' system. The donors would have a balance with the brokerage, and they would commit their money to various shares for the projects they liked, but the money would not be deducted from their balance until the final closing of the deal for that project. This would also serve to create an ongoing relationship with the donor, and create possibilities for such things as conditional share sales. For example, a donor might commit all of a $100 balance to buy shares in 4 projects, and buy a conditional share in a 5th project. If the closing prices of the first 4 projects decline enough, then the donor would be able to join the 5th project, too. Again, the donor has a positive incentive to encourage other people support the same projects.
I hope an example at this point will clarify more than it will confuse, though each focused example will introduce new wrinkles and possibilities. Consider the case of a magazine with a Web-based version. Acting as the charity brokerage, the magazine would be equating donors with subscribers, but these subscribers would be buying the right to buy shares in supporting various authors and articles published by the magazine. In this situation, to exercise editorial control, the publishers would probably adjust the stock prices to reflect their editorial priorities. For example, they can deliberately create high prices for supporting a popular columnist while simultaneously offering less expensive shares in related projects that can attract some of the subscriber/donors in this application. For a popular article that sells out both the basic and extra shares in the Web version, the publisher can offer a special issue of shares to support publishing the same article in the print edition, essentially substituting some Web-derived revenue for conventional advertising revenue. In that case, donors might be motivated by wanting to support the wider publication of authors or positions that they agree with.
However, the most important aspect is really that the economic model allows for many kinds of experiments in marketing ideas to the real audience, while simultaneously letting the audience vote with their wallets. This is not intended to eliminate other funding approaches, but I'm suggesting it as an additional donation mechanism, with various kinds of side effects. For example, one interesting side effect is that the visibility of this mechanism would be highly resistant to astroturfing (as when a project has too many anonymous donations). Corporate donations can be incorporated in several ways, such as matching share purchases or up-front donations that reduce the share costs to the other donors. In addition, donors would be able to look over their own donation histories to assess what kinds of projects they had supported and get recommendations for similar projects they might be interested in buying into.
Let me know if you're interested, want details about other possible application areas, or have any suggestions about where to pitch this idea. I've already been flogging it for a while now, and as far as I know, it has not yet been adopted.
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