Creating markets and the Amazon Honor System

Tyler Cowen's post on how to make school choice work has really crystallized some thinking for me on how we run the "supply" side of our operations here at GlobalGiving. For us the "supply" side is the project side; donors demand projects, and we ensure that there's enough of a selection of projects that everyone can find what they are looking for. But the points he summarizes from Caroline Hoxby's paper:

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* Supply flexibility, which means that schools should have the ability to open where there is demand for them, expand with increased demand and contract with reduced demand
* Money should follow students, which means that funding policies must be designed so that schools that are in demand have the funds to expand and those that are not in demand lose funds and must contract; and
* Independent management of schools, which means that schools must be free to innovate in a range of areas, including pedagogy, teacher pay, budget allocation, and the way the school is organised.

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speak directly to my thoughts about how we structure the incentives for project leaders on GlobalGiving. It's critical that they can respond to demand--so access to good information about demand is critical--and that they can exit/enter easily. And the flexibility to expand/contract argues for certain types of projects/programs. I think on point 3 we're OK--because by definition we work with autonomous agents and have no central program of our own.

Now on a completely tangential note, I also discovered the Amazon Honor System on Tyler Cowen's blog, and from what I can make out, it's a micropayment functionality that allows producers of content to collect voluntary payments from people who produce content. I'm not even sure I grok the full implications of this, but it's fascinating (including how subtle the Amazon branding is. If I weren't such a big customer of Amazon I doubt I would have recognized the swoosh.