I don't really want to create an account on yet another website, so I'll comment here. Anyone with a login there should feel free to copy and cross post.
It is a thought-provoking idea, but there seem to be serious problems with the model underling the proposal. The model fails to distinguish between flows and stocks.
Then at equilibrium, the price of certificates of impact on X is equal to the marginal cost of achieving an impact on X. Any deviation is an arbitrage opportunity: if you can do X more cheaply, then you can sell the resulting certificates for a profit; if you are doing X more expensively, then you could save money by buying certificates instead.
This is a faulty analogy to product markets, and is true only if certificates are consumed. They are not.
The better analogy would be to the market for money, where the demand for money is greatly affected by the public's desire to hold cash. We see hyperinflation (i.e. a rapid decline in the price of money) where the public believes that money is becoming worthless. When that happens, what used to be extra-marginal stock becomes infra-marginal flow. A similar crisis of confidence could occur for certificates of impact. In fact, that is exactly what has happened to carbon credit schemes.
One way to make the model look more like a product model is to expire the certificates. They are only good for a year, or they all expire on December 31, or something like that.
A related point is how to validate that the activity claimed to have an impact actually occurred. This is a systemic risk similar to the problem of assigning credit ratings to collateralized debt obligations. Someone has to say whether or not the activity occurred. If the person saying so is revealed to have exercised insufficient diligence, then the market has a crisis of confidence.
This is a faulty analogy to product markets, and is true only if certificates are consumed. They are not.
I don't quite understand this. Are you objecting to the quoted argument?
If X is being bought and sold for $1, and you can make X for less than $1, then you can make X and sell it, at a profit. Where does this assume that X is being consumed vs. saved?
Similarly, if X is being bought and sold for $1, you would be better off buying a unit for $1 than making it yourself for a higher price. This is true regardless of what you plan to do with X.
...The bette
Paul proposes that we could create a market for certificates of impact. The certificates would be created whenever someone does something that has a positive impact in the world.