Impact litigation creates large-scale social change in areas where traditional public- and private-sector solutions may be less effective.
Some social causes are more effectively advanced by litigation than by more traditional routes, like non-profit service provision, social entrepreneurship, or political elections. This is especially true for causes involving civil rights, like mass incarceration, voting rights, and immigration.
The current system is undemocratic and inefficient.
Impact litigation—like philanthropy more broadly—is frequently guided undemocratically by the whims of the wealthy. But impact litigation presents some additional challenges.
Coordination problems: A given area of impact litigation may need $1 million in order to get off the ground—thus, any small donor’s contribution will be worthless unless many others give.
Uncertainty: Winning a lawsuit is never a sure thing. Thus, to the extent that smaller donors are more risk-averse in their social contributions than larger donors, we would expect “speculative” giving (like impact litigation or political campaigns) to show overrepresentation of the wealthy.
Lack of outcome-orientation: There is no reliable, easy-to-use interface to understand the social impact of litigation. In contrast, in the world of traditional non-profits, donors can compare potential impacts on platforms like GiveWell and DonorsChoose.
Duplication of effort: Because impact litigation nonprofits sustain themselves with large donations, and donors are more likely to give to organizations in the news, it is common for many organizations to work on headline-worthy cases at the expense of other, less-newsworthy cases. Thus, donors end up giving to organizations that are all working on the same, “sexy” litigation, rather than more boring, but under-resourced problems.
These additional challenges, taken together, make it plausible to us that impact litigation may have an even wealthier and narrower donor base than traditional philanthropic areas.
Our proposed solution: crowdfunding + quadratic finance on an outcomes-oriented platform.
We propose a new way to fund impact litigation: crowdfunding with matching via quadratic financing on an outcomes-oriented platform. Let’s take each element in turn.
Crowdfunding: Crowdfunding—likely familiar to readers and already being piloted in the impact litigation space by a few organizations—alleviates the coordination problem we discussed above. Individuals’ contributions are only triggered once a project reaches a funding threshold. One might worry that our idea could be self-defeating, if the preferences of a non-expert “crowd” do not line up with the most socially beneficial litigation (e.g., because the public may not understand which kinds of litigation are more/less costly or more/less likely to win). However, our third element, an outcomes-oriented platform (below) may alleviate this concern.
Quadratic Finance: The quadratic finance mechanism was proposed as a new solution to public goods problems by Buterin, Hitzig, and Weyl (2018). This mechanism, essentially a “formula” by which a matching fund would work, is pro-democratic because it provides larger matches to causes whose support is more widely spread across contributors. To take a simple example, imagine that four donors can choose to allocate funds to litigation related to voting rights, immigration, or education. The diagram below shows that because the voting rights option had the widest base of support, it received the most matching funds. In contrast, the education option, essentially a “pet project” of only one donor, received no additional support.
- Outcomes-oriented platform: Finally, we think it would be helpful for this contribution process to happen in an online platform setting where contributors could view projected social outcomes across a “menu” of litigation project areas. For each menu option, the platform should present potential “outcomes” and potential “social impacts” calculated by a team of lawyers and economists (and adjusted for probability of winning). An outcome, for instance, could be “voter ID requirements are relaxed for X million people,” while a “social impact” could be “X million more low-income people will vote.” The distinction between outcomes and social impacts is important–the former can be deduced easily from the objective of the litigation area, while the latter relies on peer-reviewed empirical research, which may not have a clear consensus. To take our current example of voting ID laws, for instance, scholars are currently debating the extent to which strict ID laws do in fact decrease voter participation. Furthermore, because it is difficult for social scientists to estimate the causal effect of many legal changes, presenting donors with outcomes and social impacts will allow them to make their own tradeoffs.
We are not proposing that all litigation areas be converted into outcomes in terms of dollars, but instead that the platform allow contributors to make their own internal tradeoffs among, say, expansion of the franchise versus days of incarceration averted. If these contribution decisions are made on a single platform, individuals will also be able to “unbundle” their ideological preferences—in contrast to the current system where donors trust that the “bundle” of issues advanced by, say, the ACLU or the Institute for Justice will satisfy all their preferences for social change.
- Where will the funding for quadratic finance matching come from? The funding for QF matching could come from a few sources. First, philanthropists could directly pledge large contributions to be used as matching funds. Second, users of the platform could themselves be subject to a per-dollar tax to fill in remaining gaps, after taking into account large-donor matching funds, as described in Buterin, Hitzig, and Weyl (2018). Finally, litigation organizations themselves could set aside large contributions to be used for matching (e.g., the ACLU could use large donations to match quadratically the set of smaller contributions it receives across litigation areas). This final option would create matching funds that are “intra-organizational” rather than universally applicable across all litigation options on the platform.
What is the right scope for the “menu options” that people will contribute to? Menu options for funding can take any level of granularity. We think the appropriate level would be a “litigation stream” that describes a social outcome in a defined geographic region (e.g., “secure voting rights for disenfranchised felons in Florida”). The scope of both the outcomes and geographic area will determine the crowdfunding threshold required to unlock the funds. Scopes that are too large may never get funded, while scopes that are too small may pose information costs on contributors and/or fail to take advantage of economies of scale across lawsuits.
Potential variations: Although the focus of this piece is on philanthropically-funded impact litigation, we see a few variations to this structure worth mentioning.
Within state AGs’ offices: the above discussion uses impact litigation organizations as an example, but state attorneys general may be able to easily incorporate democratic participation into their affirmative litigation work. One might object that the public have elected their Attorney General precisely to make such choices, so this option will present a tradeoff between the benefits of democratization and the increased information costs on citizens.
Different outputs to fund: Instead of using funding for litigation itself, crowdfunding could be used for the production of amicus briefs lawsuits, expert testimony, or requests for publication of court decisions in already-existing lawsuits.
Philanthropic vs. financially sustainable approaches: This same mechanism could be used for profitable litigation ventures that have a public good dimension. For instance, a platform could market “enforcement bonds” for state attorneys general and city attorneys to bring affirmative litigation. This is just one example of a much broader range of financially lucrative litigation that might benefit from democratic input.
We are eager to discuss this idea with anyone who is interested in refining it and thinking about how to test it out in the real world.
Matt Prewitt (@m_t_prewitt) is the President of RadicalxChange Foundation and Paul Healy is a student at Yale Law School.