First, let me just say that prediction/futures markets are awesome, and Hanson’s motivation — that thinking up effective and economic public policies ought to be profitable too is a laudable one.

With that said, the whole system falls at the first hurdle, when we are required to vote on the way of evaluating the outcome of public policies. Not only does it assume that
1. there is some objective “value function” for evaluating public policy, but it assumes that —
2. whilst democratic vote is deemed a poor way of working out the outcomes of public policy, it is a good way to work out what those outcomes should be

Assume, for instance, that I am a fundementalist Mormon. For me, an important aspect of public policy is that it minimises drug use and permits bigamy.

I am a minority in the US, so my democratic votes are not going to have that much effect on the value-function. Whether the decision markets work or don’t, I’m going to be pretty dissatisfied with the outcome.

However, if we abandon the idea of a universal value-function, we may also abandon the controversial decision market for predicting public policy outcomes. I “shop” for a legislature in the same way I shop for baked beans; by their outcomes. If a legislature’s public policy provides poor outcomes — intended or not — I will choose another.

The exact method of “shopping” for a legislature may vary. Moldbug’s Patchwork, Friedman’s PDAs, or even the old-school Panarchy are all adequate solutions.

This, in my opinion, is a far better way to make inventing good policy profitable.

Saturday, January 16, 2010 Debate between Robin Hanson and blogger Mencius Moldbug about futarchy, a subject on which fur has flown over the blogosphere…….

Also, I expect it will take some skill to read market prices and determine whether they are sending a signal or showing only noise. I expect boards of directors to initially have much discretion in making that distinction, and that as evidence grows the range of prices over which they can plausibly use this discretion will shrink, and will be gradually codified into rules.

I have trouble identifying a specific point in these trends when the process becomes mechanical. Are you imagining something different, such as some software that sends out “you are fired” letters being turned on?

Peter, yes it seems that the electoral college slowly and gradually became less important, so that national elections slowly became more mechanically in control of who is president. So there are degrees of direct control, and mechanical processes can slowly and gradually be placed in charge.