Futarchy in BBC Focus Mag

I have a 600 word pro-futarchy oped in the current issue of BBC Focus magazine. It begins:

Has the recent MP expenses scandal soured the idea of democracy for you? Good, because a vast space of possible forms of government remains unexplored, and it is high time we explored it. Yes, democracy beats a dictatorship, but there might be better systems. …

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  • 3 initial thoughts: nice article; “OPEN-SOURCE GOVERNMENT” – it seems like a misleading headline; lastly, it should say: NON-EXPERTS who do not know this lose money…

  • Matt

    I’m not sure I completely understand this concept but it sounds interesting. I would like to hear more about it and what kind of challenges or drawbacks would be entailed.

    The first problem I see would be measuring success. Given the adaptive nature of humans and especially politicians, wouldn’t the policies eventually be tailored to boost the numbers, with little concern about wether or not it made people’s lives better. This seems to be a problem with all measures of success, like GDP.

    Another challenge I have is, isn’t this process already being implimented subliminally with the stock market? People might want to have certain laws passed to make themselves feel better, but I would argue that the bulk of the rules that guide people’s lives are already decided by efficient and voluntary markets.

  • Great op-ed. I have two suggestions for improvements for futre iterations:
    1. “elite committees” -drop or clarify that phrase. If you mean prediction markets are competitive with or superior to expert consensus panels, say so. Otherwise it looks like you’re trying to trick your audience by using too unpopular words: “elite” and “committee”.
    2. Deal specifically with the concern that people (wealthy or dedicated special interests or dumb masses) will manipulate the markets to manipulate policy, and be willing to absorb the losses for the policy outcome. There’s already a large toolkit for dealing with market manipulation so I don’t think this is a futarchy-destroyer, but I think it’s a serious concern and deserves attention.

  • Tim, I didn’t get to pick the headline.

    Hopefully, the editor cut out my section on manipulation.

    • Could you provide it here?

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  • Mike

    I like hearing any ideas for new forms of govt, and I find this one interesting. My main problem is this: it seems to give too much decision-making power to the wealthy, who have sufficient excess resources to place whimsical bets in the speculative markets.

    I know you argue that, insofar as these speculators are wrong, they lose money and can no longer bet. But I think in practice this process would act too slowly. For instance, by the time Bill Gates lost a significant fraction of his fortune he could put enough “noise” into the markets to override thousands of academic experts. If Bill Gates were a completely rational person and consistently lost money, maybe he would give up early. But in practice he would win some and lose some, if only by chance, and it’s unclear to what extent his psychology would take this as motivation.

    On the other hand, I guess the system doesn’t have to be perfect — it just has to be better than what we have. In our present system, I think, there is an element of speculation: a firm can lobby and gain political influence in return, and in a sense it determines how much money to spend on lobbying based on its perception of the probability of success and the return. However, in the present system, the firm makes these bets vis-a-vis its individual benefit, regardless of what is good for other firms are people at large. In your system, at least the purpose of the bets is to improve some social welfare statistic.

  • Mike

    Another problem is disentangling the effects of competing policies.

    For instance, perhaps I propose (and the speculation market agrees) that some form of regulation of some industry will increase some social welfare statistic. But at the same time someone else proposes (and the speculation market agrees) that some form of industry taxation will increase some social welfare statistic. If the statistic goes down, it might be very difficult to tell which policy was wrong, or if both were wrong. It could also be that the statistic goes up, even though one policy was wrong, because the benefits of the other were so great.

  • Mike you are imagining an extreme worst case, not a typical case, and yes it just has to be better than what we have now. The mechanism I’m suggesting doesn’t infer things from time changes, so it doesn’t have the interaction problem you imagine.

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