Fight The Fighters

My undergrad public choice class ended with a lecture on futarchy. (Bryan Caplan says he did something similar in grad Public Finance.)  I think I convinced most students that futarchy is promising and worth trying, first on a small scale, and mostly met their objections to their satisfaction.  But I didn’t perceive much enthusiasm.  As usual, people don’t go to the barricades for efficiency; they get passionate about fighting enemies.  If only more people would object violently to futarchy, maybe we could inspire more interest in it. But just getting most folks more of what they want, who can get excited about that?

But consider: passion about pacifism.  There have been times, when the world was divided into sides fighting vicious and deadly wars, that some folks took the side of stopping the fights.  They took the natural passion of fighting an enemy and channeled it into fighting the fighters. I’d like to get folks to similarly see the wasteful pointlessness of today’s political battles. Today we induce millions of people to make up mostly-random political opinions on hundreds of diverse complex policy topics they hardly understand, split into warring factions based on shared opinions, and then fight vicious political battles over which factions get to make the government implement their random opinions. I’d rather folks focused on generating meta-political-opinions, not about particular policies like wars or bank bailouts, but about what political processes best choose effective policies.

Some folks are concerned that the public will feel dissed by Vote on Values, Bet on Beliefs, in that their opinions would no longer be solicited, via voting, on how to get what they want; they’d only be asked about what they want.  While anyone could speak on how to get stuff, those contributions would face stiff penalties for inaccuracy (as well as rewards for accuracy). But rather than seeing this as disrespect, I’d like folks to see it as a mark of status:  high status folks tend more to just tell their underlings what they want, and to say less about how to do that.  Better quality household servants, or exectutive assistants, need less instruction on how to do their job.  You can more just say you want scrambled eggs and toast for breakfast at 8am, and they’ll figure out how to make it happen.

Similarly, nations where citizens can effectively control their government by just specifying a national welfare function, and tweaking it a bit periodically, should be higher status than nations where ordinary citizens must continually form opinions on the effectiveness of hundreds of rapidly changing policies. For example, many Californians, who every few months face another thick booklet of direct democracy initiatives, complain they shouldn’t have to wade through such detail; isn’t that the politicians’ job? If political servants can’t be trusted to choose well without heavy monitoring, well then yes voters are forced to monitor them. But people with access to more trustworthy servants should gain the benefits both of having to pay less attention to details, as of the respect owed those who achieve such efficiency.

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  • Bill

    Why not experiment at GMU?

    Have the students run the university using Futarchy principals. They pick the goals, then you use markets.

    You can even start on a smaller scale, a class.

    Report back on your experiment.

  • rapscallion

    I think I’d like to see the same changes you would, but I’m not sure what kind of efficiency you’re talking about.

    Do you mean attaining higher values of some social welfare function, or do you have some kaldor-hicks/Paretian notion of efficiency in mind? If the latter, I take issue with the terminology: inefficiency can never be observed. All actions can be described as optimal behavior according to some utility function. If people aren’t optimizing according to the utility function you’d like, then they’re optimizing according to some other utility function, and hence their actions are efficient in Paretian sense.

    As long as you’re explicit that you are making normative claims and think people should act differently than they are, striving for a different social welfare function, then I’m with you. But you can’t drawn normative implications from the fact that people aren’t behaving in accordance with some positive model of behavior. If they’re not, then the model is wrong, not the people.

  • Arthur

    I think you should change the name.

    The Future never comes.

    Besides that, I think the problem with the system is that only those who have money to bet can say something about the way to do things.

    • James K

      There’s an easy way to fix that. Give everyone some credit in a trading account, that they may choose to withdraw and spend instead. They can have a say, if they want.

    • Adam

      I assumed the name was created in reference to “idea futures”, not to imply “this is the political system of the Future”.

      “…only those who have money to bet can say something about the way to do things”: Not quite. Everyone has a say on what values to optimize. And the people with money have a vested interest in betting on what will actually optimize those values; the more money they have to bet, the more incentive there is to bet carefully on likely outcomes.

      In fact, I think rich people can probably be relied on to place better bets anyway. They are more likely to be well-educated or to be able to afford to pay experts for betting advice.

  • I like your point about dissing, but I don’t think the pacifism analogy is very helpful. When have pacifists ever succeeded? Even most opponents of war distance themselves from the doctrine so as not to lose credibility.

    • Φ

      I would go even further than that. Describing the “pascifists” of recent memory as ” folks [who] took the side of stopping the fights” is to take a naive and uncritical view of their pretensions. In contrast, I would describe the kind of people who chanted “Ho Ho Ho Chi Min / The NLF is gonna win” as actively talking the enemy’s side.

      • Bryan Caplan, who proudly flies the pacifist banner, agrees.

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  • Khoth

    Is there a good basic description somewhere of the mechanics of how prediction markets work? (ie, who creates the bets, and how, and whether derivatives tend to be traded too, and so on)

    • Guy

      Seconding this query. (Another rather important question would be who decides who has won the bet?)

  • j r

    the problem lies in that you seem to be asserting that human beings are status-maximizers. in one sense we are, but that can easily be trumped by our tribalism.

    human beings have this incredible ability to sublimate their own personal wants into some larger group, so that a success by the group or a member of that group feels as good as personal success.

  • Erisiantaoist

    You’ve just inspired me to tell people I’m a futarchist when they ask my political leanings. I’m far from 100% convinced it will work, but I’m even further from believing in the efficiency of any other political stance with a name; and futarchy will be much more entertaining to defend.

  • I’d be happy to get the simpler project accomplished – Create laws with functions and parameters, and some process for setting those parameters over time.

    We have laws relating benefits to GDP, I believe. But we could do a lot more than that. We could design homeostasis into our laws.

  • David C

    I’ve read most of your paper on this subject (although not even close to thoroughly) and there’s one problem I’m having, which I’m not sure if it has been addressed. The major difference between futarchy and other betting markets is that betting markets aren’t able to influence the outcome. This ability to influence the outcome would distort how people bet. If a bet is automatically called off every time the market closes below 50% in favor of a proposal, then this gives investors zero incentive to bet against a proposal when the market is below 50%. If the market never rises above 50% again, then they won’t make any money. If the market does rise above 50% again, then they should wait until that occurs to place their bet and make more money. Regardless of where the threshold is set for approving a policy, an efficient market will always remain above that threshold. On the other hand, automatically giving the money to the person who bets against if the proposal fails would give the investor in favor of the proposal zero incentive to bet below the threshold, and they would wait until the market was above the threshold.

    • Tim Tyler

      That happens in other markets too – e.g. if market traders all think your company is going to fail – and so sell your stock – then that reduces your assets – and so is likely to increase your chances of failure.

      • David C

        That’s different. In your case, the company still has the possibility of not failing at all times. In this case, any time the odds are low enough for the bill not to be passed, that’s a guaranteed loss for the person betting against. So all bills will always pass in an efficient system.

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  • Keith

    I certainly see some value in this idea, but I’m not 100% convinced of any of your 3 premises.

    That said, there seems to be a path dependency to political change. Not all peoples will accept or readily adapt to all forms of government, regardless of their potential to generate well-being. Would we be ready for futurarchy, if it could be handed down now?