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
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?
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.
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.
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.
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.
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.
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.
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.
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)
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.
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.
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?
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.
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.
http://www.amazon.com/Wisdo...
Bryan Caplan, who proudly flies the pacifist banner, agrees.
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.
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.
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.
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.
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.
Seconding this query. (Another rather important question would be who decides who has won the bet?)
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)
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.
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.
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.