An Introduction to Futarchy
blog.ethereum.org
blog.ethereum.org
The irony of proposals to reform the whole stakeholders-periodically-approve-an-all-powerful-executive model, on the assumption that markets make for better decisions than individuals with great power and limited accountability, is that markets consistently don't penalise large, successful firms for being almost-invariably run by a bunch of powerful executives whose power is checked only by the occasional AGM.
[1]though many corporations' shareholders would justifiably argue the latter part is a feature of the system rather than a bug
Only if you think that every "best way" to do every thing has already been done, which I highly doubt.
Better policy for them, perhaps, but not for everyone else.
Simple example:
Country X decides to do something dastardly against the interests of Futarchy Y. Confidence in the economic outlook wavers, as happens in any country where there's an anticipated reduction in trade and maybe even war. Country X, could have made a lot of money shorting "future GDP per capita" on the Futarchy prediction exchange prior to their dastardly act though.
It gets worse because not only is Country X able to directly profit from making the lives of Futarchy Y worse, but the futarchic system actually makes retaliation impossible. Much as the government of Futarchy Y talks tough, and would like to take action, like sanctions, but when they actually put their sanction policy to the test, these proposed sanctions probably have a negative impact on "future GDP per capita", which is one of a perfectly reasonable set of metrics Futarchy Y has chosen. Despite the man on the street tending to agree that sanctions would be a just and moral cause of action Futarchy Y is forced into retreat because a priori metrics matter more than what the government and the public actually want to happen, and there's no way the market agrees that sanctions are going to help them achieve the given goal of growing GDP.
Smart people outwit crude algorithms in simple games like Go if they have an infinitude of possible outcomes. Now imagine that crude algorithm is calibrated by simpletons voting on parameters they don't really understand
You seem to assume the incentives are always correctly
aligned, and agreed on concepts of "better" are
immutable. They're not.
That's precisely what the prediction market purports to solve.
Imagine a referendum where voting yes results in rich people receiving a benefit at the expense of the poor and voting no results in no benefit or expense to anyone. One example of this might be introduction of a regressive tax. Most of us would agree that, according to standard Western civil values, the "correct" vote is no. But obviously rich people in our current system are incentivized to vote yes, and perhaps also to spend money campaigning in support of this referendum.
The trick is that, once we've settled on the metric to target, trying to sabotage it using the markets would cause you to lose large amounts of money. Moreover, if rational actors realize you're trying to sabotage the system, they can bet against you and make large amounts of money. It provides an in-built incentive to execute whatever was democratically decided in the first step.
Not a perfect system, but it does address that particular issue.
For instance, if the one-person-one-vote decided, for whatever reason, that a metric of importance was grams of marijuana sold in a year to people older than 18, minus (18-age)^2*grams for any weed consumed by minors, then rich people would decide the best way to repeal marijuana prohibition while keeping it away from kids.
The prediction market would decide the policy. But this is where I get confused about the payouts. The predictions have to be tied to reality in some way to have any value. So the backers of a given policy choice have a financial incentive to see it exceed predictions, while the opposition has incentive to see it fail completely.
They could game the metric to avoid paying out as much, and do something like pass out pot brownies to kids in day care. They have an ongoing incentive to influence the metric. But if you remove the influence incentive, you also remove the motive to predict accurately. I feel like I'm missing something here. It seems like if you tried this with government, you're making renegade behavior potentially profitable.
In the article example, it seems that if banker wanted a bailout, he would go long on bailout and short on no-bailout. If the no-bailout policy won, he then has a giant incentive to do anything in his power to crash the economy and keep GDP down. Can anyone explain what I'm missing, if anything?
If everyone got a single vote on what model of automobile should be produced, and only the winning model was produced, surely we all agree that the resulting automobile would be much worse than the average automobile produced by the market. In this scenario, it's obvious that there would be mass voter apathy: the amount of time it takes to research automobile designs and manufacturers isn't worth it, because your vote is extremely unlikely to effect the automobile you receive. But when each person has to pay for their own automobile, it's absolutely worth you time to research automobiles, because you get exactly the automobile you purchase.
#2: Any method of assigning relative degrees of influence is unacceptably vulnerable to a corruption by the advantaged party tantamount to a violation of #1.
Side note: Efficiency of law production is not a metric most people will consent to prioritizing above metrics like perceived justice.
My point is that even though there are widely accepted moral arguments for why "one vote per person" is the best way to organize society, it really boils down to an economic argument about what the actual results of such a society will be. I suspect few people would support "one vote per person" on moral grounds if they believed that another system would result in a society where everyone is better off. Likewise, I suspect few libertarians, socialists, anarchists, etc. would continue to make moral arguments if they truly believed that their proposed society would end up the way their opponents believe it would end up.
> Side note: Efficiency of law production is not a metric most people will consent to prioritizing above metrics like perceived justice.
Economically efficient law is pretty difficult to argue against. I suspect the vast majority of people will support it if they understand the definition of economic efficiency. From Wikipedia:
"An economic system is said to be more efficient than another (in relative terms) if it can provide more goods and services for society without using more resources."
> > Side note: Efficiency of law production is not a metric most people will consent to prioritizing above metrics like perceived justice.
> Economically efficient law is pretty difficult to argue against.
"Efficiently producing law" and "producing economically efficient law" are rather dissimilar concepts, in the same way that "efficiently producing automobiles" and "producing fuel efficient automobiles" are dissimilar concepts.
Sorry, I didn't intend for you to infer that. I meant the same concept in both sentences. I am not talking about some more specific type of efficiency like fuel efficiency, which has nothing to do direct with the concept of economic efficiency.
I think you misunderstand the problem; "Producing efficient X" and "Efficiently producing X" aren't the same thing. The first is about the efficiency of the process of producing something (how the inputs are used to produce the output), the other is about the qualities of the output. The problem isn't "economic efficiency" vs. "some more specific type of efficiency", its production efficiency (in whatever terms) vs. efficiency of the product (economic or otherwise.)
I understand your claim. I'm trying to avoid a semantic argument by making it clear what I meant. I'm not arguing about what the "true meaning" of those phrases are. Just know I was referring to economic efficiency both times.
I don't think that "one vote per person" is so fundamental that many people would continue to advocate it if they truly believed that some other system would lead to a better life for everyone in the society.
Basically, I think that most people will not continue to make a moral argument if they are genuinely convinced that the results of that stance would be horrible for all (or most) people.
If you believed that "one vote per person" would lead to a society where every is much poorer than they would be under some other system, I suspect you would not continue to claim it is a moral axiom.
The reason that is a tough sell in this case is because it very quickly can come across as declaring a class of people as superior to another class of people. "One person one vote" might lead to certain negative side effects, but the side effects of an alternative can be much worse.
What I'm saying is that if you can make compelling economic arguments for why a different system would be better, most people will not stick to their "moral axioms" if they buy the arguments.
> "One person one vote" might lead to certain negative side effects, but the side effects of an alternative can be much worse.
That's an economic claim, and is precisely what I challenge.
You need some sort of broad voting for public works projects and other issues of broad public concern, like how much pollution should be allowed into the environment from steady-state industrial processes, or how much tax money to spend regulating and engineering hedges against engineering disasters like Deepwater Horizon or Fukushima.
One person one vote may not be the universal best way to produce law, but it's the best way society has figured out how to run things that doesn't degenerate into dictatorships, or unjustified discrimination/disenfranchisement. It's true that certain people are better at determining proper policy, but once they get exclusive voting rights on policy, it turns into an oligarchy, a cabal, that too often seeks to increase its own wealth and power and sustain itself rather than serving the public interest.
I was presenting the market for cars or food as essentially a "vote with your wallet" system. You don't literally vote, of course, but by choosing where to spend your money, you determine what product you end up, and also influence the producers.
> However, you need some sort of broad voting for public works projects and issues of broad public concern, like ...
That is an economic claim, and I would disagree. I think there are very plausible economic arguments that other ways of organizing society could solve these problems as well or better than the what we currently have.
Changing culture, which is the means to change the psychological and sociological effects of different forms of governance (or different conditions, generally), is difficult. You can't legislate culture. Form of government A works in society B, therefore we can import A into the U.S. and get the benefits seen in society B even while Intel continues to turn out cpus and farmers in Iowa continue to grow corn?
In order to achieve what you want, you need not only a better form of government, you need a way to hack culture to get it to tolerate that form of government without significant shocks to perceived quality of life (A shock to perceived happiness in that sense is, I think, more likely to disrupt your plans for better political order than to anchor them).
There are examples of self-organization to various extents, although there is obviously no example of a society exactly like what I propose. Many parts of what we currently consider the standard role of government have been done without government by many societies. What is considered the "standard role of government" changes quickly (it would probably sound ridiculous 200 years ago to say that Western states would tax something like a third of national GDP). Private arbitration is already quite common, and government courts are widely recognized as slow, expensive, and unreliable. International trade by definition has no higher level central body governing it, and that constitutes a decent chunk of global GDP. Decentralized mechanics already govern nearly all everyday transactions which are not worth the cost and unreliability of using government arbitration (restaurants generally try to satisfy their customers not out of fear of prosecution or litigation).
> It's easy to propose theoretical alternatives with no regard for psychological or sociological effects (which are complex and therefore difficult to predict in theory).
In fact, the vast majority of my arguments revolve around psychological and sociological incentives. You're right that any significant change to society is difficult to assert with absolute confidence. But that alone doesn't mean that a given proposal is more like to be bad than good.
> In order to achieve what you want, you need not only a better form of government, you need a way to hack culture to get it to tolerate that form of government without significant shocks to perceived quality of life
I'm a proponent of gradualism, so while that's a valid criticism, I don't think it applies to me.
What if the policy in question is a rather difficult problem where all solutions are equally likely to fail? Would that discourage everyone to vote on that policy except for those who are already wealthy enough to make a risky investment?
Stepping back further, this would likely discourage anyone who didn't have sufficient disposable income to vote, thus making policy more lopsided. If I lose my job, how do I vote on establishing/expanding a safety net when I have to worry about feeding my family? If I can't vote, does that effectively mean that welfare and similar programs will be voted out by those that have no use for it?
I think the proper response to wanting to vote for a sheriff who would cook the books is to increase the penalty for sheriffs who are caught cooking the books, since their actions would incentivise others more than they do now. Hopefully then, even a more crooked sheriff would recognize that it is not in his interest to go to jail just so that the people who voted him in with can make more money.
To help those who are on welfare, perhaps the metric needs to additionally include a criterion such as average happiness of everyone, including those on welfare, as rated by a periodic survey.
Applying markets to problems other than information problems won't work. Using markets to "deci[de] on a political party every few months and that political party makes decisions" isn't bad (just) because it's a one-party state, but because nobody--not even new Soviet man or Madison's government of angels--is actually competent to make the decisions that would be needed to make central planning work. Democratic or Plutocratic or Market-inspired or AI-based central planning all don't work because the problem is central planning, not the method of choosing the planners.
for theoretical examples the 2 presented are especially awkward and seem fated to trip over themselves not because of the mystic beauty of self reference but rather because they are the wrong tools for the job.
perhaps to start thinking this way its better to remove legacy institutions and things like government bail outs and ceo pay as a priori conditions.
For example: There are plenty of people who would love to invest in the Microsoft Surface, but don't care at all about Microsoft Office or Microsoft Windows. Why would I want to package all of those together if I don't have to?