Futarchy
November 22nd, 02007 by Stephanie Gerson
Futarchy is an untried form of government proposed by economist Robin Hanson, in which officials define measures of national welfare while prediction markets determine which policies are most desirable. In Hanson’s words, “we would vote on values, but bet on beliefs.”
Futarchy is based on the assumption that poor nations are poor because their governments adopt flawed policies, despite expertise recommending otherwise. Although this assumption may be problematic, in that it boils economic stagnation down to sheer misjudgment, the question of how to render governments accountable to public opinion regarding the future is a valuable one. Futarchy intends to address this by having democratically-elected representatives formally define and manage after-the-fact measurements of national welfare, while allowing market speculators to determine which policies are expected to raise national welfare (Hanson). According to Hanson, “the basic rule of government would be: when a betting market clearly estimates that a proposed policy would increase expected national welfare, that proposal becomes law.”
Hanson was also involved in the creation of the Foresight Exchange (see image), an online play predictions market in which current market prices reflect consensus about the future, and FutureMAP, a (now cancelled) DARPA research project into the use of prediction markets for shaping government policy.
It’s possible to imagine participation in something like the FX as a civic duty in Futarchic societies, and specialized predictions markets emerging around particular issues, geographies, etc. For more information, including Futarchy’s potential shortcomings, refer to “Shall We Vote on Values, but Bet on Beliefs?” and visit Hanson’s website.
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Posted on November 22nd, 2007 at 9:23 am
A good summary. :)
Posted on November 22nd, 2007 at 1:45 pm
Serendipity: The word that synthesizes most of my Internet experience. Finding a pleasant, unexpected, surprise while searching for something else. But sometimes, the surprise is not really pleasant.
Futarchy is one of such surprises. I took time to read the whole paper written by Hanson and it brought me mixed feelings of both irresponsible laughter and the responsibility of refuting the whole thing for those who might think it has some plausible statements.
The paper starts infamously with the following statement: “The space of possible forms of government is vast and largely unexplored”; what is this supposed to mean? People should experiment more with governance? It continues but it doesn’t improve: “1. Current democracies fail largely by not aggregating enough available information.”; what democracies have actually failed? “3. It is feasible to, after the fact, tell rich happy nations from poor miserable ones.”; No it’s not. It is feasible to tell rich nations from poor ones, but it’s not feasible to tell happy nations from miserable ones.
Happiness is not accountable, there are no indexes for it. That’s precisely what instigated Locke in his Liberalist works in contrast with Rousseau’s. For Rousseau, it’s the nation duty to provide happiness to its citizens, anyone against the nation’s will (and policies) is insane and should be locked. While for Locke, only the individual may decide what provides him happiness so the state must restrain itself, as far away as possible, thus allowing the citizen to search for his own happiness as he wills too.
Hanson links “bad democracy” to lack of information and, in overall, to voters stupidity. Where “bad democracy” would be the one that doesn’t provide an increase of “Nation’s wealth”. Well, according to Schumpeter, democracy is not really about increasing anything except the legitimacy of the government. On the contrary, the greatest economic boosts ever seen came from authoritarian regimes: Nazi Germany, Fascist Italy, Stalin’s and Mao’s communist regimes, etc.
Also the lack of foresight when choosing representatives is always criticized from the point of view of a well-fed intellectual, but a short-term result is sometimes the only option from a starving population. Its not a matter of lack of information it’s a matter of survival.
“Since speculative markets do so well at a task that democracies have troubles with, it is tempting
to try to improve democracy by making them rely more on speculative markets.”. No wonder why: they are designed to do different things. As a matter of fact, one of the incumbencies of a democratic government is to put brakes in the speculative market.
Hanson also likes to cite GDP as a good index to bear policies “a good policy will increase GDP”, but that’s not true at all. All mid-eastern countries have excellent GDPs due to oil revenues but that by itself says nothing about the country. HDI – Human Development Index – has succeeded GDP on the last 15 years as a social indicator. It includes health, wealth, leisure and the environment in a composite formula in order to take a snapshot from the social structure of a country. HDI may be refined to portrait a specific neighborhood or coarsen to demonstrate a whole country mean.
After screening by several nonsensical paragraphs, I actually agree that Hanson’s Futarchy is not at all worthless. It does have some value. It may be used strictly as proposed on a Star Trek episode as base for the Ferengi Race legislature. This is, hoping that the screenwriters that made up the fictional basis for the characters wont put up a lawsuit for plagiarism.
Posted on November 28th, 2007 at 7:46 am
Thanks, Robin. (Sequoia Hax ISL, Stephanie Gerson IRL ;)
Posted on November 28th, 2007 at 7:53 am
Bruno, I agree that some assumptions are problematic, which is why I wrote that although boiling “economic stagnation down to sheer misjudgment, the question of how to render governments accountable to public opinion regarding the future is a valuable one.” If you’re willing to momentarily put aside the assumptions that bad democracy results from lack of information and good policy will increase GDP, how would you render governments accountable to public opinion regarding the future? (How would you gauge public opinion about the future, and then hold governments accountable to it?) Is this even a worthwhile goal?
Posted on December 20th, 2007 at 7:23 am
Bruno, GDP was an illustration of an outcome measure than many people find relevant. If you don’t find GDP relevant, then ask yourself what measures you might use to tell after the fact if outcomes had been to your liking. If HDI would do that for you, then imagine a futarchy tied to HDI. What would be your objection to that?