Systems of governance built on prediction markets (with Robin Hanson)
Sep 7, 2023
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In this enlightening discussion, Robin Hanson, associate professor of economics at George Mason University and prediction market pioneer, delves into the innovative governance system known as futarchy. He explains how prediction markets could revolutionize decision-making, tackle legislative processes, and even evaluate political proposals. The conversation shifts to the societal reluctance towards blending finance with governance and examines the meaning of 'sacred' in politics. Packed with insights, this dialogue challenges conventional views on governance and social dynamics.
Futarchy uses prediction markets to improve decision-making by estimating outcomes and allowing market speculation.
Obstacles to implementing Futarchy include resistance to reducing hypocrisy and discomfort with using money in sacred contexts.
Preference for the status quo and skepticism towards radical social systems can hinder the adoption of new decision-making frameworks like Futarchy.
Small-scale trials, experimentation, and open dialogue are crucial steps towards overcoming obstacles and implementing Futarchy.
Deep dives
Futarchy: A New Approach to Decision-Making
Futarchy is a proposed decision-making system that aims to improve information aggregation and decision-making at all levels, from personal decisions to national and international issues. The system uses prediction markets to estimate the impact of different choices on a specific outcome measure, such as GDP or national welfare. By allowing people to trade based on these predictions, the system harnesses the power of market speculation to guide decision-making. For example, in the context of firing a CEO, Futarchy proposes using decision markets to determine whether or not to keep the CEO based on the estimated impact on the stock price. The system also suggests using auctions to select which bills are up for consideration in the prediction markets, allowing anyone, even individuals outside of politics, to propose bills. While some concerns may arise, such as gaming the system or challenges with specific measures in the national welfare function, Futarchy offers a new and potentially more effective approach to decision-making.
Hypocrisy and the Challenge of Implementing Futarchy
One of the obstacles to implementing Futarchy is the fear of reducing hypocrisy. Currently, politicians often make promises and take positions based on signaling loyalty to their tribe, rather than genuine desire for societal improvement. With Futarchy, decisions would be driven by objective outcome measures, potentially revealing the gap between stated positions and actual actions. This could be perceived as a loss of the ability to be hypocritical and might create resistance to adopting the system. Another challenge is the discomfort many people feel about using money in sacred contexts like government decisions. The introduction of betting-like prediction markets and auctions may be viewed as tainting these important processes. Moreover, the complexity of financial systems and potential for gaming might make people hesitant to fully embrace a new decision-making framework. Despite these challenges, Futarchy presents an innovative and potentially more effective way to make decisions based on aggregated information and market speculation.
Preference for the Status Quo and Aversion to Change
People often have a preference for the status quo and can be skeptical of radical new systems, particularly in social areas such as politics. This preference stems from the belief that historical systems have served reasonably well in the past, and the fear that new changes may bring uncertainties or unintended consequences. Additionally, the complexity of financial systems and the potential distrust of technocratic decision-making may make individuals hesitant to embrace the complexities of Futarchy. While innovation is generally embraced in many areas of life, the conservative sentiment towards changing social institutions can pose a barrier to adopting new decision-making frameworks like Futarchy.
Overcoming Obstacles and The Need for Experimentation
Despite the challenges, the potential benefits of Futarchy cannot be ignored. An important step towards its adoption is experimentation and conducting small-scale trials. This allows for identifying and addressing specific concerns as they arise, rather than trying to predict and resolve all possible obstacles beforehand. By engaging in rigorous testing and refining the system over time, stakeholders can gain real-world experience, build trust, and gradually overcome the resistance to change. While the obstacles may be formidable, an ongoing commitment to experimentation, transparency, and open dialogue can pave the way for the future implementation of Futarchy to revolutionize decision-making processes.
Testing Innovative Concepts in Simple Environments
Innovation should be tested in simple environments to understand its feasibility. Combining multiple risky innovations in the same venture makes it difficult to identify the cause of failure. Small-scale experiments in settings like new hiring or restaurant menus can provide opportunities for trial and error.
Overcoming Resistance to New Ideas
The resistance to new ideas can arise from a violation of people's heuristics and a lack of familiarity. People often have a preference for trusting and listening to ideas from a perceived elite group. Additionally, unfamiliar ideas that diverge significantly from the mainstream face challenges in gaining acceptance.
Implementing Prediction Markets and Tax Career Agents
Prediction markets in organizations face challenges when conflicting with prevailing manager opinions and political processes. Overcoming such obstacles necessitates experimentation and finding novel approaches to ensure accurate prediction outcomes. Tax career agents, a proposed idea, would require trust in the system and elite figures to handle individual tax revenues for career guidance and optimization.
What is futarchy? Why does it seem to be easier to find social innovations rather than technical innovations? How does it differ from democracy? In what ways might a futarchy be gamed? What are some obstacles to implementing futarchy? Do we actually like for our politicians to be hypocritical to some degree? How mistaken are we about our own goals for social, political, and economic institutions? Do we enjoy fighting (politically) more than actually governing well and improving life for everyone? What makes something "sacred"? What is a tax career agent?
Robin Hanson is associate professor of economics at George Mason University and research associate at the Future of Humanity Institute of Oxford University. He has a doctorate in social science from California Institute of Technology, master's degrees in physics and philosophy from the University of Chicago, and nine years experience as a research programmer at Lockheed and NASA. He has over ninety academic publications in major journals across a wide variety of fields and has written two books: The Age of Em: Work, Love and Life When Robots Rule the Earth (2016), and The Elephant in the Brain: Hidden Motives in Everyday Life (2018, co-authored with Kevin Simler). He has pioneered prediction markets, also known as information markets and idea futures, since 1988; and he suggests "futarchy" as a form of governance based on prediction markets. He also coined the phrase "The Great Filter" and has recently numerically estimated it via a model of "Grabby Aliens". Learn more about Robin at his GMU page or follow him on the-website-formerly-known-as-Twitter at @robinhanson.
