Shall We Vote on Values, But Bet on Beliefs?

A key question to ask about any social institution is how well it generates, aggregates, and distributes information. Speculative markets seem to do well at this, while familiar democratic institutions, relying in part on academic institutions, seem to fail in many ways. So perhaps we should consider “futarchy,” a form of government where betting markets become our primary common source on matters of fact. Democracy would say what we want, while speculators would say how to get it. That is, elected representatives would formally define and manage an after-the-fact measurement of national welfare, while market speculators would say which policies they expect to raise national welfare. If we are willing to recommend policies that macroeconomic data suggest are causally related to GDP, it seems we should be willing to consider futarchy. Using an qualitative engineering-style approach, this paper considers thirty design issues with futarchy, and then presents a relatively specific proposal which responds to those concerns. ∗For their comments, I thank Peter Boettke, Nick Bostrom, Tom Breton, Bryan Caplan, Roger Congleton, Tyler Cowen, Hal Finney, David Friedman, Karl Hallowell, Bernardo Huberman, Peggy Jackson, Hassan Masum, Peter McCluskey, Jim McKinney, Eli Lehrer, Karen Vaughn, Eliezer Yudkowsky, Richard Zeckhauser, and participants in the Monomedia Berlin: Value conference and the 2000 GMU Public Choice Outreach Seminar. I thank the Mercatus Center for financial support, and Edward Stringham for research assistance. †[email protected] http://hanson.gmu.edu 704-993-2326 FAX: 704-993-2323 MSN 1D3, Carow Hall, Fairfax VA 22030