3 ms·
I think I've spotted a paradox. I'm generally pro-markets, but I don't think they're a panacea. They mostly seem to concentrate rather than decentralise wealth
by nkoren 8y ago
I think I've spotted a paradox.
I'm generally pro-markets, but I don't think they're a panacea. They mostly seem to concentrate rather than decentralise wealth. If you're poor, you can't enter the market at all. If you're middle class, you can make some bets in the market: maybe you win, and maybe you lose, and if you lose enough then you become poor and are knocked out of the market for good. But if you're rich, you can afford to hedge and diversify your bets, staking out positions along the whole of the efficient frontier, hiring analysts to figure out exactly where that is, and perhaps paying for a bit of regulatory capture so that you can tilt the market in your favour. Of course even the rich can still lose money on the market by being complete idiots -- but that's basically the only way they can lose money.
So, anyhow: betting markets centralise money.
Now let's say that society votes on a value: "we want to decrease inequality". So they create a futures market which rewards policies that decrease the society's Gini index.
The market responds with a variety of policies. Some work, some don't. The policies that work increase the wealth of the people who bet on them. Per the above, none of those bets will come from the poor; some of them will come from the middle-class, and a disproportionate share of them will come from the rich.
Hence, in this system, a policy which reduces wealth inequality is one that makes the rich richer. Seems like a variant of the Liar's paradox.
A potential solution would be for everyone in society to be given a basic income that was only usable for betting in the future's market; this would keep the poor in the game. Moreover, you'd need a cap on the amount of total assets one could have in the market (say, 4x or 10x the UBI), to eliminate incentives to game the market via regulatory capture etc.
- ada1981 8y agoPerhaps UBI could be implemented as UBA (Universal Basic Assets) in that each citizen owns a piece of the betting market. There could be a tax to place a bet that is then distributed evenly to all citizens so even if one goes bust they still get chips to play. I’d be curious if there is a way to implement this in a small community as a test. Perhaps we could run an annual festival by this method and experiment with it. I’d be happy to offer up http://Majagual.org http://Majagual.org (the island for those who are wise and of good will) as a resting ground for this or other forms of alternative goverernance.
- taffer 8y ago> Hence, in this system, a policy which reduces wealth inequality is one that makes the rich richer. Seems like a variant of the Liar's paradox. Assuming that the betting market is only a tiny fraction of the overall economy, its impact on inequality should be negligible. But I agree with your idea of setting a cap on the size of the stakes.
- dragonwriter 8y ago> The market responds with a variety of policies. Some work, some don't. The policies that work increase the wealth of the people who bet on them. There's incidentally no way that actually works in practice; different policies have different shapes of effects over time, multiple policies exist simultaneously, and there's no way to isolate the effects of one policies on the outcome at any given time.
- zack_amoveo 8y agoPrediction markets are for helping communities of people make decisions that benefit the community. Whether or not they cause wealth inequality is another question entirely. As long as they help communities come to good decisions, then futarchy is a success. Peanut butter is for tasting good. Even if peanut butter was causing wealth inequality, it would still achieve its goal of tasting good.