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This reminds me of Goodhart's law: "When a measure becomes a target, it ceases to be a good measure." Even if betting markets can accurately forecast whether a

by comex 8y ago

This reminds me of Goodhart's law: "When a measure becomes a target, it ceases to be a good measure." Even if betting markets can accurately forecast whether a hypothetical policy would increase welfare, that would last right up until they actually affect policy. After all, there are plenty of people with vested interests in policy and stupid amounts of money to manipulate the market with. The 2013 paper linked does address the issue: > What do noise traders have to do with manipulators? Manipulators, who trade hoping to distort prices, are noise traders, since they trade for reasons other than asset value info. Thus adding manipulators to speculative markets doesn’t reduce average price accuracy. This has been verified in theory,[xxxvii] in laboratory experiments,[xxxviii] and in the field.[xxxix] However, I took a quick look at the "in the field" citations and am not terribly impressed. One of them involved making individual large bets on horse races and seeing how they affected the odds, then canceling them before the race was actually run. The other was an overview that briefly mentions two other studies, broadly similar. None of them seemed like good models of manipulation under futarchy that would be (a) much longer term and (b) much better funded.

zack_amoveo 8y ago
Attempts to manipulate the outcome actually make a prediction market more accurate. Every wrong bet creates a prize for others to come and put the price where it belongs. It is important to compare futarchy against existing alternatives, instead of some imaginary ideal. Democracy is easy to manipulate. Each voter has little incentive to become an informed voter, and the cost to becoming informed is high. And once informed, each voter has little incentive to vote for what is best. (the personal benefit of a good election result) * (probability that their vote mattered) is practically zero. In this situation, people are vulnerable to bribery and propaganda.
- dragonwriter 8y ago
  > Democracy is easy to manipulate. Each voter has little incentive to become an informed voter, and the cost to becoming informed is high. But that feature is retained in futarchy, since the whole system relies on an elected legislature engaged in an even more abstract and difficult for a voter to concretely evaluate task than passing policy legislation directly, and that legislature remains a major target for manipulation.
dragonwriter 8y ago
> Even if betting markets can accurately forecast whether a hypothetical policy would increase welfare, that would last right up until they actually affect policy. Or until there was enough money at stake that corrupting those involved in outcome measurement was deemed worthwhile given the probability and consequences of being caught and punished for that. The more policy is at stake, the greater incentive to try to distort market price; the more money is at stake, the greater the incentive to manipulate the measures the determine settlement. Plus, once you think you’ve detected someone manipulating settlement, sure, you could report your concerns to law enforcement. OTOH, you would perhaps be better off to not do so, and instead factor their interests into your own market participation.

by comex 8y ago

zack_amoveo 8y ago

Attempts to manipulate the outcome actually make a prediction market more accurate. Every wrong bet creates a prize for others to come and put the price where it belongs. It is important to compare futarchy against existing alternatives, instead of some imaginary ideal. Democracy is easy to manipulate. Each voter has little incentive to become an informed voter, and the cost to becoming informed is high. And once informed, each voter has little incentive to vote for what is best. (the personal benefit of a good election result) * (probability that their vote mattered) is practically zero. In this situation, people are vulnerable to bribery and propaganda.

dragonwriter 8y ago
> Democracy is easy to manipulate. Each voter has little incentive to become an informed voter, and the cost to becoming informed is high. But that feature is retained in futarchy, since the whole system relies on an elected legislature engaged in an even more abstract and difficult for a voter to concretely evaluate task than passing policy legislation directly, and that legislature remains a major target for manipulation.

dragonwriter 8y ago

> Even if betting markets can accurately forecast whether a hypothetical policy would increase welfare, that would last right up until they actually affect policy. Or until there was enough money at stake that corrupting those involved in outcome measurement was deemed worthwhile given the probability and consequences of being caught and punished for that. The more policy is at stake, the greater incentive to try to distort market price; the more money is at stake, the greater the incentive to manipulate the measures the determine settlement. Plus, once you think you’ve detected someone manipulating settlement, sure, you could report your concerns to law enforcement. OTOH, you would perhaps be better off to not do so, and instead factor their interests into your own market participation.