
A Call to Adventure - r721
http://www.overcomingbias.com/2017/06/a-call-to-adventure.html
======
meredydd
Hanson's "Adventure #1" is the promotion of futarchy, or rule by (prediction)
markets. This is one call I fervently hope goes unanswered. It's the most
dangerous sort of bad idea - namely, one that produces good results in small-
scale trials.

Prediction markets perform great, _so long as they don 't matter_. The idea is
that you make a contract that pays out if some future event occurs (eg "pay
the holder $1 if Donald Trump is re-elected in 2020"), and then you trade it
on an exchange (like the stock market). If the market price is $0.50, that
means a 50% chance of Trump winning. This produces much better estimates than
listening to pundits on TV, because traders profit by being _right_ (rather
than, eg, getting good ratings, or looking good to their boss). Prediction
markets perform very well in studies, and so Hanson et al propose we should
use them to make all our decisions.

That's where things go from empirically great to predictably terrible.
Goodhart's Law[1] says that if you use a measure to control a process, it
stops being a good measure. (Think of the Soviet nail factory which was
rewarded for each ton of nails produced - so produced a single, massive nail
each day.)

If you make decisions based on a prediction market, any successful pump-and-
dump scammer can control your decisionmaking. Put another way, every decision
can be bribed (by someone willing to lose enough money moving the market
price).

Proponents counter that the market will self-correct (eg it's difficult to
move IBM's stock price much just by betting on it, cause lots of people will
bet against you). But the S&P 500 is a well-developed, liquid market. If
futarchy were ever implemented, the policy equivalent of the Pink Sheets[2]
would be carnage.

[1]
[https://en.wikipedia.org/wiki/Goodhart%27s_law](https://en.wikipedia.org/wiki/Goodhart%27s_law)

[2]
[http://www.investopedia.com/ask/answers/201.asp](http://www.investopedia.com/ask/answers/201.asp)

~~~
unimpressive
Maybe the way to solve this bug is with a contributor limit like we have for
campaign funding?

~~~
petters
Maybe, but trying to make a market better by regulating it sounds wrong.

------
venamresm__
I've been working on the second one for a while on my website, here's an
example:
[https://psychology.wtf/social_coherence.php](https://psychology.wtf/social_coherence.php)
. However, that's just for fun, it's not a final answer to anything.
Correlation correlated with other correlations.

