
An Introduction to Futarchy - panarky
https://blog.ethereum.org/2014/08/21/introduction-futarchy/
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notahacker
If prediction markets were really the best way for a large, centralised entity
to make decisions, you'd think at least a few successful corporations would
have implemented it into their corporate governance.

The irony of proposals to reform the whole stakeholders-periodically-approve-
an-all-powerful-executive model, on the assumption that markets make for
better decisions than individuals with great power and limited accountability,
is that markets consistently don't penalise large, successful firms for being
almost-invariably run by a bunch of powerful executives whose power is checked
only by the occasional AGM.

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Zigurd
There are many governance variants that should outperform conventional
decision-making practice in corporations but go unadopted. Either we're living
in a decision-making Golden Age, which seems unlikely, or corporate decision
making is very ego-driven and resistant to systemic change.

~~~
notahacker
Corporate decision making _is_ very ego driven and resistant to systemic
change[1]. From which we can conclude either that stock markets are not very
good at promoting good governance (even with narrow, homogenous criteria like
"grow shareholder value) or that concentrating power in the hand of ego-
driven, change resistant groups of [mostly] old men is not as bad for
shareholders as running a corporation based on prediction markets. I'd say
both were true

[1]though many corporations' shareholders would justifiably argue the latter
part is a feature of the system rather than a bug

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vertex-four
Umm, so, basically, this is a system which would get rid of one-vote-per-
person, and implement a pay-to-vote system, where those with more money to
spend have more vote, built into the very fabric of the system. Unless I'm
getting it completely wrong.

~~~
baddox
Can you explain from first principles why "one vote per person" is a good way
to efficiently produce law, given that most of us accept that it's _not_ a
good way to produce many other things (like food and automobiles)?

If everyone got a single vote on what model of automobile should be produced,
and only the winning model was produced, surely we all agree that the
resulting automobile would be much worse than the average automobile produced
by the market. In this scenario, it's obvious that there would be mass voter
apathy: the amount of time it takes to research automobile designs and
manufacturers isn't worth it, because your vote is extremely unlikely to
effect the automobile you receive. But when each person has to pay for their
own automobile, it's absolutely worth you time to research automobiles,
because you get exactly the automobile you purchase.

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idlewords
The market is not some entity that exists outside of human society, it's a
product of that society. And "one person one vote" is a foundational principle
of how we organize ourselves as a society in the first place. Demanding that
someone make economic or legal arguments for it is a category error. It's the
bedrock that law and economic life stand upon.

~~~
baddox
I addressed that in this comment:
[https://news.ycombinator.com/item?id=8209696](https://news.ycombinator.com/item?id=8209696)

I don't think that "one vote per person" is so fundamental that many people
would continue to advocate it if they truly believed that some other system
would lead to a better life for everyone in the society.

~~~
21echoes
sure, but i think the reason no one has stopped advocating for it is that very
few people believe that "some other system would lead to a better life for
everyone in the society", especially seeing as many people count "having a
voice in the structure of my society" as one of the very things that makes
life good for them.

~~~
baddox
I agree. But that also means that it's not _really_ a moral axiom, so the
moral argument is insufficient.

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csandreasen
Though I've advocated for more metrics-based accountability in the past and
agree with the author on that level, I don't know that tying a profit
incentive is necessarily a good thing. It encourages people to vote for which
policy is more profitable, which may or may not equate to which policy is more
effective. If the goal was, for example, to reduce crime rate, it would be
more profitable for me to vote for the Sheriff who's slightly more likely to
fail but simultaneously more likely to cook the books than the one who has a
50/50 shot of actually decreasing the crime rate.

What if the policy in question is a rather difficult problem where all
solutions are equally likely to fail? Would that discourage everyone to vote
on that policy except for those who are already wealthy enough to make a risky
investment?

Stepping back further, this would likely discourage anyone who didn't have
sufficient disposable income to vote, thus making policy more lopsided. If I
lose my job, how do I vote on establishing/expanding a safety net when I have
to worry about feeding my family? If I can't vote, does that effectively mean
that welfare and similar programs will be voted out by those that have no use
for it?

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roryokane
This all just points to the importance of choosing a good metric. The
article’s example of GDP as a metric was just an example – later in the
article, the author points out that a few ways in which that metric would need
to be patched.

I think the proper response to wanting to vote for a sheriff who would cook
the books is to increase the penalty for sheriffs who are caught cooking the
books, since their actions would incentivise others more than they do now.
Hopefully then, even a more crooked sheriff would recognize that it is not in
his interest to go to jail just so that the people who voted him in with can
make more money.

To help those who are on welfare, perhaps the metric needs to additionally
include a criterion such as average happiness of everyone, including those on
welfare, as rated by a periodic survey.

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seanflyon
The problem of selecting a good measurable metric is not solvable.

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bcoates
Markets only solve the information problem, they don't address the decision
problem (given unlimited knowledge of the present, how do we optimize the
future? -- an intractable problem) or the measurement problem (were the
decisions we made in the past good or bad? What was the GDP in 2011? -- a very
hard problem).

Applying markets to problems other than information problems won't work. Using
markets to "deci[de] on a political party every few months and that political
party makes decisions" isn't bad (just) because it's a one-party state, but
because nobody--not even new Soviet man or Madison's government of angels--is
actually competent to make the decisions that would be needed to make central
planning work. Democratic or Plutocratic or Market-inspired or AI-based
central planning all don't work because the problem is central planning, not
the method of choosing the planners.

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bitCromwell
there seems a fundamental incongruence between a market based decision
mechanism and a singular fiat decision. prediction markets are valuable
because of their ability to absorb complex and dynamic information. while they
point to a consensus it is a fleeting one by definition.

for theoretical examples the 2 presented are especially awkward and seem fated
to trip over themselves not because of the mystic beauty of self reference but
rather because they are the wrong tools for the job.

perhaps to start thinking this way its better to remove legacy institutions
and things like government bail outs and ceo pay as a priori conditions.

~~~
drcode
Agreed, futarchy seems clever but there seems to be too many reasons why you'd
never reap the theoretical benefits in practice.

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Executor
This idea is horrible since it is plutocratic and elitist. It encourages the
lives of affluent people living in the finance sector/stock traders but
empowers nobody else. It punishes those who don't participate in the stock
market, fail to correctly predict trends. Remember the damage caused by the
finance industry in recent years: the 2007 depression, the bursting of the
housing market, as well as the initiation of austerity policies around the
world. We should be concerned with eliminating the finance sector's control on
society - not increasing it.

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josephschmoe
I actually really like the idea of Futarchy for corporates because it gives
investors a way to invest in a change in the company, rather than just the
company in general.

For example: There are plenty of people who would love to invest in the
Microsoft Surface, but don't care at all about Microsoft Office or Microsoft
Windows. Why would I want to package all of those together if I don't have to?

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josephschmoe
What's to keep someone from going short on a proposal and just going from
house to house wrecking mailboxes with baseball bats?

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roryokane
The incentive that already exists – the law. A single person couldn’t do much
damage on their own to affect a global metric like GDP much, and they would
probably not consider it worth it to have made a little bit of money if they
have to spend time in jail because of it.

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otakucode
I thought for sure futarchy had to have something to do with futa as a
governmental system...

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josephschmoe
How do you pronounce "futarchy?"

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roryokane
The introductory paper on futarchy
([http://hanson.gmu.edu/futarchy.pdf](http://hanson.gmu.edu/futarchy.pdf))
says ‘For no particular reason, I’ve named this alternative “futarchy.”’ That
seems to indicate that “fut” isn’t any kind of standard prefix with a known
pronunciation. So the way I naturally read the word is “FOO-tar-ki”.

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micahwayne
Somebody CC Bill Belichick - I'm sure he can get this thing in place for a
fourth down play by the post season.

