What is Futarchy

Answer
Futarchy
Government system proposed by economist Robin Hanson
Definition
A form of government where elected officials define measures of national wellbeing, and prediction markets are used to determine which policies will have the most positive effect.
Proposed by
Robin Hanson, an economist
Key principle
"Vote on values, bet on beliefs"
Futarchy is a proposed form of governance where elected officials define measures of national wellbeing, and prediction markets are used to determine which policies will have the most positive effect on those measures. The key principles are:
  • Elected representatives formally define and manage metrics to measure national welfare or wellbeing. These could include economic indicators like GDP, as well as other factors like health, education, environmental quality etc.
  • Policy decisions are then made based on prediction market forecasts of which policies will increase the national welfare metrics the most. The policies with the highest predicted positive impact get implemented.
  • So voters choose the values/goals (via elected reps defining welfare metrics), while prediction markets determine the best means to achieve those goals based on crowd-sourced forecasting.
The core idea is to combine the strengths of voting (expressing collective values/preferences) with the strengths of speculative markets (incentivizing truth-seeking and aggregating dispersed information) to make better decisions. Futarchy was first proposed in 2007 by economist Robin Hanson as a way to overcome failures of traditional governance systems in heeding expert knowledge. Some key potential benefits claimed for futarchy include depoliticizing policy decisions, leveraging collective intelligence, and aligning incentives toward improving national welfare. However, it remains an untested idea with various challenges around implementation and potential downsides.
What are the drawbacks of Futarchy? In short bullet points
Answer
The main drawbacks and criticisms of futarchy include:
  • Defining an official measure of national welfare/wellbeing is vulnerable to corruption, manipulation, and Goodhart's law (where the measure becomes distorted).
  • The wealthy would have more influence than the poor, as they can make larger bets on prediction markets.
  • Long time horizons become more difficult to forecast accurately in prediction markets.
  • Technical issues with interpreting prediction market prices as expected values of policies, like separating out traders' risk preferences.
  • Values and beliefs may not be separable as futarchy assumes - policies likely influence both.
  • Subsidizing prediction markets enough to make them accurate forecasting tools could be prohibitively expensive.
  • Concentrated wealth could allow rich actors to manipulate markets and implement policies benefiting themselves over the public good.
  • The complexity of futarchy may make it too difficult for citizens to understand and engage with the system.
Related
how does futarchy address corruption in governance
what are the potential biases in futarchy's decision-making process
how does futarchy handle long-term policy decisions