Futarchy, Blockchain Voting, and Vote Contracts

Futarchy is a buzz word in political economy at the moment. More than 2.5% of the Less Wrong 2013 survey self-identified as futarchist and Bryan Caplan tweeted about it.

Futarchy is an idea from GMU political economist and idea futures expert Robin Hanson. In this article, Hanson defines futarchy in the following way:

In futarchy, democracy would continue to say what we want, but betting markets would now say how to get it. That is, elected representatives would formally define and manage an after-the-fact measurement of national welfare, while market speculators would say which policies they expect to raise national welfare.

Futarchy seems to be an attempt to make the political system more free market. In my opinion there are far simpler ways to make our political system even more free market. I have written on vote contracts, which I also call commoditized voting, vote contracts, vote selling, or whatever else I can call them to get the point across. My related articles include:

My idea is that a votes can be efficiently allocated on the market. We can treat it like a contract, a currency, and/or a commodity. These treatments would allow a market to manipulate votes and therefore allocate them efficiently. Specifically, I pointed out that bitcoin could allow this to occur. On Jan. 12, 2015, Bitshares announced that “Transparent voting on a blockchain is here.”

Commoditized votes could be implemented into an otherwise unchanged political system very easily, although it would improve the performance of the system by a relatively small amount. Better yet, the entire legislative branch can be eliminated. By replacing juries with a similar mechanism much of the judicial branch can also be replaced.

Basically, government would just be law enforcement, not law generation. At that point it would only be one step away from full polycentric law which would allow for competing private enforcement agencies.

This is similar to but different from futarchy. Futarchy would involve setting up a futures market, ostensibly still run by the government instead of the blockchain approach. Would these futures transactions be transparent? How can transactions be verified? If transactions cannot be verified then private individuals cannot be confident in whether or not contracts are being fulfilled and the market incentives for proper allocation are greatly diminished, as well as the security against corruption.

In my view futarchy is less efficient than even weak commoditized voting, the implementation which minimally changes the political system. Strong commoditized voting would be even better than that. In addition to the transparency problem leading to relatively weaker incentives, security issues, and the increase in size due to futures market management, another problem is that under futarchy the democratically elected representatives still effectively choose the final policy. Even if a futures market efficiently selects the ideal policy out of the considered policies, and I think it probably would, the political ability on the part of the politicians to control the considered policies amounts to an ability on their part to chose the final policy.

Weak commoditized voting does not allow the market to directly chose the final policies, although SCV does. WCV does allow the market to chose the policymakers more effectively. So in deciding between WCV and futarchy we are essentially asking the question, “Is it better to chose a better man and let him manage the whole process, or to chose a worse man but allow us to select among the options he presents us?” At the risk of speculating, I imagine the former would be more efficient, although it is admittedly a significantly empirical question.

A small tweak would seem to make futarchy much more market oriented. The improvement would be to allow a futures market to act on suggestions from the entire market. Allow any individual, not only elected officials, to suggest policies for market consideration. I suggested this to Hanson via Twitter but got no good response:




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