1. Government body says "We are considering adding full Github-flavored markdown support to Hacker News. Please establish a market on whether or not this will raise GDP by 1% over the next year."
2. People place their bets, either in the "Yes please" pool, or the "No to markdown" pool.
3. "Yes please" gets the most betting money. Betting period ends. Government decides to add markdown. People in the "No to markdown" pool get their money back.
4. If GDP does in fact go up over that 1 year, people in the "Yes please" pool make money. If not, they lose their bets.
There isn't a mechanism to make money by sabotaging GDP.
> If GDP does in fact go up over that 1 year, people in the "Yes please" pool make money. If not, they lose their bets.
Who do they lose their bets to? If the answer is the money is just set on fire or some equivalent (which I think is actually a mechanism we should use more of when it comes to things like fines), where does the money come from if they win?
That article doesn't deal with the issue of directly manipulating the thing measured by the success metric (and implicitly assumes that it is unmanipulatable).
To take the example given in the article for bailing out banks and GDP, as soon as the "yes" trades are reverted and the "no" trades are confirmed, we collapse exactly into the scenario many other commentators on this thread have talked about. Now, all holders of negative amounts of "no" tokens are incentivized to decrease GDP in 10 years because this increases their profits at the expense of holders of positive amounts of "no" tokens. The argument is presumably that there is an equal incentive on the other side to increase GDP, but that's a fragile assumption (since in the real world betting market we still see fraud in the direction of those with power, even though in theory you could have fraud "pulling in both directions") and still leaves open the more general fragility-of-value problem (as the article refers to it later on), namely that someone can manipulate GDP but doesn't expose this when betting occurs (which again happens in real-world betting markets), which I'll talk about in a bit.
(Although if someone could explain "after ten years everyone holding the asset on the “no” market gets $26.20 apiece." that would be great, because I think that's a typo and the $26.20 just exchanges hands immediately, or alternatively everyone who's sold the asset gets $26.20 apiece rather than those who hold it? That's however irrelevant for the larger point.)
The problem we're talking about is basically the same one as a problem the article itself points out later.
> A futarchy-as-government, especially if unrestrained, has the potential to run into serious unexpected issues when combined with the fragility-of-value problem... Of course, in reality, futarchies would patch the value function and make a new bill to reverse the original bill before implementing any such obvious egregious cases, but if such reversions become too commonplace then the futarchy essentially degrades into being a traditional democracy.
The problem here can be recast as a version of the fragility-of-value: the value function is no longer accurate because it has/can be manipulated. But the half-solution that the article hand-waves, namely "futarchies would patch the value function and make a new bill to reverse the original bill before implementing any such obvious egregious cases" is doing a lot of work here and should be viewed with a great deal of suspicion.
It's not as relevant for the article, which explicitly points out it's not advocating for futarchy as government (or at least not for all governance rather than e.g. just party selection), which is probably why it's hand-waved away, but if you care about futarchy as government this is extremely important and it is not at all apparent that this "patching" would occur, especially given that the financial incentives are magnified vs a traditional democracy and there is potentially no way of knowing the value function is being manipulated, up until the very moment it is manipulated (and even then it may not be apparent that that is happening!).
In a way, truly solving the fragility-of-value problem is basically solving the same problem as AI existential risk and I would assume most people in the futarchy community agree that the latter problem is a very difficult problem. A failure mode of futarchy can then be thought of as a "monetary AI" completely optimizing for the wrong thing in spirit, even if it's the right thing in letter, e.g. manipulation of the value under measurement.
How do the No people win in this scenario? What happens if Markdown is added and GDP goes down? How do you resolve that markdown actually caused the change in GDP? (Aren't you just asking people to conditionally bet on GDP going up?) Who are people betting against if No loses? (Who's money do they get?)
Wait, that can't work; it's comparing against a counterfactual. Let's say Hacker News gets markdown. Also COVID disappears at the same time. GDP goes up by 1%, but maybe that's because COVID is gone. How do we know what GDP would have done if Hacker News didn't get markdown?
>How do we know what GDP would have done if Hacker News didn't get markdown?
We do not, but that's not the purpose of a prediction market.
The purpose of the market is not to prove that the change caused the result, but to choose the best path forward in a world of uncertainty.
You don't have to have a perfect crystal ball to make useful predictions about the future. Yes, sometimes a black swan event will cause a "good" prediction to not pan out, but on average if you can make better-than-chance predictions about the future and policies based on those predictions will personally gain predictors value, then people are incentivized to make good predictions on average.
Just like someone who can count cards won't win every blackjack hand, if they play for long enough, they are a favorite.
Sure, but the point is that with futarchy as proposed you don't actually have a prediction market on whether the policy is good, you have the government looking at the delta between markets for and against a policy, and the one for the policy which isn't enacted gets voided so anyone manipulating its price loses nothing.
Big Markdown shorts the "No Markdown" policy, it doesn't get implemented and they get their short positions back again.
There's really no prediction market incentive to bet against them: so long as they keep pumping money in to move the rate, none of your bets on the correct rate of GDP without Markdown will ever get paid out on. They only need to bid it one basis point below the price of the With Markdown GDP futures contract to get their policy, so even if you have deep enough pockets to outbid them and good reason to believe Markdown has no effect on GDP, you'd be risking a lot (GDP is pretty volatile and expert forecasts are regularly more than a basis point out in either direction) to win very little if they didn't get their way.
Maybe I don't understand the bets because they weren't clearly spelled out. Even if HN markdown was actually what held GDP back from 5% growth, you wouldn't be able to tell.
The government asked for market "on whether or not markdown will raise GDP by 1%". Presumably, they want to know if it gets an additional 1% on top of other growth (which is what? Let's say 2%?).
But there are four possible future outcomes to consider:
1. HN gets markdown, GDP grows 3% or higher
2. HN gets markdown, GDP grows less than 3%
3. HN gets no markdown, GDP grows 3% or higher
4. HN gets no markdown, GDP grows less than 3%
Of these possible outcomes, two will be discarded based on the decision to implement markdown, presumably made based on the betting odds, and then one more will be discarded based on GDP's measured performance over the following year.
Let's structure this as a bet. If you believe markdown is good, then you'll believe P(1)+P(4) > P(2)+P(3).
So you say: "I bet that either HN will get markdown and GDP will grow 3+%, or HN won't get markdown and GDP will grow less than 3%". I don't like markdown so I consider taking the opposing side.
But, I also believe COVID vaccines are going to cause GDP to grow 10% next year, and markdown will have a trivial impact in either direction. So in my opinion, P(1)+P(3) >> P(2)+P(4).
Then in that case I'm mostly betting on whether or not I think markdown is going to get implemented, not whether I think it's going to be beneficial. And if the implementation decision is going to be based on which side bets more money, then that's mostly a popularity contest. I just want to bet alongside whichever side is winning if I think the GDP is going to go up anyway for other reasons.
I think that your example largely shows that it's not useful to make prediction markets about GDP for policies that have effectively no impact on GDP.
If HN wanted to run a prediction market for features, they should use a measure like user growth, or average score of posts that use the feature or something. Something directly related to the feature in question.
But presumably there are policies that have an impact on GDP, right? A prediction market there is going to function properly. If you want to know what tax rate or pandemic policy the government should implement, it will absolutely have an impact on GDP.
Wouldn't this also open up to foreign influence dumping money and misinformation to promote negative policy decisions.
Or not even foreign influence. It's just rephrasing money = speech. Instead of spending millions to influence voters, you spend millions on positions, and you get your money back if you don't win your side? So it lets the megacorps/trade groups get richer by removing the uncertainty of lobbying in place of buying policy once you hit a certain critical threshold of money to throw around.
Yes, plausibly. Maybe you could limit this by requiring bets to be made by individual citizens (in the case of government policy markets) or by shareholders (in the case of a corporate market) or something.
There are still avenues for corruption, but it's not clear to me that they are worse than the present state. There is of course always the chance that those attempting to manipulate the market will lose their shirts.
