>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.