Robin's paper (http://hanson.gmu.edu/futarchy.pdf
<http://hanson.gmu.edu/futarchy.pdf> or .ps) presents an adaptation of his
Idea Futures proposal to government. The basic idea is that a proposed
policy should become law if it increases expected welfare, where the welfare
measure is determined by democratic vote, and expected effect on welfare is
determined by the trading value of claims on what the welfare will be given
that the proposed policy is accepted. I think the idea is very interesting
and definitely worth exploring further.
One point that I would be interested in seeing discussed in the paper is
whether this system of decision-making is often used in corporations, and if
it isn't, what is the reason? Is it the case that nobody has thought of
doing things this way before (which would be surprising, given that there
are so many companies around involved in fierce competition, and a lot of
people trying to think of better forms of management)? Are there legal
prohibitions, and are they then strong enough that no company would find it
worthwhile lobbying to get rid of them? And is that the case in every market
economy in the world? A corporation would seem to provide a nice prototype
test-bed for this approach, so it would be interesting to know whether the
experiment has already taken place in "nature", and if so, what the outcome
is. (Or if this is really novel, would it be possible for Robin to get a
patent on it?)
BTW, a faint reflection of this approach can be found in Geoffrey Moores'
recent book "Living on the Fault Line" (which Max mentioned here recently).
Moore argues that managers of companies in emerging markets should pay more
attention to market cap and less to earnings and sales figures. Management
should try to guess how different actions might affect their current stock
value - which is speculators' way of specifying the expected future
"welfare" of the company. So maybe futarchy is brand new stuff for the
corporate world after all?
On a smaller point: Robin says (p. 29) that one should not require markets
to agree on a proposal for too long a period before it can be officially
approved, because "Otherwise speculators early in the period may worry that
speculators later in the period will know substantially more, and bias their
estimates thereby." It's not clear to me why this would be a problem, or
what the bias referred to would be.
Dept. Philosophy, Logic, and Scientific method
London School of Economics
Homepage: http://www.hedweb.com/nickb <http://www.hedweb.com/nickb>
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