RE: Vote on Valuess, Bet on Beliefs

Date: Mon Jul 31 2000 - 10:46:06 MDT

Nick writes:
> Robin's paper (
> <> 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?

I am still catching up on my reading after returning from vacation,
and haven't read Robin's latest version of this paper, which I hope to
do soon. BTW since it hasn't been mentioned here lately, Marc Stiegler's
novel EarthWeb describes how Idea Futures (IF) can be used to manage
every step of a hazardous space exploration. Literally, an IF market
is used to decide whether to turn one way or the other at intersections.
I didn't think this was very plausible but it does represent an extreme
case of how IF might come to permeate society.

I think there would be difficulties in using IF in corporations as you
suggest. As you say, Robin's idea has two parts: set up a measure you
want to optimize, and then use IF to evaluate which strategies would
lead to the best outcome in terms of this measure.

For a corporation, the natural measure to maximize would be corporate
profits. Then the question becomes, which strategies will best maximize
profits? Theoretically, IF can answer that question. However, there are
many problems, some of which might apply to the government case as well.

First, the number of possible strategies is nearly infinite. This is a
common problem in AI/robotics work as well. For a robot to accomplish
a goal, it has a virtually infinite number of possible combinations of
actions to take. Somehow the possibilities have to be pruned down to a
manageable number before beginning the detailed analysis of which is best.
This pruning process may be vulnerable to error that would impair the
usefulness of the IF projections.

This problem applies to government, and it may be addressed in Robin's
paper. However the problem is worse in the case of corporations, because
there are far more of them than governments. You'd need IF claims on
every possible strategy for every possible corporation. The market
would be spread so thinly that the number of interested investors per
claim could be too low to provide meaningful information.

Another problem is the exposure this would provide of potentially secret
corporate strategies. Secrecy is an important tool in the product
development cycle. A corporation which had to run its best ideas
through a public IF market to see which ones are worth pursuing must
give up secrecy. This would not be so much of an issue for government
programs, with the exception of military research.

I would also be concerned that efforts to manipulate prices (and therefore
predictions) could succeed in places. Corporate competitors could work
to drive the corporation into unproductive strategies. They have deep
pockets and focussed interests, so they may be able to move prices
significantly, out of proportion to their size. This is a general
problem with IF and I know that Robin predicts that it will not happen,
but I am not confident. It seems to me that even in today's investment
markets, which are among the most liquid and heavily traded that have ever
existed, there have been many successful cases of price manipulation,
at least for a limited time. If IF became a more widely used mechanism
for social organization, liquidity per market would be diluted, making
manipulation even more practical.

> 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?

The obvious practical problem is that no IF market exists!
If corporations were going to piggyback on an existing IF market to
evaluate future strategies, they couldn't do so until there was such
a market.

As far as the question of starting a market, the legal issues are
complicated due to the many possible jurisdictions involved. In some
ways it is a form of gambling, but in others it is more like a commodities
market and plays a similarly useful role. In most places both activities
are heavily regulated, so you'd probably need special legal authorizations
for a large scale IF market to operate.


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