The Market-Based Legislature
The market-based legislature would be a text-authoring market charged with the task of drafting bills. The bills, if enacted, would be legislative acts, and these in turn might amend a codified text, much as in the There might be alternative approaches to creating the group of ex post decision makers. A more populist version might require selection of a random citizen to serve that function. That citizen could read arguments on both sides of a particular issue and then make a decision that resolves the prediction market payouts. A weakness of this approach is that to the extent that citizens might systematically fail to appreciate certain subtleties, the market will tend to disregard those elements of an issue. A slightly less populist proposal would require a citizen to select a member of the legislature (perhaps from among a randomly selected group) who would make the decision. There are still less populist variations as well. We could select a decision maker from the judiciary or from a new judiciary created explicitly for this purpose. This might help ensure that the ultimate decision makers have the expertise needed to analyze proposals effectively. Or one could go a bit further and have members of the judiciary select the ex post decision maker, in much the same way as federal judges in the As these possibilities suggest, the choice of how populist to make the market-based legislature presents a tradeoff. On one hand, less populist approaches can result in a more expert decision-making body. On the other, more populist approaches will increase the chance that policy corresponds with what a majority of the population would prefer. There might be a danger that elites may tend to prefer policies that will benefit them at the expense of the people as a whole. At least initially, the first proposal described above, in which a randomly selected legislator would make a decision, would represent the least dramatic change from the status quo. This institution would be the most similar to the existing legislature, except that it would serve as an ex post decision maker rather than an ex ante one. The legislature itself sometimes might decide to delegate some of its power as ex post decision maker, either in a more or less populist dimension. Perhaps delegation in one direction or another would improve results, but there is little need to resolve this issue in sketching out the market-based legislature. The market-based legislature also might dictate changes that would make the market more like the regime of predictive cost-benefit analysis while still producing integrated texts rather than dollar figures. First, the proposal described above imagines that there would be no delay before ex post decision makers reach their decisions. We have seen, however, that adding some delay can reduce ideological variability. Because a legislature is large, its median voter should not change as often as the leadership of an administrative agency, but delay could still provide some benefit. Delay has costs, too, in particular the risk that the nation will be ruled by its future rather than its present demographics. Second, the proposal imagines that ex post decision makers would vote for or against proposals, making binary decisions. It would also be possible, however, to have them produce a figure that reflects net costs or benefits. The result of this change would be that a relatively small number of strong views among the pool of ex post decision makers could have an increased effect. Intermediate regimes can limit the possibility that a very small number of such decision makers could control results with wild estimates (see Chapter 8). The market-based legislature also might decide to resolve some issues using prediction markets that anticipate objective numbers rather than opinions. The key difference between Hanson’s proposal and mine, which might well amount to little difference in practice, is that I would have the central prediction market decision-making mechanism be a form of a normative prediction market. The primary reasons for this preference are technical. Normative prediction markets can evaluate small as well as large decisions. Perhaps the most important legislative changes would be those that would have a large anticipatable impact on the measure of national welfare, but a legislature ought to be able to make smaller changes as well. At the same time, the market-based legislature would not need to rely on proxies for the national welfare but could directly forecast ex post decision makers’ assessments of whether particular proposals would increase or reduce welfare. Those decision makers, one might hope, in turn would consult prediction markets that are making assessments of objectively verifiable variables, but they also would apply their own intuitions and judgment about issues that elude easy measurement. There is also a more philosophical reason to prefer a normative prediction market to Hanson’s futarchy. If the public does have preferences about means as well as ends, there is no inherent reason why these preferences should be disregarded. It might be possible for Hanson’s legislature to factor into the measurement of national welfare an assessment of the degree to which the public is benefited or harmed by having its preferences as to means followed or disregarded, but this seems like a rather indirect way to honor these preferences. Ultimately, accepting the legitimacy of preferences concerning means rather than ends is one reason that my envisioned market-based legislature should not exist for the foreseeable future; people would not want it, no matter how wonderful it might be. I, too, would not adopt the market-based legislature today, though if prediction markets continue to prove effective, I might prefer it at sometime in the future, probably before the population at large does. But I count as a benefit of my proposal that it would not recommend itself for a long time and suggest that the day it would recommend itself in some country, should that day ever come, is the day it should be adopted.
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