Use Markets to Discipline Ideologues and Policy Makers

One of the great advances in human history has been the discovery of our collective ignorance (link no longer available). We now understand that there is so much that we do know about the world and need to discover. Unfortunately, many politicians and policymakers miss out on this truth.  Much of our politics consists of ideologues and policy makers making claims about the wonderful effects of their own policies and the bad effects of their opponents’ proposals.  Our politics would improve if we held these entrepreneurs more responsible for their claims.

Philip Tetlock and Peter Scoblic recently wrote a fine New York Times oped arguing that policymakers should be asked to provide specific predictions about what their policies will accomplish—specific enough to assess whether their objectives have been achieved.  Tetlock and Scoblic show that when they have done this experimentally both conservatives and liberals modify their predictions to make them more modest and realistic. This kind of tournament of predictions makes experts across the ideological spectrum more responsible, because they will be held accountable. Most people do not want to look foolish.

Their proposal could would benefit from one additional component.  As I argue in Accelerating Democracy, we should put up these measurable policy predictions on information markets where people can bet on whether they will occur. Policy experts do not have a monopoly on wisdom and indeed sometimes have collective biases and overconfidence. And putting up predictions of what the effects of a policy will be before the policy is adopted, can help us choose the policy with a better effect.

Thus, for instance, we could ask what would be the effect of a specific tax cut about to be voted on by Congress on the rate of economic growth versus keeping the tax rate the same. Even more generally, we could ask for predictions of the  what economic growth rate and unemployment rate will be from 2017-2021 conditional on the election of a Democratic presidential candidate and conditional on the election of  the Republican candidate. This market would provide useful information not only to policy makers but the electorate.

Fortunately,  Predictit.org,  has  recently begun making information markets. They have received a dispensation from the Commodities Future Trading Commission from regulations that would otherwise make such markets illegal.  So far, however, they have only made markets in the horse races of politics, such as who will win the presidency.  They should add markets that bet on the effects of policy and elections. Many politicians claim we need more government to discipline markets, but we need more of these markets to discipline government.