Decision markets extend prediction markets from forecasting to decision-making. The basic idea is: use markets not only to predict what will happen, but to choose actions that maximize outcomes.
What a Decision Market Is
A decision market asks questions like:
- If we choose Policy A, what is the probability of Outcome X?
- If we choose Policy B, what is the probability of Outcome X?
Instead of one market, you get conditional markets, one per decision. The decision-maker picks the option with the best predicted result.
Futarchy in One Sentence
Futarchy is a proposed system of governance summarized as:
- Vote on values, bet on beliefs.
In other words:
- Society decides what it wants (growth, equality, safety).
- Markets decide which policies are most likely to achieve those goals.
Why This Is Powerful
Decision markets can:
- Turn debates into measurable predictions.
- Reduce politics-as-performance by forcing probabilistic claims.
- Create a feedback loop where policies are chosen based on forecasted outcomes.
Why It Is Hard
Real-world futarchy faces hard problems:
- Defining the objective function (what are we optimizing).
- Preventing corruption, sabotage, or perverse incentives.
- Choosing trusted oracles and clean measurements.
- Handling long time horizons where feedback is slow.
Key Takeaways
- Decision markets forecast outcomes conditional on choices.
- Futarchy is the radical version applied to governance.
- The hard part is not trading, it is defining goals and measuring outcomes.