Yes, except that if you spend your money to vote irrationally, smaller players can use this as a profit opportunity to extract money from the "rich"... irrational/biased voting is penalized.
Better policy for them, perhaps, but not for everyone else.
Simple example:
Country X decides to do something dastardly against the interests of Futarchy Y. Confidence in the economic outlook wavers, as happens in any country where there's an anticipated reduction in trade and maybe even war. Country X, could have made a lot of money shorting "future GDP per capita" on the Futarchy prediction exchange prior to their dastardly act though.
It gets worse because not only is Country X able to directly profit from making the lives of Futarchy Y worse, but the futarchic system actually makes retaliation impossible. Much as the government of Futarchy Y talks tough, and would like to take action, like sanctions, but when they actually put their sanction policy to the test, these proposed sanctions probably have a negative impact on "future GDP per capita", which is one of a perfectly reasonable set of metrics Futarchy Y has chosen. Despite the man on the street tending to agree that sanctions would be a just and moral cause of action Futarchy Y is forced into retreat because a priori metrics matter more than what the government and the public actually want to happen, and there's no way the market agrees that sanctions are going to help them achieve the given goal of growing GDP.
Smart people outwit crude algorithms in simple games like Go if they have an infinitude of possible outcomes. Now imagine that crude algorithm is calibrated by simpletons voting on parameters they don't really understand
You seem to assume the incentives are always correctly
aligned, and agreed on concepts of "better" are
immutable. They're not.
That's precisely what the prediction market purports to solve.
Imagine a referendum where voting yes results in rich people receiving a benefit at the expense of the poor and voting no results in no benefit or expense to anyone. One example of this might be introduction of a regressive tax. Most of us would agree that, according to standard Western civil values, the "correct" vote is no. But obviously rich people in our current system are incentivized to vote yes, and perhaps also to spend money campaigning in support of this referendum.
The trick is that, once we've settled on the metric to target, trying to sabotage it using the markets would cause you to lose large amounts of money. Moreover, if rational actors realize you're trying to sabotage the system, they can bet against you and make large amounts of money. It provides an in-built incentive to execute whatever was democratically decided in the first step.
Not a perfect system, but it does address that particular issue.
For instance, if the one-person-one-vote decided, for whatever reason, that a metric of importance was grams of marijuana sold in a year to people older than 18, minus (18-age)^2*grams for any weed consumed by minors, then rich people would decide the best way to repeal marijuana prohibition while keeping it away from kids.
The prediction market would decide the policy. But this is where I get confused about the payouts. The predictions have to be tied to reality in some way to have any value. So the backers of a given policy choice have a financial incentive to see it exceed predictions, while the opposition has incentive to see it fail completely.
They could game the metric to avoid paying out as much, and do something like pass out pot brownies to kids in day care. They have an ongoing incentive to influence the metric. But if you remove the influence incentive, you also remove the motive to predict accurately. I feel like I'm missing something here. It seems like if you tried this with government, you're making renegade behavior potentially profitable.
In the article example, it seems that if banker wanted a bailout, he would go long on bailout and short on no-bailout. If the no-bailout policy won, he then has a giant incentive to do anything in his power to crash the economy and keep GDP down. Can anyone explain what I'm missing, if anything?