At present, it is hard for ordinary world citizens to judge the quality of global governance choices. It would be feasible, however, to create open “decision markets” where traders could speculate on the outcomes of particular global policy choices. On the basis of information developed through those markets, rather than simply trust their representatives to negotiate the right outcomes in relatively opaque governance forums, global citizens could pressure governments to support the choices that they believe will most benefit them.
Nations today jealously guard their autonomy. As a result, institutions of global governance tend to rely less on clear rules enforced by authorities with formal power, and more on opaque information sharing that influences private negotiations and perceived norms and agendas. Outsiders can find it hard to judge the concrete policy implications of global governance choices, or even what choices have been made.
And this can make it hard for ordinary world citizens to judge the quality of global governance choices. Citizens must trust their governments to have negotiated in their interest, and to have done so effectively. Which can be a lot to ask. Can we do better?
An alternative exists that could allow better global governance, by helping global citizens to more directly judge the quality of global choices. This alternative is simple and low-tech, and nations need not give up any more of their autonomy. This alternative, however, does have two requirements.
First, it applies only to cases where global governance can allow for clear, discrete choices. For example, a particular treaty might or might not be signed. Or a particular governance body might rule one way or another. While such clear discrete choices may not be the usual case, they do happen often enough to be worth improving.
Second, this alternative requires us to choose and support a few focal after-the-fact global outcome metrics relevant to each set of clear discrete choices. For example, world product in the years after a trade treaty, or war deaths in the years after a peace treaty.
“A large empirical literature consistently shows that open speculative markets are among our best institutions for aggregating information into robust estimates available to all. Decision market estimates would thus offer global citizens a clear visible consensus on the effects of discrete global governance choices.”
Given such clear discrete policy choices and related outcome metrics, we could create “decision markets”, wherein traders can speculate on these focal outcomes, given particular policy choices. If trading in these markets were sufficiently subsidized, either via subsidized market makers or via market estimates influencing contentious policies, then the policy estimates produced by these markets should be as accurate as any competing source of information.
For example, imagine that a particular global-warming treaty is under active consideration. It might or might not be signed by a particular plurality of nations. And it has the stated purpose of influencing outcomes such as global sea levels, storm damage, and crop yields, over the coming decades. For concreteness, let us focus on a particular measure of average global sea levels in thirty years.
In this specific example, we would create two speculative markets, each of which gives one conditional estimate. One estimate would be of that particular sea level metric conditional on the treaty being signed. The other estimate would be of sea level conditional on the treaty not being signed. The difference between these estimates corresponds to the best estimate of market speculators regarding the effect of this global warming treaty on this sea level measure.
To pay off these bets, and thus to reward speculators for making accurate estimates, we don’t need to know the actual causal connection between this treaty and sea levels. We just need to know what sea levels finally were, and if the treaty was signed.
As another example, imagine that a new treaty might be signed to create stronger intellectual property protection, in order to better promote technological innovation. Here we might create markets that estimate world product in twenty years, conditional on this treaty being signed, or not being signed. The difference between these two estimates would say how much speculators expect stronger intellectual property to promote growth worldwide.
A large empirical literature consistently shows that open speculative markets such as these are among our best institutions for aggregating information into robust estimates available to all. Such markets have done well at estimating weather, sales, elections, project completion dates, and more. They are especially resistant to manipulation and able to identify and correct for their own biases. Decision market estimates would thus offer global citizens a clear visible consensus on the effects of discrete global governance choices.
Global citizens could then pressure governments to support the choices that they expect will benefit them. Such citizens would have less need to trust their governments to negotiate opaque global governance outcomes in their interest. Even as nations retain all of their existing autonomy. Which could be a big win for effective global governance.
It is possible, of course, to imagine lots of potential problems with this proposal, including noise, sabotage, media distortions, unequal participation, and selection biases. But most of these problems are more imagined than real. And as these markets can be quite cheap, if they fail for some reason, such as insufficient traders or citizen interest, we would have only lost a small financial investment. So, what are we waiting for?