Combating Bias: More Reason to Favor Prediction Markets and Oppose Earmarks

The information delivered by new technologies about policy results will be more effective insofar as it changes people’s minds. But many people are biased. They hold to their preconceptions about the wisdom of policy, regardless of the new evidence presented. Thus, another urgent task for adapting to technological acceleration is to help democracy better update on the new information generated by our new technologies.

In my book Accelerating Democracy , I offer a variety of electoral reforms, like introducing top-two primaries, that make politicians more responsive to the electorate as a whole and thus cabin the effect of partisan bias. Here I discuss two more unusual reforms that would also facilitate democratic updating.

The first recommended reform for constraining bias is again prediction markets. In addition to injecting more information into collective decision making, prediction markets can help with bias. Cognitive scientists have shown that forcing individuals to consider the alternative is one way of combating bias. Conditional prediction markets—markets that predict consequences both in the event a policy is adopted and in the event it is not– by their very nature force the consideration of alternatives.

For example, a conditional market on a capital gains tax cut forces people to consider the alternative economic situations where a capital gains tax is cut and where it is not, thus forcing both proponents and opponents of capital gains tax cuts to confront the preferred policy world of the other and observe the predicted results. A market considering both conditions also prompts consideration in a relatively non-partisan context. The absence of partisan cues reduces bias.

The second reform is the permanent elimination of earmarks. Earmarks are the practice by which individual members of Congress target appropriations for their own district outside of any competitive process and or other neutral criteria. The usual complaint is that earmarks—a kind of pork barrel politics—add to the budget deficit and green light inefficient projects, like the infamous Bridge to Nowhere, in which the costs far exceed the benefits to the nation as a whole.

But a ban on earmarks can also be seen as an information-eliciting rule, because it increases responsiveness to policy issues and curbs bias. Earmarks interfere with responsiveness in two ways. Since the ability to gain earmarks increases with seniority, earmarking biases voters in favor of the incumbent, whatever the incumbent’s policy positions.

Earmarking also creates an axis of electoral competition irrelevant to democratic updating on policy. A salient issue becomes who can bring home the bacon rather than whose general policies are best. Candidates can gain great advantage from succeeding on this axis of politics, because voters more easily associate a specific, visible local project with a candidate than a complex social policy.

Thus, helping people update on new information is yet another reason for Congress and state legislatures to legalize prediction markets and make the ban on earmarks permanent. A society’s capacity for learning must keep up with its rate of change.

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