Quick proposal: Decision market regrantor using manifund (please improve)

By Nathan Young @ 2023-07-09T12:49 (+23)

Epistemic status: Some fundamental errors but worth leaving up

I think the error with this piece is that it is a hammer looking for a nail, rather than the reverse. Austin makes the point well here. Rather than saying "how to institute Futarchy," I guess it should say "how do we solve problems people already have"

Summary

What is Futarchy and why is this a good opportunity?

Futarchy is a decision-making system where prediction markets are used to make decisions on what actions to take. You agree on some some kind of metric that you care about, and then predict how decisions will affect that metric. Futarchy generally implies a deterministic system, though this proposal is more about ironing the kinks out of the system so it could initially be advisory initially[1].

We can imagine running decision markets on a Manifund regrantor. Manifund is a new regranting org. Individuals get regranting budgets and then publicly allocate them. I guess that if they use their budget well they can argue to be given more.

Manifund

Manifund is a good test bed for Futarchy for three reasons:

  1. They already run an impact market system, so one could try and do some kind of futures markets on the impact certificates. I don't know the legality or technicality of this.
  2.  It's associated with a play money prediction market, Manifold - Austin Chen is a cofounder of both Manifold (the prediction market) and Manifund (the regrantor) hence the same part of the name. I think it'd be much easier to implement features than any other comparable one. 
  3. The Manifund team ship things very quickly, and are into mechanistic design in general, so it just seems more likely to work here than maybe in other places.
This is what futarchy feels to me

How it might work?

 So, it occurred to me that this would be a cool thing to exist, so this is me trying badly to do it. I don't pretend I'm going to do a good job here. I'm going to lay out what seems like the way I would do it, and then if, you know, please correct me,

For each grant proposal you want a prediction market with two sets of options, either 4 options or 2 continuous options in a single market[2]:

The regrantor needs to prioritise grant opportunities above some funding bar. The key questions is "what's the value add". Here, the answer is the difference in the metric if it happens and if it doesn't. Perhaps divide by the size of the grant. 

Suggested metrics

So, this requires that we have a clear metric, which is going to be a problem. Here are three suggested metrics:

  1. Impact Markets. We could see whether Manifund want to run a futures market (is this even legal, are they doing it?) or we could run our own prediction markets, charity prediction markets, sure, but of the future value of the grant.. I don't actually really know what the future time should be. 5? 10 years?[3] I also don't quite understand how the non-funding aspect of this works. I guess you choose a funding bar and only fund things with a good enough return on investment.
    1. Pros
      1. It is a financial mechanism that already exists
      2. They may already have this process
    2. Cons
      1. If the markets are on manifold, there isn't a way for many investors to get their money back, so may not invest properly
      2. It may be illegal somehow
      3. I have some vague foreboding that this won't actually work
  2. Community/expert assessment. The community or small group scores grants 5 - 10 years later on how much value they created or destroyed. Then pays out the prediction markets based on who was correct. This is similar to an impact market, but doesn't require having huge, liquid impact markets. My intution from the accuracy of prediction markets vs Metaculus is that if you gatekeep the voting well (say, LessWrong/EA forum users) then this is as accurate as a liquid market.
    1. Pros
      1. Doesn't need lots of liquidity
    2. Cons
      1. Have to decide who votes and who doesn't
      2. Not real money
  3. A vote. We could vote in 5 -10 years on if the grant should have been funded. This seems the easiest to implement. But I don't know that it can account for the second order effects. If there were secret or complex costs or benefits then I expect the market or assessment to figure that out. A straight vote might boil down much more to vibes.
    1. Pros
      1. Easy to implement
    2. Cons
      1. Worse incentives
  4. Can you think of better?

 Issues with futarchy

I reserve the right to edit these.

Issues I buy

The issues I don't buy

Comparison to current grantmaking orgs

To me it seems more like GiveDirectly than GiveWell. Something that is less effective (due to the benefits of both secrecy and an org that manages decisions) but can be scaled much more. I'm doubtful that a futarchy regrantor would scale soon, but equally I sense one day that all regranting will happen like this.

It will be attractive to a certain kind of donor. I sense a certain kind of donor (often crypto) will find the idea very attractive. And since large crypto donors are comparably prevalent (and with a bull run, will be even more so), there seems reason for more so. 

It would be good to test futarchy. I would like to understand why we haven't seen more futarchy. What are the kinks that need ironing out? I think there is value in testing in a real world situation. Maybe there are learnings transferrable to other orgs.

This was written quickly, let me know what you think

I dictated this and spent about an hour editing it. Please correct errors or make suggestions. I don't currently intend to put this into place, so if you want to, do! Please let me know.

  1. ^

    It doesn't seem hard to remove the downside by saying there will be a committee who will veto markets if they seem obviously manipulated. 

  2. ^

    People's intuition seems to be that there should be 2 separate markets - "If A" and "If not A". To me this seems wrong. If you make a profit on such a market you need a way to take the money out of the market. I can go into the details in the comments, but this requires a "will A happen" market. And so you might as well have all 4 options as a single market.

  3. ^

    A criticism here is "5 years, that's ages" but it seems normal grantmaking operates on this timescale also. 


Austin @ 2023-07-09T16:23 (+20)

Thanks for the writeup, Nathan; I am indeed excited about the possibility of making better grants through forecasting/futarchic mechanisms. So I'll start from the other direction: instead of reaching for futarchy as a hammer, start with, what are current major problems grantmakers face?

The problem that seems most important to solve: "finding projects that turn out to be orders of magnitude more successful/impactful than the rest". Paul Graham describes funding seed-stage startups as "farming black swans", which rings true to me. To look at two example rounds from ACX Grants, which I've been involved in:

So right now, I'm most interested in mechanisms that help us find such founders/projects. Just daydreaming here, is there any kind of prediction mechanism that can turn out a report as informative as the ACX Grants 1-year project update? The information value in most prediction markets is "% chance given by the market", which misses out on the valuable qualitative sketches given by a retroactive writeup.

Other promising things:

Nathan Young @ 2023-07-10T07:46 (+2)

Many of the projects look good, but a handful seem to have gotten outlier success; I would count Lars and Will's Valuebase, the Oxfendazole group, and our own Manifold as having gone on to raise millions in further funding.

Do you think there was a sense that this might be the case?

So right now, I'm most interested in mechanisms that help us find such founders/projects. Just daydreaming here, is there any kind of prediction mechanism that can turn out a report as informative as the ACX Grants 1-year project update?

I guess you could encourage anyone to make markets, not just the funders. Then have some way to select the 10 most interesting markets. If you wanted you could try and run an LLM to generate text for some kind of premortem. Seems a bit galaxy brained though.

Lizka @ 2023-07-09T14:28 (+12)

Some notes (written quickly!): 

  1. You write "it can either be an advisory system or it can be a deterministic system," but note that an advisory system misses out on a key benefit of what I understand as ~classic futarchy: the fact that it solves the problem of conditionality not being the same as causality. See here (from my earlier post):
    1. Causality might diverge from conditionality in the case of advisory/indirect markets.[10] Traders are sometimes rewarded for guessing at hidden info about the world—information that is revealed by the fact that a policy decision was made—instead of causal relationships between the policy and outcomes.[11]
      1. For instance, suppose a company is running a market to decide whether to keep an unpopular CEO, and they ask if, say, stocks conditional on the CEO remaining would be higher than stocks conditional on the CEO not staying. Then traders might think that, if it is the case that the CEO stayed, it is likely that the Board found out something really great about the CEO, which would increase expectations that the CEO would perform very well (and stocks would rise). So the market would seem to imply that the CEO is good for the company even if they were actually terrible.
    2. There's also a post on this (haven't re-read in a while, only vaguely remember): Prediction market does not imply causation
  2. I think getting a metric that's good enough would be really difficult, and your post undersells this
    1. E.g. it should probably take into account the cost. I'm a bit suspicious of metrics that depend on a vote 5 years from now. There are still issues with forecasting on decently long periods, and if I'm thinking about how I would bet on a metric like this, I'd go look at the people doing the voting, I'd be trying to forecast how beliefs and biases of the relevant group would change (which could be useful, but it's not exactly what grants are for), etc. If the point is ability to scale this up, the metric should be applicable to a wide variety of grants. Grant quality could depend on information that isn't accessible to a wide audience (like how much a grant supported a specific person's upskilling), etc. 
    2. But maybe my argument is ~cheemsy and there are versions of this that work at least as well as current grantmaking systems, or would have sufficient VoI — I'm not sure, but I want to stress that at least for me to believe that this is not a bad idea, the burden of proof would be on showing that the metric is fine. 
  3. I'm also honestly not sure why you seem so skeptical that manipulation wouldn't happen, but maybe there are clever solutions to this. I haven't thought about this seriously (at least, not for around 2 years). 

Relatedly, 2 years ago I wrote two posts about futarchy — I haven't read them in forever, they probably have mistakes, and my opinions have probably shifted since then, but linking them here anyway just in case:

Austin @ 2023-07-09T16:30 (+4)

Thanks for the thoughts (and your posts on Futarchy years ago, I found them to be a helpful review of the literature!)

I'm a bit suspicious of metrics that depend on a vote 5 years from now.

I am too, though perhaps for different reasons. Long-term forecasting has slow feedback loops, and fast feedback loops are important for designing good mechanisms. Getting futarchy to be useful probably involves a lot of trial-and-error, which is hard when it takes you 5 years to assess "was this thing any good?"

Nathan Young @ 2023-07-09T22:08 (+2)

Fwiw I think this is an issue with grantmaking too. 

Zach Stein-Perlman @ 2023-07-09T17:00 (+2)

I thought "Causality might diverge from conditionality" is a big problem for "classic futarchy" too? E.g. if we're betting on welfare conditional on policy A and on welfare conditional on policy B, the market price for welfare conditional on policy A = expected welfare conditional on [policy A has the highest expected welfare at market close and thus is implemented] (or something) > expected welfare counterfactually conditional on policy A. I guess the ">" approaches "=" near market closing time, under certain reasonable assumptions? Huh.

Pat Myron @ 2023-08-19T21:01 (+3)

I don't buy that someone can jump on the markets and mess with them. Manifold (or better real money) markets have great incentives against this. I am unaware of any time this has happened in a way that it would in a live prediction market.

Manifold markets hasn't solved longterm market incentives yet:
https://manifold.markets/Nu%C3%B1oSempere/this-question-will-resolve-positive-4a418ad86de3#jdUj58EdDXBbF8ZNyXaT
There are even accounts dedicated to messing with Manifold markets:
https://manifold.markets/ButtocksCocktoasten?tab=questions
Manifold doubled mana loan amounts this month to try to mitigate the longterm market incentive issues on the platform