Often in politics there are two sides that strongly oppose each other. For example there is climate change where on the one hand there are the climate maximalist that sense a coming disaster and want money to solve the problem. On the other hand there are the climate change deniers that see no problem and do not want to 'waste' money on the plans of the maximalists.

I do not want to tell my opinion on climate change here because it does not really matter, but on both sides of that debate there is no shortage of stupid people with strong opinions. The question I do want to answer is how we can proceed and solve climate change should it be a problem. And all of that without requiring and force or authority.

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I will assume that the extremists on both sides are willing to commit their own resources to fight their cause. Of course they want (and need?) more money, but it is not uncommon for people that are convinced of something also commit resources. We see it all the time with charities that exist even though people are already heavily taxed.

Who is Right?

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Here is where the problems start. We have no good way to find out the absolute truth. The media can be bought to influence public opinion. Science can be bought and only few experts can verify what they do. These can be discredited and pressured. The public debate more closely resembles battlefield than a mechanism to discover truth.

Private information gain is often very limited by the own capabilities. Then how do we know if climate change is a real problem or not? We have to decide for ourselves. Who do we trust most? What seems most likely. What are costs compared to risks. And the big problem is that not everyone will come to the same conclusion and there is no way to change this. Absolute truth is objective, but the limited human perspective of what may be true depends on all experiences of the person in an analysis of incomplete information.

How to Decide?

Let us assume we have a problem which cannot be solved by the people that believe it exists. Climate change seems to fall into exactly this category. One half of the population believes expensive action is needed, while the other half does not see this and obviously also does not want to pay.

The common answer is to resort to politics. Whoever gets the most votes can decide and force action on others. The winner is the best manipulator of public interest and these are likely also the people that will then abuse their new gained powers and not actually solve climate change. We see this in current politics all the time. Politicians collect votes and claim to do something against climate change, but then simply abuse to topic to push their own agenda. Such as Macron taxing fuel officially as a response to climate change. Looking a bit deeper we see that he reduced taxes on the rich and the fuel taxes are just there to pay for these tax reductions. It is nothing but a scheme to transfer money from the poor rural workers (that rely most on fuel) to some rich elite. Also in Germany, the self-proclaimed leader in renewable energy, emissions do not go down even though a lot of money is being spent. Where does that money go?

But there is another option that has much better game theoretical properties. If you believe your theory is right while a lot of people follow a different interpretation, then you believe to have an information advantage. And free markets have a mechanism to turn such an advantage into funding, funding that can be used to tackle exactly the problem where you have an information advantage. It is almost like magic.

Every good theory does make predictions. If a theory does not, then it is not really conclusive and no big decisions should be made based upon it anyways. What everyone can do is bid on prediction markets. How much will temperature rise next year? Climate maximalist and deniers will have a different answer and can use some of their money to bet. The great thing is that whoever has the better theory will gain more and more money and both sides are incentivised to play because they feel that they do make a good deal.

Voting vs Prediction Markets

Can this idea solve the voting dilemma? I do think it can. In both voting and prediction markets people that are not ready to commit resources should not decide. If you do not really believe that temperatures will rise, then why force others to spend money on trying to prevent it? You need to put your money where your mouth is!

By voting you can get a bonus on your invested money by forcing others to also pay. The same it true in prediction markets. The further your opinion is away from the opposing position the more money you can make. But while voting is not a method to find truth but only popularity, prediction markets are different. The do not find truth, but they do reward truth.

No matter who is right, the money keeps flowing to the people that have the better theory and then these people can decide what should be done to solve the problem with these funds.

Instead of trying to vote away climate change which cannot even work, all people with strong opinions should get involved in prediction markets. And then these people can gain the leverage they need to save earth, be it from climate change, alien invasions or whatever else they are afraid of. I would be happy to bet against a lot of these theories. But should they be right, they get my money. And this is still a win-win. Because if an aline invasion is coming who better to give the money to than the weird alien fanatic spending all their live researching extraterrestrial life?

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Nobody Forced and Problem Solved

Of course this idea is not perfect. Only few people will do this because they believe that politics should solve the problem. And of course it is hard to put money to these causes when we already pay taxes. And there is also a problem of people that benefit without contributing. For these there should be a crab in the bucket mechanism pulling them back. But even with all of these flaws, it is still much better than any political solution.

I think it would be amazing to make a global climate change charity that offers predictions for future temperatures and CO2 levels to be filled by the deniers. The maximalists can donate and should they be right the charity can use their growing funds to really cut emissions or follow alternative solutions. But if they are wrong all the deniers will gain a nice bonus.

And if nobody fills any bids? Then apparently all these people talking all day are not that certain about what will happen and then really nothing should be done!

More generally this leads to the idea of voting with money an idea I will write about a bit more in the next weeks. While it has an abysmal reputation, there are many appealing game theoretical aspects to it.