A Modest Proposal: Fake News Futures Market

Alternative title: James Madison, Meet Mechanism Design

Note: This is my penultimate blog post in a multi-part series on conspiracy theories

Why are conspiracy theories so popular, and how should we respond to them? I have already spent considerable time and space on this blog trying to answer these questions. In this post, I will propose a new approach, the logic of which can be summed up in the following five words: “James Madison, Meet Mechanism Design.” In Federalist Paper #10 (available here), Madison famously identified the problem of “faction” as a great source of danger to liberal values, even going as far as to call factions a “dangerous vice.” (To the extent modern-day factions like QAnon and others are the source of fake news and conspiracy theories, Madison’s 18th-Century admonition continues to hold true today!) But at the same time, Madison explains in Federalist 10 that efforts to curb factions are always more dangerous than this disease. In Madison’s memorable words:

Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.”

By the same token, contemporary proposals to curb fake news and the spread of conspiracy theories–either through direct regulation of social media platforms or through the appointment of a national/federal “reality czar”–are likewise dangerous. Why? Because such “solutions” might stifle or even suffocate the marketplace of ideas. Returning to Madison and Federalist #10, what was Madison’s ingenious solution to the dangerous vice of factions? More factions! Again, in the immortal words of Madison:

Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens ….”

In other words, the more factions there are, the more they cancel each other out, making it far more difficult for any one faction to dominate politics. Likewise, perhaps the solution to the problem of fake news is not less fake news but more! Simply put, instead of trying to repress fake news and conspiracy theories and risk shutting down the marketplace of ideas, what if we encouraged people to propose–and bet on–as many items of fake news and conspiracy theories as they want to? From a theoretical perspective, ideas markets have many desirable and classical liberal properties, since such markets incentivize people to seek information and to be precise in their claims. Also, ideas markets are able to efficiently aggregate disparate sources of information and scale well with the number of people and opinions.

I will say more about my proposed “fake news futures market” and conclude my series on conspiracy theories in my next post.

The Federalist Papers by Alexander Hamilton, James Madison and John Jay

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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