Thus far, I have blogged about the twin dangers of false information (fake news, conspiracy theories, etc.) and censorship (secret algorithms, arbitrary “content moderation” policies, DHS surveillance, etc.). But how can we combat false information without resorting to censorship? I hereby propose the creation of a new truth market. In summary, my proposed truth market, which is inspired by the work of F. A. Hayek, would operate like an ordinary betting market–but instead of placing bets on the outcome of future events (like an upcoming football match or basketball game), bettors would place wagers on their beliefs about past events. Or in the alternative, why can’t we extend an existing prediction market platform like Kalshi to cover conspiracy theories, fake news, and the like?
By way of background, here is how the Kalshi market works: users can post any question about a future event that others can bet on, so long as the question has a discrete outcome, like Yes or No. (By way of example: “Will Donald Trump be indicted before Thanksgiving?“) Once a question is posted on the Kalshi platform, people can then buy “event contracts”: Yes contracts or No contracts, depending on whether they believe the answer to the question will be Yes or No. Each event contract, in turn, is priced between $0 and $1 (as long as the sum of one Yes contract and one No contract equals $1), and the price of the contracts at any given time will fluctuate depending on the overall demand for Yes contracts and No contracts. The price for a Yes contract, for example, will be higher if more people are buying Yes contracts, and vice versa, lower if more people are buying No contracts. Buyers can also trade or sell their contracts like any other financial security, and when the market closes, the buyers who guessed the correct outcome get to collect $1 for each winning contract; the losers get nothing.
So, why can’t we replace Kalshi’s prospective event contracts with retrospective “belief contracts“? The main difference between the Kalshi model and my proposed truth market is that traditional betting markets must close by a specified date. But we don’t need a close date or final resolution in principle, especially about events that have already occurred, like a popular conspiracy theory or a disputed news report. Instead, we could leave the market for belief contracts open indefinitely in order to allow people to post questions about past events and to bet on their beliefs about such events. By keeping the betting market open indefinitely, the price of any given “belief contract” will track belief or non-belief in the conspiracy or in the disputed story. A bettor will stay in the market for belief X (where X is a conspiracy theory, disputed news report, etc.) if he thinks the price of belief in X will increase, or he will opt out if he thinks it will fall.
I will say more about the mechanics of these “beliefs contracts” in my next post. In the meantime, I will conclude with the following observation. By monetizing beliefs, bettors will have an incentive to seek new information that not only supports their wagers but is also likely to persuade other bettors, thereby advancing the search for truth. As long as there is yet-to-be-discovered evidence that may be convincing to some bettors, some conspiracy theories and fake news should move toward resolution without the need for an omniscient arbiter.