Truth markets literature review

Following up on my previous post, it turns out that my proposal for a Hayekian “truth market” (i.e. a retrodiction market) has at least two recent antecedents, i.e. above and beyond John Stuart Mill’s original “marketplace of ideas” metaphor from his classic 1859 essay On Liberty. One is Marshall W. Van Alstyen’s ingenious 2020 proposal for “A Market for Truth to Address False Ads on Social Media.” The other is Yonathan A. Arbel and Michael D. Gilbert’s modified truth-market proposal in their 2022 essay “Truth Bounties: A Market Solution to Fake News.”

Let’s begin with Marshall W. Van Alstyen, a respected professor at Boston University (here is his Wikipedia page). In brief, Professor Van Alstyen proposed a “A Market for Truth to Address False Ads on Social Media” as early as March of 2020. (His ingenious three-page proposal was published in July of 2020 in The Communications of the ACM, the monthly journal of the Association for Computing Machinery, and is available here via SSRN.) Under this proposal, social media platforms like Facebook and Twitter would require advertisers to guarantee the truth of their ads. How? By requiring advertisers to put a large sum of money in escrow as an “honest ad pledge” that their claims are true. Anyone who doubts the veracity of an ad could dispute the ad, but they would have to pay a non-refundable fee first. If anyone decides to dispute the ad, then an independent fact-checker would judge the ad’s truthfulness, and if the ad proves false, the injured party would then receive the advertiser’s pledge from the escrow account.

As it happens, Professor Van Alstyen and I not the only scholars to have proposed a market for truth. (I first proposed a “conspiracy theory betting market” in April of 2021 at a conference on “Alternate Realities, Conspiracy Theory, and the Constitutional and Democratic Order” at the University of St Thomas, and my proposal was eventually published in The Journal of Law & Public Policy in the summer of 2022.) Last fall, law professors Yonathan A. Arbel (Alabama) and Michael D. Gilbert (University of Virginia) proposed “A Market Solution to Fake News” in the form of truth bounties. (Here is a link to their 54-page paper via SSRN, and here is a summary.) In brief, their proposal is similar to Professor Van Alstyen’s, except that they would replace Van Alstyen’s “independent fact-checker” with a “dedicated body of private arbitrators” composed of independent experts.

Alas, although both market-oriented proposals are a step in the right direction, since they attempt to harness financial incentives such as escrow accounts and bounties, both are nevertheless doomed to failure. For starters, Professor Van Alstyen’s proposal assumes the existence of an “independent fact-checker” that everyone can agree to ahead of time. In reality, there is no such thing as an “independent” fact-checker. No individual fact-checker, no matter how smart or respected, will be free from bias because biases are inevitable, and the degree of independence of any particular fact-checker will thus always be disputed.

By the same token, Professors Arbel and Gilbert enlist a “dedicated body” of experts, i.e. an arbitration panel whose members can be trusted to collectively arrive at the truth, presumably by majority vote. (I say “presumably” because I have yet to read all 54 pages of their paper.) But the flaw with Arbel and Gilbert’s “dedicated body” is that a group of so-called experts or arbiters is no more likely to arrive at the truth of disputed claim than a sole independent fact-checker is. Why not? Because as Frank Ramsey and Bruno de Finetti showed us long ago (look them up!), truth is subjective. That is, when a claim or belief is contested, the truth value of that claim/belief should be expressed as a probabilistic quantity (i.e. between 0 and 1), not as totally true (1) or totally false (0).

My Hayekian truth market, by contrast, dispenses with the need for trusted experts or fact-checkers altogether, and you can find my proposal here.

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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