Re: AltInst: Vote on Values, But Bet on Beliefs

Tom Breton wrote:
> > > "You need a way to tell if a proposal was implemented". You appeal to
> > > contract law, but it's not clear that policy writers would have
> > > incentive to be as clear as possible, which contract writers do.
> >
> > If you write a sloppy contract, your prospective partner (eg
> customer)may balk.
> > Similarly, speculators may not endorse your proposal if
> > they don't know what exactly it is.
>
>ISTM that in combination with insider trading, this could potentially
>be a problem. Ie, an insider with deep pockets or an accomplice
>writes an unclear proposal. He moves the price insincerely. The
>price seems kind of out of line, but most speculators don't dare
>invest because the proposal is not clear to them. So the stadium gets
>built, and the profits pay for any losses the insider took in the
>market.

I've just put these paragraphs into that section:

If it were not clear to speculators how a proposal would be interpreted and
implemented, then speculators would have to average over the kinds of
interpretations they think likely. Unclear proposals include both sloppy
but sincere attempts to improve national welfare, and also insincere
attempts to slip in policies that would not be approved if proposed
clearly. Insincere proposals probably reduce national welfare, while
sloppy sincere proposals may well increase it.

Speculators must thus estimate the relative contribution of sincere and
insincere proposals to the class of unclear proposals in any given policy
area. When insincere proposals dominate, speculators should be wary of
endorsing unclear proposals, just as anyone is wary of signing a contract
he or she does not understand. But when sloppy but sincere proposals
dominate, speculators may accept the occasional insincere proposal as the
price to be paid for valuable and sincere but sloppy proposals. Which is
as it should be.

Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323

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Received on Wed Aug 16 20:33:28 2000