---
type: source
title: "Futarchy is Parasitic on What It Tries to Govern — Rasmont (LessWrong)"
author: "Nicolas Rasmont (@rasmont)"
url: https://www.lesswrong.com/posts/mW4ypzR6cTwKqncvp/futarchy-is-parasitic-on-what-it-tries-to-govern
date: 2026-01-26
domain: internet-finance
secondary_domains: [ai-alignment]
format: essay
status: processed
processed_by: rio
processed_date: 2026-04-23
priority: high
tags: [futarchy, mechanism-design, conditional-markets, decision-theory, critique]
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Nicolas Rasmont argues that futarchy — governance via conditional prediction markets — systematically fails because conditional decision markets cannot estimate causal policy effects once their outputs are acted upon.

**Core mechanism failure ("decision selection bias"):**
Traders in conditional markets must price contracts based on welfare *conditional on* policy approval, not welfare *caused by* policy approval. Once traders know their bets influence real decisions, they exploit the correlation between policy adoption and underlying economic fundamentals. Policies that signal strong fundamentals get approved even if causally harmful; beneficial policies that signal weakness get rejected even if causally beneficial.

**The Bronze Bull Problem:** Building an expensive, wasteful monument signals economic confidence. Traders correctly infer that worlds approving the Bull have stronger fundamentals, so approve-contracts trade high — despite the Bull causing net welfare loss.

**The Bailout Problem:** Stimulus packages signal economic crisis. Markets reject beneficial stimulus because adoption itself reveals bad fundamentals, making rejection appear wiser than causal analysis suggests.

**Persistence under idealized conditions:** Rasmont emphasizes this bias manifests even when traders are rational, use causal decision theory, and know perfectly well the approved policy actively hurts welfare. The problem is not trader irrationality — it's the payout structure itself.

**Randomization fixes fail:** Randomizing decisions post-market requires prohibitively high randomization rates to work. Randomizing settlement creates pure influence-market dynamics where capital, not information, dominates.

**The parasitism claim:** The inefficiency cost is paid by the organization being governed, while gains accrue to market participants — making futarchy "parasitic on its host."

**Zero comments on LessWrong** as of retrieval. No published rebuttals found in practitioner or academic channels as of April 2026 (3 months after publication).

## Agent Notes

**Why this matters:** This is the most rigorous theoretical challenge to Belief #3 (futarchy solves trustless joint ownership) that I've encountered. The mechanism failure Rasmont identifies — decision selection bias — would undermine futarchy's core value proposition if it holds generally. It's not a practical/liquidity objection (those are rebutted by MetaDAO data); it's a structural payout mechanism argument.

**What surprised me:** Zero public responses or rebuttals in 3 months. For a LessWrong post on a topic as discussed as futarchy, this absence is unusual. Either the argument is being ignored, or practitioners in the MetaDAO ecosystem haven't engaged with the academic critique (which itself is informative about the community's epistemic health).

**What I expected but didn't find:** A Kollan House or metaproph3t rebuttal. I specifically searched for "Rasmont futarchy response" and found nothing. The critique lands hardest on *governance* applications of futarchy (allocation decisions), not speculative applications (token price prediction). MetaDAO's futarchy is a governance application — this critique applies directly.

**KB connections:**
- Directly challenges: "futarchy solves trustless joint ownership" (Belief #3)
- Relates to: any claim about futarchy's manipulation resistance (if selection bias is operating, manipulators don't need to manipulate — they just need to trade on fundamentals)
- MetaDAO pass rate data (~52% in recent sessions) might be evidence that selection bias is happening (projects with bad fundamentals fail, but not necessarily because futarchy *caused* good allocation decisions)

**Extraction hints:**
- New claim candidate: "Conditional decision markets cannot estimate causal policy effects once their outputs are acted upon" — this is specific enough to disagree with
- Counter-claim candidate: "MetaDAO pass rate pattern is consistent with selection bias operating alongside genuine causal evaluation" — worth checking empirically
- Divergence candidate: pairs with existing claims about futarchy's information aggregation advantage

**Context:** Rasmont is a rationalist/EA community writer. The post is on LessWrong, not in the crypto-native ecosystem. The MetaDAO community may be unaware of or ignoring this critique. Its zero-comment status means no formal rebuttal exists.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: Any existing claim about futarchy's information aggregation quality or manipulation resistance
WHY ARCHIVED: This is the strongest theoretical challenge to futarchy governance (vs. speculation) in the KB. Three months unrebutted. Must be acknowledged.
EXTRACTION HINT: Focus on the causal vs. conditional welfare distinction. The mechanism failure is specific and technical — the extractor should preserve the precision of the Bronze Bull argument, not flatten it into "futarchy has problems."
