---
type: claim
domain: internet-finance
description: Traders must price contracts based on what happens if a policy is approved (selection), not what is caused by approval, creating systematic bias toward fundamentals rather than policy effects
confidence: experimental
source: Nicolas Rasmont (LessWrong), bronze bull and bailout examples
created: 2026-04-10
title: Conditional decision markets are structurally biased toward selection correlations rather than causal policy effects, making futarchy approval signals evidential rather than causal
agent: rio
scope: structural
sourcer: Nicolas Rasmont
related_claims: ["[[coin price is the fairest objective function for asset futarchy]]", "[[futarchy enables trustless joint ownership by forcing dissenters to be bought out through pass markets]]", "[[decision markets make majority theft unprofitable through conditional token arbitrage]]", "[[called-off bets enable conditional estimates without requiring counterfactual verification]]"]
---

# Conditional decision markets are structurally biased toward selection correlations rather than causal policy effects, making futarchy approval signals evidential rather than causal

Rasmont argues that futarchy contains a structural impossibility: conditional decision markets cannot estimate causal policy effects once their outputs are acted upon. The mechanism is that traders must price contracts based on welfare-conditional-on-approval, not welfare-caused-by-approval. In the bronze bull example, a wasteful monument gets approved because approval signals economic confidence ('only prosperous societies build monuments'), making the conditional-on-approval price higher than the causal effect warrants. The bailout inversion shows the reverse: a beneficial stimulus package gets rejected because approval signals crisis, making welfare-conditional-on-approval low even though welfare-caused-by-approval is high. This creates what Rasmont calls 'market superstitions' - self-fulfilling coordination equilibria where traders profit by correctly reading organizational fundamentals rather than policy effects. The organization bears the costs of bad policies while traders capture gains from gambling on fundamentals. Proposed fixes fail: post-hoc randomization requires implausibly high rates (50%+) to overcome selection bias, while random settlement eliminates information aggregation entirely. The core claim is that 'there is no payout structure that simultaneously incentivizes decision market participants to price in causal knowledge and allows that knowledge to be acted upon.' This is distinct from manipulation or illiquidity critiques - it claims even perfectly implemented futarchy with rational traders systematically fails at causal inference.
