Futarchy is a proposed government system in which decisions are made based on betting markets. It was originally proposed by Robin Hanson, who gave the motto “Vote on Values, But Bet on Beliefs”.
A futarchic government holds an election to determine what metrics to optimize; for example, a ballot might allow citizens to vote on the following options:
Gross Domestic Product (GDP) over the next 4 years, as estimated by an impartial council of economists.
GDP over the next 8 years.
GDP over the next 30 years (etc).
Happiness, as measured by a large survey. (Over the next 4 years, 8 years, etc.)
Family values, as measured by (such-and-such procedure)
And so on.
A futarchy then sets up betting markets for the effectiveness of various policies. The policies with the best estimated effectiveness get implemented. The consequences are then observed, so bets about the implemented policies can pay out.