What I am saying requires many qualifications and explanations. In the future I believe new types of markets will emerge that will allow individuals and groups to hedge risks, including legislative risks. The "potential group" is the group of what I previously described here as "speculators." What I have called "hedgers" corresponds to Olson's special interest groups which lobby as a "bi-product" of some other activity. The problem for Olson was that the potential group would remain latent because of insufficient incentives to form. In my scenario, the market imbalance caused by the special interest's initial desire to hedge produces an inefficiency in market price, which represents the probability of the legislation being passed by a certain date. Whether the price is interpreted as mean belief or something else does not concern me; the point is that the special interest's relative need to hedge will skew the market price and create an inefficiency for the speculator to take advantage of. The first speculator is the first member of the "potential" group. The marginal reward to join for the first speculator tends to be maximal. I will get to technical objections like market liquidity later-on, but if you are still following you might saying, "hold-on, your 'potential' group members (the speculators who take the other side of the special interest's hedge) stand to gain from the special interest getting its way in the legislature -- this isn't what Olson had in mind at all." I think it is actually, but I want to stress an important difference. The legislation-hedge market makes the outcome of the legislation non-binary. Instead of 10 million dollars going from the taxpayers to industry X, if the industry hedged by selling at 50% probability, then both the hedger and the speculators will end-up with 5 million. The special interest isn't forced into an all-or-nothing outcome and the market will simultaneously allow people to hedge their implied tax losses by betting with the special interest hedger, against the passage of legislation otherwise favorable to the hedger. Now, notice how the goverment's ability to (re)-distribute money has changed. This will obviously attract many people on the Right from the formal standpoint of the relationship between free enterprise and government, but simultaneously the Left stands to gain content-wise, as with stem cell research funding.
I'll compile objections and answer them in subsequent posts. How the government reacts to such markets is of course one of the more significant and interesting problems here.