In Britain, the House of Lords was traditionally dominated by hereditary peers–a right bequeathed by the monarch, sometimes in ancient times, to sit in the House of Lords that was transmitted generationally. That system has been withering away for decades, however, and was finally ended this year by the 2026 Hereditary Peers Act. So how should members of the House of Lords be chosen?

One idea which comes to mind quickly is selection by merit. Perhaps the House of Lords should be filled with Nobel Prize winners, wise professors, former politicians, distinguished public servants and so forth. All very well and good but the nub here is that these people have to be chosen by someone, and whoever controls the selection process inevitably influences the kind of people selected. That makes an appointed chamber less independent of, and potentially more similar to, ordinary politics, even with lifetime appointments. Moreover, what is their interest? Madison argued that for a good system “the interest of the man must be connected with the constitutional rights of the place.” A politicized selection of representatives, even meritorious representatives with lifetime appointments, may not differ enough from ordinary elected politicians to make much difference.

In 10% Less Democracy, my colleague Garett Jones, suggests that bondholders have a formal role in government. So let us consider, a House of Lords based on bond holdings. The advantage of this system is that bond holders are self-selected and their interests are in long-term stability–exactly what we want in a check on the popular house.

Votes in the House of Lords could be allocated proportionally to holdings; thus in practice we would get institutional representatives most notably including pension funds. If you want stability and growth, giving pension funds a bit more sway in national politics does not seem like a terrible idea. Bondholders would, for example, likely be more concerned with long-run financial stability, for example than current politicians seem to be. Should foreign holders of bonds be given a vote? Why not? Perhaps this would improve the prospects for peace. Although the popular house will always have the final say.

If anything, bondholders might prove too fiscally conservative as they are concerned primarily with default risk. The traditional House of Lords based on hereditary peers really amounted to a House of Lords based on landed property which isn’t a bad proxy for long-term stability and growth. After all, land owners do tend to do well when the country does well and you can’t take your land to another country. The ancient system had its wisdom; but landholding is not perfectly aligned with national prosperity. The House of Lords defended tariffs on imported foods (the corn laws) to promote land rents at the expense of food prices for everyone else. For similar reasons, we might, therefore, want to leaven the House of Lords with some equity, say ownership of Trills–< href=”https://marginalrevolution.com/?s=trills”>the Robert Shiller idea for shares backed by real GDP. We would thus have a popular house and a corporate house divided into equity and bonds, all well aligned.