Britain's House of Lords was traditionally dominated by hereditary peers — a right bequeathed by the monarch, sometimes in ancient times, to sit in the chamber and transmitted from generation to generation. That system had been withering away for decades — the Life Peerages Act 1958 created life peerages, and the House of Lords Act 1999 removed all but a compromise group of 92 hereditary members — before being brought to an end this year by the 2026 Hereditary Peers Act_Act_2026). Writing at Marginal Revolution, the author takes up the question that follows: how should members of the House of Lords now be chosen? The question is an old one in Westminster: promised “second stage” reforms have stalled repeatedly since 1999 — a 2012 bill for a partly elected chamber was withdrawn amid coalition disagreements — leaving unsettled the composition of one of the largest legislative chambers in the world.

The idea that comes to mind most quickly is selection by merit. Perhaps the chamber should be filled with Nobel Prize winners, wise professors, former politicians, distinguished public servants, and the like. The difficulty, the author argues, is that such people still 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. There is also the question of interest. Invoking Madison's argument in Federalist No. 51 that for a good system “the interest of the man must be connected with the constitutional rights of the place,” the piece contends that a politicized selection of representatives, even meritorious ones with lifetime appointments, may not differ enough from ordinary elected politicians to make much difference.

An alternative is suggested by the author's colleague Garett Jones, a George Mason University economist who in the 2016 book 10% Less Democracy proposes that bondholders be given a formal role in government. Consider, then, a House of Lords based on bond holdings. The advantage of such a system is that bondholders are self-selected, and their interest lies in long-term stability — “exactly what we want in a check on the popular house.”

Votes in the chamber could be allocated proportionally to holdings. In practice, this would produce institutional representatives, most notably pension funds — which would roughly mirror who already holds British government debt, since UK pension funds and insurance companies rank among the largest holders of gilts, alongside overseas investors and the Bank of England, whose quantitative easing programs left it with a large stake. If the goal is stability and growth, giving pension funds a bit more sway in national politics “does not seem like a terrible idea”; bondholders, for example, would likely be more concerned with long-run financial stability than current politicians appear to be. That concern already registers in British politics through the market itself: the gilt turmoil that followed the September 2022 “mini-budget” prompted emergency Bank of England bond purchases to steady pension-fund positions and was followed within weeks by the reversal of most of the announced tax cuts. Should foreign holders of bonds be given a vote? “Why not? Perhaps this would improve the prospects for peace.” The popular house, in any case, would always have the final say — as it already does under the Parliament Acts of 1911 and 1949, under which the Lords can delay most public legislation for roughly a year but cannot ultimately block it.

If anything, the author notes, bondholders might prove too fiscally conservative, since they are concerned primarily with default risk. Viewed in this light, the traditional House of Lords based on hereditary peers really amounted to a House of Lords based on landed property — not a bad proxy for long-term stability and growth, given that landowners tend to do well when the country does well and cannot take their 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, repealed only in 1846 after the Anti-Corn Law League's campaign — to promote land rents at the expense of food prices for everyone else. Clashes over the chamber's use of its powers did not end there; its rejection of the 1909 “People's Budget” ultimately cost the Lords its absolute veto through the Parliament Act 1911.

For similar reasons, the author suggests leavening the chamber with some equity, for example ownership of Trills, the Nobel laureate economist Robert Shiller's idea for shares backed by real GDP. The result would be a popular house and a corporate house divided into equity and bonds — all, the author argues, well aligned.