Ken Kittlitz posted an interesting report on the recent DIMACS Information Markets Workshop to fx-discuss. I hadn’t seen the approaches to clearing regulatory hurdles spelled out so clearly before. Unsurprisingly researchers found that the effect of manipulators on markets is not pernicious. The other theory/experimental results sound interesting, will have to read more. If I used bookmarks I’d bookmark David Pennock. My previous comment expressing disappointment in NewsFutures may have been off base. Ken’s summary indicates that HedgeStreet will soon offer longer term contracts. Several open source platforms are in the works, including possibly opening the code for fx (hooray, the UI could really use some work). Also:
Several participants indicated that the accuracy of these markets may not be their prime attraction to organizations. Rather, the fact that they help make people aware of differences of opinion, and forge a community that can discuss such differences, may be their strongest feature.
Another attendee was reminded of early quantum computing worksops:
Quantum computing back then had some promising research (factoring algorithms for example) and no one was sure whether it would lead to whole new computing paradigm or just disappear into the ether. Information markets are also a new technology with some promising research (mostly analytic and experimental) and no one knows whether it will revolutionize the way everyone does prediction, information aggregation and decision making or just slowly disappear.
Quantum computing needs to deal merely with the laws of physics but information markets need to deal with the laws of the United States of America.
I’m not so sure. If quantum computers break current cryptographic systems, shouldn’t they be banned as circumvention devices, if not cyber-terrorist weapons? Just kidding, I hope.
Unrelated to the DIMACS conference, Art Hutchinson has a nice post noting the commonalities between blogs and prediction markets:
I’m seeing that both blogs and prediction markets – born of the democratizing power of the web – have demonstrated their power to circumvent traditional information hierarchies to the detriment of established organizations and individuals.
Finally, Peter McCluskey asks what a Futarchy should maximize and proposes life expectancy. I’ve assumed a futarchy welfare function would be, or become, very complex, but longevity sounds good and simple to me.
Thought experiment: what would futarchies with different simple welfare functions look like (e.g., maximize GDP, minimize Gini coefficient) after n years of divergence?
One “constitutional” means to prevent a simple welfare function from growing complex through “politics” — require any change in the welfare function to be “approved” by the markets in terms of the current welfare function — investors have to bet that welfare in terms of the current function will be improved if it is replaced with a different function. I haven’t thought this through, it may make little sense. Even if not a hurdle changes must clear, such a market might give futarchy citizens interesting information about the magnitude of a proposed welfare function change.
Addendum 20050210: Chris Masse has added links to Ken Kittlitz’s report and Art Hutchinson has two posts remarking on Ken’s report. Unrelated to idea futures, read anyway Art’s experience with WalMart music store’s Digital Restrictions Management.