Prediction Markets

Post Prediction Markets

Optimistic engineers

Friday, September 8th, 2006

A survey of IEEE Fellows (distinguished engineers) is cast as bursting tech bubbles before they balloon but doesn’t really do anything of the sort. Emphasis added:

So although we may not be able to say that in 2015 a space elevator will be shuttling goods and people into orbit or that in 2020 we’ll all have robot servants, we can foresee that in the next several decades we will be building our infrastructure in a new way: we will have unlimited computing resources, live in a sensory-rich computing environment, and reengineer ourselves and the biological world around us.

Even stereotypically science fiction technologies such as self-driving cars and humanoid robot elder care are seen as likely by 26.4% and 27.1% of respondents respectively or given equal chances by 30.2% and 27.9%. I think those responses are for “in the next 50 years”, though it is not made entirely clear.

It would be interesting to compare the survey with FX prices. At a glance it appears FX traders are more optimistic than IEEE Fellows, though I don’t know of any claims that exactly match survey questions. FX is gives driverless cars by 2015 a 15% chance and a humanly mobile robot by 2036 a 79% chance.

If I read the article correctly about 13% of respondents say commercial machine translation is likely by 2016 (64.8% say it is likely, presumably in the next 50 years, 19.8%, presumably of those who say it is likely, say it is likely in the next 10 years), while the last FX price of machine translation by 2015 is 67.

So perhaps the survey “bursts bubbles” relative to FX traders (who are a very technophilic bunch), but the future it envisions is still one of radical new capabilities — a future that is much better than the present. I particularly like the engineering profession’s appreciation for decentralization.

Via Boing Boing.

Posted in Prediction Markets | No Comments »

Experts agree to bark like dogs

Saturday, September 2nd, 2006

One of the more annoying things political pundits do is to consistently make the case that their candidate or cause is a likely winner, or if too obvious a loser, at least will beat expectations. Surely there is demand for pundits as critical about their favored outcome’s chances as they are about their ufavored outcomes? Perhaps if I watched lots of television I would know of such a chimera.

Fortunately there are again (see Historical Presidential Betting Markets) markets to give anyone who wants one a reality check. However, it is rare (in the U.S.) for a “third party” candidate to be significant enough for an election market to cast any light on their chances. Often “field” will be available (for example, Intrade currently lists the following spreads for 2008 Presidential Election Winner (Political Party): Democrat 49.1/49.2, Republican 47.6/48.4, Field 2.9/3.2) but chance accorded by traders to “the field” has to be based on the expectation that a viable independent will come out of the woodwork (e.g., Ross Perot in 1992) rather than the expectation that a Green, Libertarian, or other minor party candidate has a non-negligible chance of victory. This is too bad in a way, as my casual observation says that minor party backers are more delusional than most when it comes to their candidate’s chances.

It appears that in the Texas 22nd congressional district there is a possibility that “the field” may map strongly to a minor party candidate’s chances — Libertarian Party nominee Bob Smither. Democrat Nick Lampson is the only major party candidate on the ballot. Republican Shelley Sekula-Gibbs is running a write-in campaign.

A Smither press release proclaims that “The Experts Agree” that Smither has the best chance of defeating Lampson, and quotes four sources that say something along those lines. These “experts” aren’t putting anything on the line though — the Intrade CD22 market has the following current bid/ask/last values: Democrat 70.0/90.0/76.0, Republican 12.0/19.9/12.0, Field 2.0/9.9 /0.1.

Traders seem to think a Smither victory is about as likely as Lampson and Sekula-Gibbs photographed together in bed, with a dog. Maybe that isn’t too unlikely. Put your money where your delusions are!

Regarding expert political judgement, I’m planning to read that book soon.

Posted in Peeves, Politics, Prediction Markets | 8 Comments »

Corporate futarchy

Monday, May 29th, 2006

Todd Henderson:

Conditional prediction markets (e.g.,, what will Firm X’s stock price be in one year if the strategy proposed by a corporate raider is adopted) could allow corporations to estimate the effect of different major decisions, such as whether to acquire a target, whether to adopt a governance reform, or whether to dismiss a CEO, on stock price.

Henderson doesn’t take this as far as corporate governance by futarchy, but that’s the logical conclusion if such prediction markets work well.

Via Chris Masse of course (Mr. Liquidity, please note “…make it possible to generate sound predictions even in very thin markets”).

Posted in Economics, Prediction Markets | 1 Comment »

Buckingham markets

Monday, May 22nd, 2006

Via Chris F. Masse, who does not provide a permanent link to his “external link” post, The Journal of Prediction Markets is launching late this year with several usual suspects on the editorial board. I used Inkling’s make your own market feature to create a play market in whether the journal will be Open Access:

Pays if the Journal of Prediction Markets is listed in the Directory of Open Access Journals before 2008/01/01.

See the Wikipedia article for background on Open Access.

Just for kicks — as an insider decision, this is probably not a good subject for a prediction market.

I noted with interest that the journal is to be published by the University of Buckingham Press, the publishing arm of apparently the only university in the UK jurisdiction not funded by the state. Although it is small I am surprised I had not heard of this university previously due to its free market connections or in the Economist, which loves to write about the sorry state of British higher education and the even sorrier state of higher education on the European continent.

Should I take this opportunity to ask Mr. Masse (who is entirely above insinuation, a better person than I) about French universities?

Addendum 20060523: Masse thinks I’m crazy for creating a market on Inkling. He doesn’t like Inkling because they removed one of their founders from their site (irrelevant, Masse-ive overreaction) and believes that liquidity is the most important attribute of an exchange, implied corollaries being that it is dumb to start a new exchange in an area where one already exists and it is dumb to allow user-created markets, both of which will lead to diffuse, thinly-traded markets. I think the field is far too young to say that a newcomer cannot topple existing exchanges even if they are natural monopolies (We’ve discussed this before) or that large numbers of niche (and thus thinly traded) claims will not prove valuable.

Why has Masse not created a market at Inkling? Is his consultancy page correct?

Each player in the field only sees his/her little part of it —I have to have the complete, global, situational, long-term, overview outlook perspective.

Is he overconfident in his negative assessment of Inkling or merely falling behind in his research?

Posted in Economics, Open Access, Open Source, Prediction Markets | 5 Comments »

Tiananmen Sex Trends

Wednesday, May 10th, 2006

It looks like Google Trends ranks overrepresentation of cities, regions, and languages for specific queries. Arabic browsers are most likely to search for sex, Chinese most likely to search for Tiananmen. Past posts on Islamic sex and Tiananmen.

A term needs pretty heavy search volume to be trended, which is probably good — massive ego searchers will not be revealed, much to their disappointment.

Prediction market doesn’t make the cut, though I predict it will soon.

Creative Commons confirms the success of CC-Spain (of which I’ve seen other indicators), particularly in the Catalan-speaking region.

Google Trends doesn’t seem to do stemming nor does it suggest spelling alternatives.

Posted in Blogs, Creative Commons, Free Speech, Prediction Markets | 4 Comments »

Futarchism

Monday, April 24th, 2006

Google and Yahoo! turn up no futarchists and nothing about futarchism or futarchisms. Are you a futarchist?

…

What are the implications of the Lucas critique for futarchy and prediction markets generally, or social policy bonds? Putting Your Money Where Your Mouth Is: Acquiring And Aggregating Costly Information From Sources Of Differing Quality (2006; PDF) mentions in passing:

There is a third theoretical doubt, a type of “Lucas critique.” If a prediction market becomes reliable, and this reliability changes policy or politics, this creates strategic incentives to manipulate the market. If the strategic incentives are strong enough, they could oﬀset any monetary losses incurred by the manipulators.

Very indirectly via Patri Friedman, who mentioned Goodhart’s Law.

I suspect the implication is that although making sense of prediction markets seems a little harder the critique probably applies more strongly to bureaucratic goal setting, making market mechanisms look relatively better than in absence of the critique. That’s just a wild[ly biased] speculation.

Posted in Economics, Politics, Prediction Markets | 5 Comments »

Rong-Solutions

Sunday, March 26th, 2006

Here’s an Idea: Let Everyone Have Ideas in today’s NYT tantalizes and annoys. Although the article never uses the words prediction market or similar (idea futures, decision market) it seems to describe a wildly successful internal prediction market at Rite-Solutions (see below for link), though I have to wonder whether the company isn’t giving more credit to its internal stock market than is warranted (a product line suggested via the market just a year ago now accounts for 30 percent of sales — either their salespeople are expert at pushing vapor or the product was already under development) for the press.

InnoCentive, the other company profiled, seems to be a freelancing site for biologists and chemists, much like RentACoder.

The article attempts to segue between the stories:

The next frontier is to tap the quiet genius that exists outside organizations — to attract innovations from people who are prepared to work with a company, even if they don’t work for it.

I agree that’s an interesting frontier, but contracting out solutions, while good and useful, differs wildly from using a market to make or inform decisions. What could’ve been an interesting story on either company turned into another breezy zeitgeist article.

In any case, a company might want to open parts of its internal prediction market to its customers, suppliers, shareholders, or even the public. I don’t think either mentions prediction markets (I’ve only skimmed), but this would very much be in the spirit of Democratizing Innovation and Collaboration Rules.

Here’s a suggestion for Rite-Solution’s stock market — get a real web site (symbol: WWW). The Flash thing at http://ritesolutions.com is from bizarro world — looks a little bit like a web site, but really slow, totally pointless transitions, and utterly unlinkable. A good reminder what the net would be like without open formats and standards.

Posted in Economics, Peeves, Prediction Markets | No Comments »

Who’s harmed by (housing) inflation?

Thursday, March 23rd, 2006

Jason Ruspini writes about a discussion of upcoming housing futures. One of the open questions about this new market is who will buy (buy long that is — use for hedging against price declines is considered obvious). I often see it implied that the only set of people harmed by housing price increases are non-homeowners. Ruspini:

The natural buyers would be prospective home-buyers, trying to ensure that they aren’t priced-out of the market, but the relative wealth of that group is – naturally – very small.

But most homeowners are prospective home-buyers. Though U.S. residents are moving less often (this was a big surprise to me) 1 in 14 homeowners moves each year and the market for second homes is booming. It seems that anyone potentially moving to better, additional, or housing in a more expensive market than their own would be interested in hedging against price increases. Add in parents who want to ensure their children can buy a home nearby, you have a large and very wealthy group.

Edward Glaeser is quoted making essentially the same mistake in an otherwise excellent article on his work recently published in the NYT Magazine:

Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. “Lack of affordable housing isn’t a problem to homeowners,” Glaeser says; that’s exactly what they want. “The thing you want most is to make sure that your home is not affordable if you own it. And for that reason, there’s absolutely no reason to think that little suburban communities with no businesses that are run essentially by their homeowners will make the right decisions for the state as a whole, for the business in the area, for the country as a whole.”

Actually I think it is the anti-housing homeowners who are mistaken (or very short-sighted), not Glaeser, who is probably right at least in part about their motivations.

It seems to me that except to the extent one exits the market (by selling vacation homes, trading down, or moving to a less expensive market) rising prices don’t offer homeowners much benefit apart from bragging rights and the ability to obtain larger secondary loans (which have to be paid back).

Consider car owners, or an even more extreme case, food owners. If car or food production was restricted, the price of their assets would increase. However, in a few years, or a few days in the case of food, they would have to pay in some combination of higher prices, lower quality, and lower quantity.

It is pretty clear that everyone benefits from cheaper transportation and food regardless of whether they presently have a car in the garage and bread in the cupboard and that everyone is harmed by more expensive transportation and food. I’d argue housing is much more like cars and food — consumption goods — than most people are ready to admit.

Posted in Economics, Peeves, Politics, Prediction Markets | 2 Comments »

SXSWi wrap

Saturday, March 18th, 2006

There were a surprising number of panels more or less concerning entrepreneurship. I only attended one of these, Sink or Swim: The Five Most Important Startup Decisions. It was very mildly amusing but as far as I could tell the only important decision discussed was whether to look for outside funding or not, a well-trod topic if there ever was one. There was even one panel on Selling (Big Ideas to Big Clients).

I understand that Creative Commons was mentioned in passing on many panels. Attendees coming to our booth were much better informed than in years past, part of a greater trend.

The Digital Preservation and Blogs panel I was on was interesting for the self-selection of the audience — I imagine every librarian and historian attending SXSW were present. A writeup, photo, and my narrow take.

Both accepted panels I helped conceive went very well, especially Open Science. Though an outlier for SXSW the audience Q&A as high quality. Moderator John Wilbanks did a great job of keeping a diverse panel (open access journal editor, synthetic biologist, IT standards person, and VC) on point.

Commons-Based Business Models included Ian Clarke of Revver, which encourages sharing of short videos with an unobtrusive advertisement at the end under a CC license that does not permit derivative works. This licensing choice was made so that stripping out the advertisement is not permitted. Jimmy Wales challenged Clarke to think about opening up some content on an experimental basis. Sounds like a good idea to me. I suggested from the audience that attribution can require a link back to Revver, so even modified videos are valuable. Clarke responded that advertising at a link away is far less valuable. True, but the question is whether derivative works that could not otherwise exist become popular enough to outweigh those that merely remove advertising. I suspect many derivatives would be uploaded directly to Revver, allowing the company and original creators to take full advantage of additional revenue and to become the leading site for explicit remixing of video, a la ccMixter for audio. Seems worth an experiment — Revver is in no danger of becoming the leading video site at the current rate.

I also asked Clarke about interest in his FairShare patronage system. He said Revver is aimed at the same problem (funding creators) but was easier to implement. In the same vein I met John Pratt of Fundable, which is based in Austin. I got the impression he didn’t think the service could be viral (I disagree). I’ve written about FairShare, Fundable and related ideas several times in the past, mostly linked to in my Public Goods Group Shopping post and its comments. The field is ripe for a really good service.

The EFF/CC party was very well attended, even not considering its obscure location (an Elks club). In the middle of the facility was a room of Elks members, playing cards and other games, oblivious to the SXSW crowd that outnumbered Elks even in that room. I gave a very brief thank-you speech for CC, which I closed with a prayer (because we were in Texas) to J.R. “Bob” Dobbs (because we were in Austin).

At the end of the trade show Rob Kaye alerted me to the giveaway of every book at a well-respected computer publisher’s booth to “cool geeks” or similar. 5-10 years ago this would’ve really excited me, but this time I was mostly concerned about bulk and weight. I took a few. I suspect they’ll be among the last computer books I obtain, free or otherwise.

James Surowiecki gave a presentation which I did not attend but I hear focused on prediction markets. I should’ve made the time to attend simply to see the crowd reaction. Several of the latest sites cropping up in that field certainly look like they were designed by potential SXSW attendees — circa 2004/5 generically attractive web applications. I should have some posts on that topic soon, starting with Chris F. Masse’s 2005 Awards.

Posted in Advertising, Books, Creative Commons, Economics, Open Access, Prediction Markets, Public Goods, SXSW | 2 Comments »

Admit defeat, not error!

Saturday, February 25th, 2006

William F. Buckley admits that the U.S. military adventure in Iraq is a defeat, but willfully fails to learn anything from it.

It is healthier for the disillusioned American to concede that in one theater in the Mideast, the postulates didn’t work. The alternative would be to abandon the postulates.

His two postulates amount to an assumption that wherever the U.S. intervenes people will act in accordance with U.S. politicians’ wishes. Nevermind that this doesn’t even work within the U.S. jurisdiction.

Buckley attributes defeat soley to “Iraqi animosities.” Even if that were the sole cause blame can be pinned firmly on U.S. politicians who were very well aware of Shiite/Sunni/Kurd/Christian/etc. “animosities” as leveraging these was a major component of U.S. policy toward Iraq after the 1991 Gulf War. However, Buckley ignores economic mismanagement, Abu Ghraib and doubtless many other idiocies endemic to political management, nevermind military-political management. To do so would be to accept blame and teeter on the edge of admitting error.

If Buckley hopes to fence off his “postulates” (and thus U.S. policy) from criticism by admitting defeat in this one instance I hope he fails miserably, but I fully expect he and other advocates of interventionism will succeed in this subversion of truth. The long history of poor outcomes of U.S. intervention in the Middle East, elsewhere, and within the U.S. jurisdiction (domestically) is forgotten completely and is never learned from.

I have probably suggested too many times that prediction markets could help remind voters that the most likely outcomes are not those predicted by politicians.

On a related note: So what if Iraq splits? A jurisdiction is not a sacred entity.

Via Mike Godwin. You must check out Godwin’s awesome site design. (Don’t worry, I still hate Macs.)

Posted in Economics, Iraq, Peeves, Politics, Prediction Markets | 1 Comment »