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In spite of reports that poll workers in Santa Clara county may have been told not to inform voters about the option of a paper ballot instead of electronic, they were asking everyone when I voted in Mountain View. But after having the first worker record my choice of a paper ballot, I still waited a minute or two in a line for the electronic booth before getting the attention of the person who was supposed to have handed me the ballot. There was a line for electronic voting but essentially no line for paper voting, partly because one electronic machine had a problem due to what sounded like a voter trying to go back and change a vote, but had reached a point where it appeared to be too late to change it. It looked like between 10 and 20 percent of voters were using paper ballots. The paper ballot seemed simpler to use than what I recall of the electronic ballot 2 years ago. See PaperOrPlastic2004.org for info about California voting choices.

The Tradesports contracts showed Bush’s chances at just below 50% within the past hour, after having stated mostly in the 50s for the past few weeks.

Voters in Oregon and the Dakotas should remember what their Senators said about the DARPA project to create a futures market designed to provide information about terrorism. Ask yourself whether our presidential election would be decided more intelligently if we had a futures contract that predicted how many people would die in terrorist attacks over the next four year if Bush stays, and a similar one for a Kerry presidency. Many press reports that describe the reactions of Ron Wyden (Oregon), Byron Dorgan (North Dakota), and Tom Daschle (South Dakota) to the DARPA project are available here.

Alex Tabarrok writes about the apparent attempts to manipulate the Bush re-elected contract at Tradesports.com (which just dropped to exactly 50!), and CNBC has mentioned the same report today (with a denial from George Soros that he is responsible).

I want to warn people not to treat the failure of this manipulation as strong evidence that manipulation won’t have much effect on the reliability of the prices. If an experienced trader such as Soros tried to engage in this kind of manipulation, he would use a much more patient and cost-effective strategy than quickly driving the price down from 55 to 10.

To estimate the harm done by manipulation, we need to look at careful studies of how accurate markets have been, plus experiments such as the one Robin Hanson arranged. Note also that Robin’s attempt at a theoretical argument on this subject is unconvincing because it unrealistically assumes that traders aren’t risk-averse.

Seasteading

I got a refreshing break from the gloomy election news at a talk on Wednesday by Patri Friedman, who seems determined to give his father some competition for the title of most effective advocate of freedom.

Mike Linksvayer (whose blog I ought to read more regularly) has a good summary of the talk. I’ll try to comment on this topic once I’ve read the online book on the subject, hopefully in time for the related talk by Spencer MacCallum at the Nov. 13 meeting of the Saturday Night Anarchy Club.

Wally Olson’s speeches in the Yale Political Union 30 years ago did more to make me comfortable with Libertarianism than any other single factor, so I’m disappointed to see him describe the Libertarian presidential candidate (Badnarik) as a "barking moonbat". I’m not entirely clear what that phrase means, but it seems to imply that the Libertarian Party ought to be rebuked for selecting him.

Badnarik does have some weird ideas and a general lack of brilliance that, in an ideal world, would mean that we should have expected better of the LP. But given the LP’s recent history, it deserves some modest rewards for selecting a candidate who does such basic things as buying advertising to spread Libertarian ideas. According to R.W. Bradford in Liberty Magazine (who may have been the first to publicize Badnarik’s strange ideas), Badnarik had spent 20 percent of the money he raised to buy ads as of mid-September. By comparison, Browne spent much less than 1 percent of his 1996 budget on buying ads. And as far as I can tell, Badnarik has enough sense to downplay his stranger ideas when campaigning.

Badnarik may be goofy and mediocre, but we’re stuck in a situation where that looks clearly better than what we should expect if we reject him.

I saw a great bumper sticker recently which (perhaps unintentionally) suggests the appropriate way to think about this election: Frodo failed – Bush got the ring. Tolkien wouldn’t want us to think that giving the ring to a Gollum or a Gandalf would be sufficient to solve the problem. Giving the ring to the least power-hungry person available is better than giving it to the smartest.

The best sound bite from the Foresight Conference on Advanced Nanotechnology was Chris Phoenix’s description of how mature versions of nanotechnology will deal with most forms of pollution:

No Atom Left Behind

He was responsible enough to point out one form of pollution that can’t be solved that way: a scarcity of heat pollution credits is likely to be an important feature of the nanotech economy.

Greenspan and bubbles

According to an October 19 Bloomberg article, Greenspan said:

"Housing price bubbles presuppose an ability of market participants
to trade properties as they speculate about the future," and the
expense and difficulty of moving "are significant impediments to
speculative trading and an important restraint on the development of
housing price bubbles,"

I wonder how he would describe the Japanese real estate prices of the late 1980s.
It might not be a coincidence that the dollar has dropped against gold and other currencies the past couple of days.

I’m not yet willing to bet money that a significant housing bubble is developing in the U.S., but it wouldn’t take too much for me to decide it’s time for such a bet.

The likely winner is incumbent Barbara Boxer, who is a co-sponsor of the Induce Act, which is designed to stifle innovation by outlawing anything that “intentionally aids, abets, induces”, etc. copyright violations. This is broad enough that it is hard to know whether it would outlaw the iPod (as the EFF suggests) or Silly Putty, and would probably have scared companies away from trying to introduce Tivo or the VCR if it had been law then. Anyone who would support this is fairly reckless about how she goes about promoting special interests.

I looked over her web site for any signs that she wants the government to be fiscally responsible. Instead I found things like “Senator Boxer is a leading voice opposing military base closures in California. … Senator Boxer and her allies successfully pressured the Bush Administration to postpone a new round of base closures from 2003 to 2005” and “Senator Boxer has voted for the three largest defense budgets in history and the largest increase in defense spending in two decades”. It’s hard to decide whether to be more upset that she supports blatantly wasteful spending or that she doesn’t question whether a defense budget that is about equal to the military spending of the rest of the world combined is a bit more than what defensive purposes would require.

Her Republican opponent recently sent me a letter containing three complaints that she voted against spending increases, versus only one complaint about her voting in favor of a spending bill (to raise her own pay; hardly a big fraction of the budget). He’s also a proud author of the poorly written Three-Strikes Law.

Why are people planning to vote for one of these advocates of special interest groups and/or demagoguery rather than a respectable candidate such as Libertarian Jim Gray? Maybe Boxer’s environmentalism convinces people she sometimes supports the public good. I feel I ought to examine that assumption closely one of these days. But I just remembered my investments in oil companies are likely to be helped by Boxer’s opposition to drilling new oil wells, since it will reduce the risk of an oil glut. Maybe I don’t have time to examine her record any more carefully than that.

Tyler Cowen and Mike Linksvayer discuss the somewhat confusing reaction of Bush wins futures to the first debate.

I have some different theories about what might have happened. The size of a typical trade seems to be a few hundred dollars or less, so the typical reward for being quick to exploit inefficient prices is probably in the $10 to $30 range. It’s fairly easy for me to imagine that the most sophisticated traders value their time enough that such rewards don’t cause them to react quickly. I’ve been making a small but steady return from fairly regular trades on Tradesports the past few months, but I only log in about once every two days.

Another possibility is that the best informed traders get their information by talking to undecided voters over several days after the debate.

Either way, as an experienced investor it doesn’t surprise me that markets are slow to react to information that isn’t very clear. Markets often show more frequent patterns of prices following a trend than I would expect from random behavior. I interpret this as evidence that some information gets reflected slowly in those prices. That doesn’t mean it’s possible to get rich by any simple trend following rule – enough of those trends are false signals created by traders trying to exploit the naive trend follower that it’s hard to get useful information out of the trends unless you combine it with good information about what the efficient price should be.

I attended a fairly interesting talk at PARC last week by Bernardo Huberman. He claimed to have created something that sounds like a hybrid between a survey and an idea futures market.
It involves selecting a small group of people (the minimum for it to work well is about 9 people). It includes some market-like trading between participants, but the results are apparently better than what markets would produce under similar conditions, because it does additional calculations such as adjusting for measured risk aversion of each participant, and has something that treats private information (i.e knowledge available to only one participant) differently from public information. At least some of the time Huberman gives participants monetary incentives to get the right answer.
This approach has an advantage over idea futures markets that bad guys are less likely to be able to manipulate it by spending money to produce inefficient prices, because the organization running the system exercises more control over who participates and how much influence each one has. Not that I think idea futures markets suffer any significant problems due to forms of manipulation like this that require the manipulator to transfer unbounded amounts of money to those who are trying to make the market prices accurate, but the difficulty of analyzing the problem has made such markets susceptible to criticism by demagogues. Also, markets tend to foster some secrecy (as traders want to maintain their advantage), while a more survey-like approach makes people less likely to have a stake in having better information than others, since they’re less likely to be involved in future surveys.
Huberman’s approach does have some disadvantages. It presumably requires the person who wants the accurate information to pay for it (with some associated public goods problems in many cases), whereas idea futures markets can often be financed by small commissions on trades. Also, Huberman’s approach probably fails to select the most informed participants in a number of circumstances, thereby failing to extract information that an open market would be able to extract.
A paper covering the most interesting parts of Huberman’s work is available here.
You might also want to see a related criticism of idea futures markets by Manski at http://www.faculty.econ.northwestern.edu/faculty/manski/prediction_markets.pdf, although that paper doesn’t do a very good job of analyzing whether any alternative is better.