Here are a few comments from Friday’s Prediction Markets Summit.
Chris Hibbert described a way that a market with multiple outcomes (such as for supreme court nominees, which list contracts for a number of people, plus one for the rest of the field) could improve liquidity with a modest software change. The system could generate bids and asks for a given contract by aggregating the opposite side of all the other contracts in that market, and generate a synthetic order which would sometimes be within the bid/ask range of regular orders.
Google’s Bo Cowgill reported that one legal problem that Google faces in implementing internal prediction markets is that they might sometimes spread information around the company that might make the people with that information insiders in a way that would complicate those employees’ ability to trade in Google stock. It sounds like the insider trading laws are onerous enough to create a nontrivial barrier to spreading information.
Newsfutures’ Emile Servan-Schreiber said that Newsfutures was supporting the use of internal corporate markets for some fairly big corporate decisions.
Mike Knesevitch of Intrade / Tradesports seems to have lots of experience in traditional financial markets. He said a good deal about the liquidity and accuracy of his exchange’s political markets. The Howard Dean contract went from 33 to 9 within about 5 minutes following Dean’s “implosion” speech. Part of Tradesports’ reluctance to make it’s prices easy to link to is the possibility that they will charge money for those prices much like traditional stock and futures exchanges do. I wish there were a good way for users to persuade new exchanges to commit to keeping information free, but I don’t see a practical way to do that.
HedgeStreet’s Russell Andersson reported that CFTC approval for new contracts was easier than I expected. It takes about 24 hours for contracts dealing with things that the CFTC normally deals with, but weeks to months for other topics. (Why so much variation??)
Microsoft Todd Proebsting is surprisingly enthusiastic about most (all?) of Robin Hanson’s vision of what prediction markets might do. He reported a case where a market did a much better job of predicting when a product would ship than the manager did, although there was some confusion when the market fluctuated when it’s prediction created some uncertainty over whether features would be cut to make the deadline (the contract didn’t adequately specify how it would be judged if the product changed significantly). He reported that there was no resistance to prediction markets from upper management (middle management resisted, since the markets are designed to indicate failings of middle management). He mentioned that laws regulating sweepstakes created some obstacles to implementing internal corporate markets (they’re designed to prevent a sweepstakes game from rewarding the people who control the sweepstakes). He inadvertently(?) promoted the use of open source licenses by mentioning that legal concerns deterred him from looking at Robin’s market scoring Lisp code, which has no license granting any permission to use it.
Eric Zitzewitz responded to Manski’s theoretical criticisms of prediction market accuracy (see his paper on Interpreting Prediction Market Prices as Probabilities), and described some problems with inferring causality from markets and how to structure markets to minimize those problems (see his paper on Five Open Questions About Prediction Markets). He showed an amusing graph indicating that Tradesports prices implied Osama was twice as likely to be captured in October 2004 as in November 2004 (implying some connection with the U.S. elections).
Here are some interesting claims about how easy it is to reduce crime through better nutrition (found via the Freakonomics blog). Probably exaggerated, but plausible.
Book Review: The Great Divergence: China, Europe, and the Making of the Modern World Economy, by Kenneth Pomeranz
This book does a good job of criticizing many Anglo-centric explanations of why Europeans industrialized first by providing detailed evidence that the area near the Yangzi river delta was mostly as advanced as England when England started the industrial revolution.
It does a less convincing job of arguing that coal and new world land were the main reasons for England’s success. I’m tempted to believe that American sugar provided desperately needed calories to break out of a Malthusian trap, but the evidence doesn’t show that became significant until the industrial revolution had already started.
Conveniently located coal undoubtedly gave England a boost, but not a big enough boost that there is a practical way to decide it was more important than the numerous cultural differences which might have given England the edge it needed.
The book makes a serious effort to dismiss those cultural explanations, but is not thorough enough. In particular, I’m disappointed with the cryptic way that it dismisses the relevance of the ideas in Helmut Schoeck’s book Envy.
The style is often deadening, with lengthy descriptions of details whose relevance is unobvious.
The Bush administration’s abuse of innocent Muslims hasn’t been getting as much coverage as it deserves, so I’m encouraging you all to spread the word about this account of the government’s continuing abuse of Muslims that it admitted months ago were innocent (thanks to Andrew Sullivan).
What is Congress doing about this boost to Al Qaeda’s recruitment efforts? Trying to restrict the habeas corpus rights of the victims so that we don’t hear about them.
Monopolies tend to become insensitive bureaucracies, and governments tend to be some of the most monopolistic entities around. (If you think of monopolies as bad only because they get monopoly profits, or think other kinds of harm are avoidable given monopoly power, I recommend reading Lessig’s book The Future of Ideas : The Fate of the Commons in a Connected World). Democracy has sometimes been effective at reducing the extent to which governments have acted as monopolies, by creating competition between factions. In recent years, gerrymandering has virtually eliminated that competition for many legislative bodies.
California Proposition 77 would eliminate the conflicts of interest that make current gerrymandering a major threat to democracy, and would give us instead something that works more like our judicial system. Our judicial system isn’t ideal, but it’s better than what a legislature does when the voters are unable to influence the legislature.
Critics have complained that Prop 77 is imperfect, but haven’t provided a clear explanation of why the alleged imperfections could be considered large in comparison to the difference between the current gerrymandering and a competitive democracy, or why it would be harder to adopt improvements to Prop 77 later than it is to adopt it now.
For a while now I’ve been bothered by the absence of an eloquent phrase for monopolies on ideas that doesn’t perpetuate the recent claim that those monopolies deserve the same respect as ownership of physical objects. That claim has caused some presumptions which distort discussion of copyrights and patents, and lead to thoughtless conclusions such as this attack on Google’s Print Library (a project which sounds like it will respect copyrights more carefully than Google’s main search engine does).
Eric Drexler recently mentioned that “intellectual pseudo property” is an appropriate term, and pointed out that many of the rules it refers to are more like a lease than ownership. Apparently Markus Krummenacker used the phrase first (without a succinct argument that it should replace the phrase intellectual property).
Finally someone has produced a quantitative measure that tests the ideological biases of supreme court justices, and it shows a good deal of bias. It looks more like a collection of small biases rather than a simple polarization into left and right.
An article titled Alito isn’t “pro-life” or “pro-choice” but “pro-law.” by Jon Adler (who I knew when he was an undergrad and whose opinions I respect) has led me to believe that Alito will be less influenced by his personal biases than the average justice.
Several posts on EconLog recently have assumed that human capital will be sufficient for their children to prosper in a Kurzweilian future.
That is a very risky assumption. Human capital has historically been a good investment largely because there have been few innovations that made it easier to produce more humans. Kurzweil’s forecasts imply that around 2040 or 2050 the cost of duplicating a human-equivalent intelligence will plunge. Which means that for most kinds of jobs, the supply of labor should be expected to become nearly unlimited, and in the absence of substantial monopoly, we should expect the price of labor under a Kurzweil scenario to approach zero. Maybe something will guarantee everyone a luxurious lifestyle in a world where there’s little reason for salaries, but I’d rather hedge my bets and accumulate financial assets.
See Robin Hanson’s analysis for a more detailed argument.
I’ve found most of the “debates” on gay marriage annoying because most of the debaters seem eager to show off their ignorance of what their opponents believe. But Maggie Gallagher recently attempted to change this, and managed to provoke an excellent response from Reason’s Julian Sanchez which directly targets the marriage-for-procreation ideal, showing that in addition to lacking strong arguments in its favor, that traditionalists are wrong to claim that was once the sole motive for having such an institution.
Book Review: The God Gene : How Faith Is Hardwired into Our Genes by Dean H. Hamer
This book is entertaining but erratic. To start with, the title is misleading. The important parts of the book are about spirituality (as in what Buddhists seek), which has little connection with God or churches. He does a moderately good job of describing evidence that he has identified a gene that influences spirituality. He makes plausible claims that spirituality makes people happy (that part of the book resembles the works of Csikszentmihalyi and Seligman). He makes a half-hearted attempt to argue that spirituality has evolutionary advantages which isn’t very convincing by itself, but in combination with the sexual selection arguments in Miller’s book The Mating Mind it becomes moderately plausible.
About halfway through the book, he runs out of things to say on those subjects and proceeds to wander through a bunch of marginally related subjects.
His descriptions of psilocybin, prozac, and ecstasy were interesting enough to make me want to learn more about those and similar drugs.
His claims that placebos are effective seem very exaggerated (see this abstract).