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.
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.