Three years after the Policy Analysis Market proposal’-s untimely and tragic abortion has analysis of probable policy consequences improved at all? If reports on the Iraq Study Group are any indication, the answer is no. I gather a group of commissioners and their staff chatted with a number of supposed experts over many months and eventually churned out a long list of plausible sounding recommendations with zero attempt to quantify probability or size of the consequences of those recommendations. The report itself, which I have only skimmed, contains 39 instances of the word could, 34 of the word would, one of the word prediction:
These and other predictions of dire consequences in Iraq and the region are by no means a certainty.
Awww, that’-s nice. And one of the word probability:
But there are actions that the U.S. and Iraqi governments, working together, can and should take to increase the probability of avoiding disaster there, and increase the chance of success.
Note that the report isn’-t assigning probability, rather asserting someone should take care to increase the probability of a good outcome!
The report’-s analysis of four often advanced policy courses (Section I(C): withdrawal, stay the course, more troops, devolution) consists of a string of cheap assertions.
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Unfortunately no private sector prediction market has stepped in to fill this vacuum.`A little over two weeks ago as speculation about the ISG and potential changes in U.S. policy ramped up I looked for prediction markets relevant to Iraq and found three, all play money, one at each of FX, Newsfutures, and WSX. Unfortunately all are concerned with U.S. troop levels or deaths and none are conditional on other events.
So I created a market on Inkling with four stocks: will the Iraq Body Count increase by 40,000 or more from May through December of 2007, conditioned on whether U.S. troop levels fell below 100,000 in April 2007.
The latter will be judged based on the outcome of the Newsfutures contract USLEAV07. It seemed to make some sense to condition on an existing contract which already had some history and volume. As far as I know this is the first time a contract on one prediction market site has been conditioned on the outcome of a contract on another site. Not that it matters. This market was not a rare jewel, but an utter failure.
The market has attracted a total of two traders have made two trades, leaving prices almost exactly at their starting points, while Newsfutures’- USLEAV07 has fallen by over half. There’-s nearly free Inkles for the taking. Actually there are many markets at Inkling offering nearly free Inkles, including two Democratic U.S. presidential nomination markets with sharply different prices for some candidates, but apparently nobody wants Inkles.
Links to Iraq-related markets referenced above are at my personal blog.
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If I create a play money market again I shall do so on FX, which at least has a base of knowledgeable traders, some of whom are fairly motivated to improve their FX score. I make an exception for playing with new sites.
Like our host I would like to see more (any!) socially relevant real money prediction markets. Over a year ago Masse said the solution is always ‘-better marketing’-. Slightly less than a year ago he said The key to more socially relevant prediction markets is better marketing. Stay tuned, folks.
I’-m not certain that marketing is the critical piece (Tradesports hasn’-t really tried “-if you build it, they will come”- though this hasn’-t entirely stopped academics from using prediction and other market prices and fortuitous circumstances to make some socially relevant inferences), but it couldn’-t hurt when combined with a tiny bit of vision.
I’-m staying tuned.
Previous blog posts by Mike Linksvayer:
- Voodoo analysis of prediction market contracts
- Bob Barr markets
- Bob Barr candidacy fails market test.
- Small comforts of prediction markets
- The Economist is taking suggestions.
- Long-term housing derivatives?
- Economists to Watch
The marketing approach encompasses two branches: the discovering (surveys, focus groups, consumer/customer data analysis, brain storming, etc.) and the crafting (branding, advertising, promoting, selling, etc.).
Your clever blog post contributes (a lot) to the first part of the task. Whether you want it or not, your blog post is part of the marketing approach to socially relevant prediction markets.
Let me repeat: When a firm tries to adapt its offerings to its consumer/customer (present or future) needs, first it needs to mind it —that’s when marketing starts. Marketing does not start with promoting and selling, but well before that point.
I can buy into that expansive definition of marketing and its necessity for prediction markets to reach their potential.
Thanks. “Les Grands Esprits se rencontrent.”