In France, prediction markets are hyped by 2 bozo economists -David Thesmar and Augustin Landier.

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Emile Servan-Schreiber is doing a great job of putting prediction markets on the French media scene. (As I type this, he is on French TV.)

2 green-foot French economists (David Thesmar and Augustin Landier) are hyping the prediction markets in the French media, using a non-scientific language (&#8220-predictive markets&#8221-, &#8220-stocks&#8221- *) and few references to hard facts. Their background is not stellar. They penned an Op-Ed in July 2007, titled, &#8220-The mega-crash won&#8217-t happen&#8221- [PDF file].

Of course, one year later, the developed world experienced (and is still experiencing) the worst financial crisis ever. What&#8217-s funny is that, in 2007, our 2 economists-in-chief were hyping the non-regulated credit derivatives that sent us into the depression, and denying the possibility of systemic risk. What a bunch of incompetents.

Emile, please recruit more serious people.

[*] The good vocabulary is &#8220-prediction markets&#8221-, and &#8220-traded bets&#8221- or &#8220-event derivatives&#8221-.

Next: French bozo economist Augustin Landier is hiding his 2007 Op-Ed that stated that the financial crisis “won’t happen”.

Next: French bozo economist David Thesmar is hiding his 2007 Op-Ed that stated that the financial crisis “won’t happen”.

Ten people are bidding on a stock at 90, while 100 people are offering to sell it at 91. What price is the next trade?

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Interviewees often say that since there are more sellers than buyers, the sellers get to determine the price. That logic usually yields an answer between 90 and 91. That&#8217-s exactly wrong. &#8220-They&#8217-re not thinking about what&#8217-s going on in the real world,&#8221- says Rubczyk. In reality, when there are more sellers than buyers, the price falls. So the next sale would probably be in the mid- to low 80s.

&#8220-Some candidates would say you can&#8217-t answer that question, because there&#8217-s no formula,&#8221- says Rusczyk. &#8220-If that makes their heads explode, that&#8217-s a problem.&#8221-

What would our Jason Ruspini have answered to that quiz?

How does InTrade deal with insider trading?

InTrade CEO John Delaney (in 2007):

Insider trading is one of the wicked problems, perhaps. Intrade is about providing the best predictive information. If insiders have information, then getting that information reflected in the market increases the quality of the information. I know this is not the conventional view concerning insider trading, and I am not arguing wholesale adoption or acceptance of insider trading. But we all know that, in the real world, insiders trade on inside information. We have even had markets on insider trading. Our view is to get the best information available into the market while we make sure there is some fair protection for outsiders.

As I said, the problem is that this view is very unpopular among event derivative traders.

APPENDIX: Economic arguments in favor of insider trading.