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Chris F. Masse August 5th, 2008

Should Google subsidize the Lunar X Prize contract on InTrade?

John Salvatier,

Our good friend Bo Cowgill might have already re-created those prediction markets on Google’s internal prediction exchange at a marginal cost of zero US dollar. No need for him to “subsidize” external prediction markets.

[As an appendix, I precise that I am in favor of opening the enterprise prediction markets to external traders, for some questions.]

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Subsidizing prediction markets is an old Robin Hanson idea that carries quite a heavy price tag.

Conditional prediction markets is a great idea on the paper. Many people (e.g., Mike Linksvayer) like the idea. However, here is what the uncritical Robin Hanson fanboys blogging on Overcoming Whatever won’t tell you:

• The first problem is that nobody trades those things.

• The second problem is that subsidizing those conditional prediction markets costs an arm and a leg.

• The third problem is that no major news media outlet has ever quoted the prediction market prices / probabilities generated by those conditional prediction markets.

Peter McCluskey could have rent a French mistress (or a French gigolo) for a full year with all the money he is spending on Robin Hanson’s idea. Or vaccinated the whole African continent against Malaria. See Peter’s comment, at the middle of the webpage, here.

Philanthropy and prediction markets are not mixing well —yet.

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Tags: conditional prediction markets, decision-aid markets, event derivative markets, Peter McCluskey, Philanthropy, prediction markets, real-money prediction markets, Robin Hanson, subsidized conditional prediction markets, subsidized prediction markets

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Chris F. Masse August 4th, 2008

Tags: conditional prediction markets, event derivative markets, prediction markets, Robin Hanson, Silas Barta

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Chris F. Masse August 2nd, 2008

Silas Barta

Tags: conditional prediction markets, event derivative markets, prediction markets, Robin Hanson, Silas Barta

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Chris F. Masse July 8th, 2008

Via our good friend Mike Linksvayer: — Implied Prices for Presidential Decision-Aid Markets — Implied Prices for Presidential Decision-Aid Markets

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My good Doctor Robin Hanson,

Please, refresh my memory:

- Are your experimental, conditional prediction markets offered by the Iowa Electronic Markets or by InTrade Ireland?

Additional question for our Master Of All Universes:

- Who has done more for web-hosting experimental prediction markets, overall: the Iowa Electronic Markets or InTrade Ireland?

Thanks for providing me with some answer(s) on those 2 important questions.

Best Regards,

Signed: Chris “GadFly” Masse

PostScriptum: When the CFTC refreshes its webpage that indexes the comments to its concept release on “event markets”, you will see that that issue has been raised by some “gadfly”.

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Tags: conditional prediction markets, decison-aid markets, experimental prediction markets, InTrade, Iowa Electronic Markets, Robin Hanson

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Chris F. Masse June 16th, 2008

Tags: conditional prediction markets, Oil price, SegWay, SegWay sales

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Chris F. Masse April 21st, 2008

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Robin Hanson on “silly” research topics:

[M]ost people think futarchy (government by [prediction] markets) is silly, even though most think it has a decent chance of performing well [...].

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Decision markets and decision-aid markets are 2 great concepts pushed by Robin Hanson, the world’s #1 researcher in the field of prediction markets. But they are just inventions, not innovations. What is important is to find out which population segment or which class of business executives find this stuff productive and helpful.

In that perspective, his presidential prediction markets at InTrade are good ideas, and the liquidity there (helped by an AMM) is decent enough. But they are just betting supports, right now. I haven’t seen any opinion leaders taking them as a trusted source of information, which is the damn goal. We will see whether that comes true in the future.

If Robin Hanson were really serious in finding a killer app for his concept of decision-aid markets, he would of course come up with conditional prediction markets in the realm of sports, which is the most popular topic in the real-money prediction markets. Alas, I often have the impression that the academics in the field of prediction markets have profound disdain for sports prediction markets.

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Robin Hanson on seeking decision advice:

[...] We rarely seek out advice, and when we do it is usually on much smaller decisions. [...] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn’t seem to bode well for fielding decision markets on the biggest organizational decisions.

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Allow me to digress from there. I think that the reading from the prediction markets is like an advice —in that you have to accept the market message as an authority. If you are an expert with direct access to primary sources of information, I don’t think you’d rely on the message from the public prediction markets (which are information aggregation laggards). The big mistake from Robin Hanson and the others has been to sell the public prediction markets as tools for the decision makers. That could happen, but marginally, I believe. Experts and decision makers will firstly want to rely on their primary sources of information and on their analysis.

I think that the population segment which is the more likely to appreciate the consumption of market-generated probabilities would be composed of people who want a chopper view of world events. Prediction market journalism should satisfy this dashboard need.

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[Please note that the thoughts expressed above refer to the public prediction markets (as stated in the post title --think BetFair-TradeFair, InTrade-TradeSports, Betdaq, HubDub, NewsFutures, and Hollywood Stock Exchange) ---not the enterprise prediction markets, which is a horse of another color.]

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Robin Hanson on decision-aid markets:

I don’t recall ever turning down a chance to consult on prediction markets for a Fortune-500 company. If you know of an opportunity that I’m missing, do let me know.

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Doc, are there more Fortune-500 executives and managers attending a conference on extra-terrestrials or a conference on finance?

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Tags: conditional prediction markets, decision markets, decision-aid markets, event derivative markets, prediction market journalism, prediction markets, public prediction markets, Robin Hanson

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Chris F. Masse April 14th, 2008

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Robin Hanson:

[...] We rarely seek out advice, and when we do it is usually on much smaller decisions. [...] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn’t seem to bode well for fielding decision markets on the biggest organizational decisions.

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The big picture:

1. The insurmountable obstacle to the implementation of any “decision market” (in Robin Hanson’s original concept - PDF file) is the decision maker’s ego. CEOs, board administrators and heads of states are honchos who will never outsource decision-making to conditional prediction markets. That will never happen.
   
2. Let alone the impossibility of overhauling our democracies.
3. The concept of decision markets (PDF file) in itself is superb, though —and that makes Robin Hanson a great thinker.
4. Great inventors seldom make great innovators. Innovators borrow ideas from inventors and apply them in ways that inventors never envisioned. In the future, Robin Hanson’s concept of decision markets might inspire applications in digital communities of libertarians (like Second Life), for instance.
5. As for decision-aid markets (a derivative, which most people confuse with his original concept), they make full sense —provided that you talk in decision makers who are already convinced by the no-ego, free-market, information-aggregation, secondary-information-source philosophy. There is only a fistful of them, out there. In that regard, Robin Hanson’s best use of his time would not be blogging incessantly about decision markets for his little clique of fanboys, or touring the world to plug futarchy to gullible audience, but to consult with the 1% of the Fortune-500 companies that could be truly interested in that radical market-based solution. Or maybe Robin Hanson should start up his own enterprise, all managed in accordance with his radical concept(s).
6. The next frontier is prediction market marketing —a bottom-up approach focused on quantifying in all dimensions the small population segment that can derive full joy from reading our prediction markets. That is ungrateful hard work, which our prestige-seeking, publicity-thirsty, acclaim-drunken, Earth-shattering propeller heads are not interested in, I suspect.
7. And that wraps up our “Robin Hanson Watch #23,173″. Stay tuned for our next episode, sometimes later.

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Robin Hanson’s comment:

I don’t recall ever turning down a chance to consult on prediction markets for a Fortune-500 company. If you know of an opportunity that I’m missing, do let me know.

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Tags: conditional prediction markets, decision making, decision markets, decision-aid markets, decisions, event derivative markets, prediction markets, propeller heads, Robin Hanson

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Chris F. Masse March 22nd, 2008

VIDEO - (it’s a Guatemala-based website) - 2007-10-24

I have clicked on the second blue link, on that webpage, and Window Media Player opened, and now I am watching The Master Of All Universes lecturing a group of politics students…

The main difficulty in developing efficient public policies is misinformation and false beliefs. The traditional information institutions are the media academics, and informal communications. These institutions have limitations in providing reliable, efficient, useful and enough information to make decisions. Speculative markets base their profits on the prediction of price patterns and are proving to be an efficient information institution. Betting markets have been better and faster predictions than experts because manipulators develop more accurate information. Therefore, speculative and betting markets have to become the central institution on political institutions in order to have effective public policies.

Click here to read the chapter “Decision Markets for Policy Advice”.

Great. But the second part of the video is more painful to follow. The students’ questions are sometimes inaudible.

Tags: conditional prediction markets, decision markets, event derivative markets, prediction markets, Robin Hanson

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Chris F. Masse March 4th, 2008

His first group of conditional prediction markets are traded quite well (although thinely), but his second group is a thermo-nuclear disaster. Right-click on the 2 images below, and open the InTrade links in new browser tabs.

I have excerpted the most liquid prediction market on the other blog (which was linked today by Marginal Revolution, for the second time –much to MG’s dismay ).

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InTrade - “US Presidential Decisions”

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InTrade - “Impact of Next President”

Tags: conditional prediction markets, InTrade, Robin Hanson

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Robin Hanson February 2nd, 2008

HP began to explore prediction markets in 1996, but did not even consider applying them to the 2002 HP-Compaq merger. Similarly, Yahoo and Microsoft are two of the companies mentioned most often as being involved in prediction markets (along with their main competitor Google), but I’ll bet none are considering the by-far-most-valuable markets they could create, on their just-announced proposed merger.

Decision markets could say whether this merger is good for shareholders, by estimating the combined stock price given a merger, and given no merger. Similarly, decision markets could say whether this merger is good for these firms’ customers, by estimating the price and/or quantity of web ads given a merger, and given no merger. This might help convince regulators to approve the merger.

My main doubt here is whether ad price and quantity are good enough measures of the merger’s social benefits - what other outcomes could such markets estimate, to speak more clearly? And this is a very clear demonstration that these companies are just not serious about finding the highest value applications of prediction markets.

Cross-posted from Overcoming Bias.

Tags: conditional prediction markets, decision markets, decision-aid markets, event derivative markets, merger, Microsoft, prediction markets, Yahoo!

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