Why doesn’t Robin Hanson implement his grandiose idea on a small organization (like George Mason University), as opposed to a national government, to see whether it makes sense? I suspect it doesn’t. Prediction markets have very, very slightly improved the world since 1988, my good doctor Hanson. That does not make a strong case for using prediction markets in decision making —let’s call that “collective decision making“, by the way.

I don’t really know if Surowiecki likes my proposal, or even knows of it. He’s never returned my emails, though maybe he’ll see this post. I suspect that he sees my proposal is too “out there” to befit a respected New Yorker columnist, and so wouldn’t endorse it even if he knew of and privately liked it.

Addendum: James Surowiecki on boards

Robin Hanson, is what I would term a market fundamentalist – somebody who believes that markets are the primary mechanism for achieving the public good. Recent events have demonstrated that this creed is morally bankrupt. We are, in the words of Michael Sandel, “at the end of an era of market triumphalism”.

Robin Hanson:

I deny the accusation, though I’m not sure why I should have to. Having a high opinion of the eventual info power of decision markets [*] is very different from saying “markets are the primary mechanism for achieving the public good.” Shouldn’t you have to first provide support for your accusation, rather than me somehow having to first prove bald accusations wrong?

[*] That’s at the core of the issue. Somebody who has a “high opinion” of something that has not given stellar results since 1988 is obviously exaggerating. I personally have a somewhat good opinion of prediction markets and conditional prediction markets, but not a “high opinion” —sense my nuance. Niall O’Connor has been too strong in his “accusation” ( ), but he is a bit in the right. [UPDATE: Niall O'Connor has an honest reply to Robin Hanson.]

Find here a good review of “Predictocracy” —via Daniel Horowitz.

Nick, I never said there are prediction markets that don’t influence decisions. On modeling factors to get trade existing, I mean any one factor is enough. On coercivity, I proposed a mechanism for governance, and described how it can be applied in both voluntary and coercive contexts. I get that you hate coercive governance, and want me to rail against it, and refuse to offer it any assistance, but I didn’t discuss that because it isn’t directly relevant. I have discussed moral hazard; if you refuse to read my publications, how can you know what I have or haven’t commented on?

Nick’s answer:

This grossly mischaracterizes my position and my reason for raising the subject. In fact I have written that coercion is quite necessary for legal procedure. (Notice that I am providing links rather than vague general claims that I dealt with this issue somewhere, and you have to root through all my old obscure papers to find where I did). My objection here is not ideological, it is that when you add coercion to an economic transaction, the outcome is usually quite different than a voluntary transaction. You can’t model them the same way. Standard economics assumes voluntary transactions and I have found that economists usually make gross errors when modelling coercive transactions. You are sweeping this crucial factor entirely under the rug in the explanations you’ve written for the general public — if you are also, as it’s quite reasonable to suspect, neglecting this crucial factor in your papers, the output from these Holy Writs, without having read which Thou Shall Not Comment on the straightforward political proposal allegedly justified therein, the conclusions reached by these vaunted works are likely to be wrong.

As for those publications, I have read your *public* publications on futarchy, i.e. those written for the general intelligent public and not just for specialists who share your particular set of hidden economic assumptions. I’ve also read enough of your technical papers on other subjects to know that this is not a very worthwhile way to figure out what you’re up to. Like most academics, you are very poor at stating your assumptions — you have a set of hidden or tacit assumptions and hidden special meanings of words, presumably shared with the journal referees, which cannot be readily reverse-engineered by the intelligent layman. So, like most of the supporters of your proposal, I read your clearer restatements, in the form of blog posts and summaries. In the case of futarchy, the proposal you are making is clear enough, it is the justifications that are obscure. And in your statements to the general public from what I’ve seen you have not dealt at all with coercion or moral hazard, nor have you answered any of my objections here. If you had seriously dealt with these problems before it shoudn’t be so hard for you to answer my objections now, but instead all we’re getting from you is ad hominem argument.

There is now a prediction market industry, where I do a lot of consulting, most of which is to private companies.  Most of these are on prediction markets, but some are decision markets.

What Robin Hanson does not say to his gullible readers (mostly, young collegians who have no experience of real-life forecasting) is that:

1. When you ask any non-ideological researchers, these days, on the value of prediction markets over simpler collective intelligence mechanisms, they tell you either that the benefit is very, very small or that it is non measurable (i.e., it probably does not exist).
2. Half of the so-called EMP industry (a microscopic industry that lives on hype and trial balloons, it should be said), which Robin Hanson is so proud to belong to, has abandoned enterprise prediction markets. Notably, NewsFutures (founded by a Robin Hanson fanboy, and advised for years by Robin Hanson himself) and CrowdCast (a VC-backed venture) have (independently of each other) decided to stop selling proposing EPM SaaS only to customers, and focused instead on simpler and more social mechanisms. For more information, I recommend my readers to go conversing with Emile Servan-Schreiver of NewsFutures, who has a lot to say about this issue. Emile is well versed into both the research and the practical sides of collective intelligence used within companies. [UPDATE: See Emile's comment.] Mat Fogarty (who, him, as experience in real-life forecasting for business) and Leslie Fine (a scientist) of CrowdCast are also good interlocutors.

Contrary to Overcoing Whatever, Midas Oracle publishes both the good and the bad about prediction markets. We do not censor the bad news. We do not cherry-pick the good news. You will notice, in the near future, that we will publish information that supports the opposite thesis (that is, EPMs are the panacea), and then we will link to Inkling Markets as the best interlocutor in town. We try to publish about both sides (EPMs are no good, EPMs are good), not because we are “bi-polar”, but because the jury is still out on this matter, and our readers need to have both arguments put under their very nose. Act one today.

An interesting set of slides —though it’s about the technicalities of value assessment, and not about the big picture.

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Combinatorial Prediction Markets – by Robin Hanson

Video + Slides

Slides from Hanson’s site – PPT file

Folks, this is great stuff. I may blog about it, again, later on —if I find time.

You can blog about it on Midas Oracle, if you wish. Or comment on it, just below. Do register yourself.

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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Prediction & Decision Markets – (PPT file) – by Robin Hanson – 2008-04-17

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And, that one, for your curiosity… really fascinating ( ):

Evolutionary Game Theory of Interstellar Colonization – (PPT file) – by Robin Hanson – 2008-05-26

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