- to “help doctors and patients gain insights into the safety and efficacy of specific drugs at the early stages of clinical trials beyond information that is publicly available.”

Complete B.S.

Indeed, it appears to me that [prediction markets] are growing not from corporate or government use, but mostly organically from within academia, stock-futures circles and political-junkie communities. I’m reading the interesting variety of writers and prediction-marketeers at Midas Oracle, which brings together widely ranging posts from faculty members at Harvard and other universities, daytraders, and even a few “amateurs.”

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Lewis Sheperd notes in his post that a number of for-profit companies (like Google and General Electric) are using private prediction markets (a.k.a. enterprise prediction markets). Non-for-profit organizations (like governmental agencies) would do great, too, using the same forecasting tool —an “information aggregation mechanism” (IAM), more exactly.

Robin Hanson, instead of boring us with philosophy, go evangelizing that newbie.

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UPDATE: Yes, he is willing to learn. See his comment.

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May 2007′s Blog Post: INSIDER TRADING: World Bank employees speculating on the Paul Wolfowitz event derivatives at InTrade-TradeSports?? -

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For Aprils’s Fool Day 2007, Kenneth Rogoff wrote the following hoax.

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ForeignPolicy.com

MEMORANDUM:
TO: World Bank Staff
FROM: Paul Wolfowitz, President of the World Bank
RE: Insider trading in “Paul Wolfowitz resignation” contracts

Dear Staff:

As long as I remain Bank President, I intend to continue enforcing my signature anti-corruption initiative at the world’s most important international development agency. My past life as Deputy Secretary of Defense under Donald Rumsfeld has taught me the importance of carrying out a plan with unwavering certainty.

In that regard, I am writing to you with a stern warning. It has come to my attention that many of you are turning your internet browsers to TradeSports.com, where there is an active market in “Paul Wolfowitz resignation” contracts for 2007. (For those of you who don’t know, this is a website where you can take bets on a variety of political events.)

I hope you understand that any attempt by World Bank Staff to buy or sell these contracts will be considered insider trading in clear violation of my anti-corruption guidelines. Your knowledge of normal World Bank personnel procedures gives you a clear information advantage in predicting whether I will be forced to resign. You must not abuse it. Please note: the Bank’s prohibition on insider trading applies not only to immediate family but also to significant others (e.g., girlfriends).

Some of you have already queried my office about whether it would still be insider trading if, when you buy “Paul Wolfowitz resignation” contracts (betting that I will leave before 2008), you also sell short “Alberto Gonzalez resignation” contracts. (This is a bet that my friend, the U.S. Attorney General, will hang on through end 2007.) My emphatic answer is no! Long Wolfowitz, short Gonzalez is only a “relative value play” that hedges out the value of loyalty to President Bush. You would still be guilty of insider trading on your Bank-specific knowledge. (And who says I don’t know enough about finance for this job!)

I hope that by now, most of you have accepted my sincere apology for the unusual pay and promotion package given two years ago to your colleague, Ms. Shaha Riza. That is, when I arrived here from my position helping to plan and manage the Iraq war for the Bush administration. I have acknowledged my mistakes (at my present job, that is), and asked for your understanding. As staff, you understand how difficult it can be to navigate the Bank’s complex rules and procedures. Please do regard my small slip as providing moral cover for poor developing-country client states that are not able to meet the good governance conditions we ask before disbursing aid.

I trust you have not been unduly influenced by the recent letter calling for my immediate resignation, signed by forty-two former World Bank managing directors, senior vice-presidents, vice-presidents, and directors. You and I can surely see through this thinly-veiled attempt to manipulate the value of “Paul Wolfowitz resignation” claims. I want to assure you that the World Bank Internal Investigations Unit will look into this matter. If any of the letter’s signatories are found guilty of price manipulation, they will be dealt with harshly. Let’s not forget who is paying their pensions…

Some of you may wonder how I can remain at the Bank when so many staff are openly seeking my dismissal. (Thank goodness most of you have tired of wearing those silly blue protest ribbons.) And what about the claim that my deputy, New Zealander Graeme Wheeler, told me I should resign at a supposedly-closed senior staff meeting last week?

Let me fill you in on the facts of life. Ever since the World Bank was founded shortly after World War II, the President of the United States has always hand-picked the President of the World Bank. That’s life; stop whining. We Americans may hold only 16 percent of the shares at the World Bank, but we insist on keeping its presidency as our birthright. So what if there might be better qualified candidates from the developing world or Asia? I am tired of hearing people say that South African finance minister Trevor Manuel would be far more effective in my job than I am. (Trevor is a good guy, but dream on. He has neither the right passport nor the right friends.)

Speaking of which: Some of you may also wonder whether World Bank staff, directors, or presidents are permitted to buy “George W. Bush Impeachment” contracts, which are also presently listed on TradeSports,com. Tricky question, but the bottom line is that your employment generally precludes political activity of this type. You will be relieved to know, however, that I have already instructed the Bank legal staff to allow exceptions to the insider trading rules for anyone who can demonstrate a truly compelling need to hedge against a change at the White House.

Thank you for your kind attention, and I appreciate your continuing to focus on your important work in relieving poverty during this unfortunate episode.

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Ultimately, Paul Wolfowitz resigned from the World Bank on a Saturday. The next Monday, he was back at the American Enterprise Institute —the nest (with the Heritage Foundation) of all neo-cons and warmongers who have destroyed the Republican Party.

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Paul Wolfowitz’s profile at the American Enterprise Institute

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- How the neo-cons drove the United States of America into the unecessary Iraq war

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Previously: The CFTC is going to close the comments in 15 days. We have 15 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).

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Another academic fella who would be better off researching his topic before blogging on something he does not master.

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Via our good friend George Tziralis of AskMarkets

Since its founding in 1996 [by Max Keiser and Michael Burns], HSX has had 1.7 million registered traders, according to Costakis. Each day, between 15,000 and 20,000 people use the site, racking up some 50,000 trades, he added.

Rock around the bunker… Rock around, rock around… Rock around the bunker… Rock around, rock around… Rock around the bunker… Rock around, rock around…

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Media Coverage

The CEO Guide To Prediction Markets (Latest case studies + tip sheet + podcast)
by Rachael King, July 7 2006

How to Decide? Create a Market
by Michael Totty, June 19, 2006

The Crowd Knows Best
by Serena Altschul, January 8, 2006

Wisdom of the crowd
by Jim Giles, November 17, 2005

Market Magic
by Alix Nyberg Stuart, November 1, 2005

Place Your Bets
by Bill Saporito, October 16, 2005

The Power of Us
by Robert Hof, June 10, 2005

Guessing Games
11/18/2004

Australian Financial Review
Opinion Market
by James Hall, August 2004

All seeing all knowing
by James M. Pethokoukis, 08/22/2004

The End Of Management?
by Barbara Kiviat, 07/06/2004

Smarter than the CEO
by James Surowiecki, 06/01/2004

You Can Bet on Idea Markets
by Ajit Kambil, 12/01/2003

Can markets be used to help people make nonmarket decisions?
by Hal Varian, 05/08/2003

Decisions, Decisions
by James Surowiecki, 03/17/2003

Leading With an Invisible Hand
by Ajit Kambil, July 2002

IEEE Intelligent Systems
Decision Markets
by Robin Hanson, May/June 1999

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Research Papers

Presidential Reality Check: An Assessment of NewsFutures’ 2004 Presidential Election Prediction Markets
by Servan-Schreiber, for NewsFutures — 1/27/2005

Prediction Markets: Does Money Matter?
by Servan-Schreiber, Wolfers, Pennock & Galebach, in Electronic Markets, Vol 14, No 3 — 9/2004
[View EM Abstract]

Manipulators Increase Information Market Efficiency
by Hanson & Oprea — Under review

Prediction Markets
by Wolfers & Zitzewitz, in Journal of Economic Perspectives — In Press

The Real Power Of Artificial Markets
by Pennock, Lawrence, Giles, & Nielsen, in Science — 02/09/2001

Prediction Markets as Decision Support Systems
by Berg & Rietz, in Information Systems Frontiers — 5:1, 79-93, 2003

Information Aggregation Mechanisms: Concept, Design and Implementation for a Sales Forecasting Problem
by Chen, for Hewlett-Packard Laboratories — 1997

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Books

Making Markets

How Firms Can Design and Profit from Online Auctions and Exchanges
by Ajit Kambil & Eric Van Heck (Harvard Business School Press, 2002)

The Wisdom of Crowds

Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations
by James Surowiecki (Doubleday, 2004)
Listen to the author on the Diane Rehm Show:

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[...] In theory, a quiet, dispersed buy of these very cheap contracts coupled with a well-timed leak could be a quick way to get some cash into the Palestinian Authority’s bare coffers. And Hamas wouldn’t even have to recognize Israel: Just whisper in the ear of a New York Times reporter that a deal is in the works, sell when the price spikes, and then deny the story. [...]

I’m not sure the InTrade-TradeSports (or BetFair) event derivative traders would rush to buy just after reading just one story based on one leak. Before putting their money at stake, they would research the issue. There is a space of two or three days, I believe, between the date a story surfaces and the date the prediction market begins to become vibrant.

Plus, selling quick in thin markets is not that easy, as Alex Forshaw will tell you.

Previous: FAKE WORLD BANK MEMO: Harvard professor of economics Kenneth Rogoff laughs in Paul Wolfowitz’s face. + INSIDER TRADING: World Bank employees speculating on the Paul Wolfowitz event derivatives at InTrade-TradeSports??

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Work Experience

President of World Bank: 2005-2007
Responsibilities: Reining in European lefties, raining tax-free money on Arab girlfriend, and giving anti-corruption efforts a bad name.
Achievements: Paralyzed the international lending apparatus to the point where small countries had to max out their Visa cards to pay for malaria medicine. Learned the traditions of many cultures, including those of Turkey, where you apparently are not supposed to take off your shoes at mosques to reveal socks so full of holes that both big toes poke blasphemously through.

Deputy Secretary of Defense for President George W. Bush: 2001-2005
Responsibility: Starting a war.
Achievements: Mismanaged the world’s most powerful army. Shattered the system of international diplomacy that kept the peace for 50 years. Undermined the credibility of American intelligence operations. Needlessly brought humankind to the brink of nuclear war. Destroyed Iraq.

Demented Visionary: 1993-2001
Responsibility: Concocting a delusional plan for regime change in Iraq with pals like Shaha Riza, Ahmad Chalabi and his merry band of Iraqi exiles who conjured up phony intelligence about Saddam’s W.M.D.
Achievements: Imagining an Iraq that didn’t exist.

Free, pirated version of the column here. THE SITE IS NOT SAFE FOR WORK.

Previous: FAKE WORLD BANK MEMO: Harvard professor of economics Kenneth Rogoff laughs in Paul Wolfowitz’s face. + INSIDER TRADING: World Bank employees speculating on the Paul Wolfowitz event derivatives at InTrade-TradeSports??

Static chart from InTrade-TradeSports

Contract expired to 100.