US scientists have invented a pill that can boost memory.

-

Invented by Dr Gary Lynch from the University of California.

-

-

John Delaney (CEO of InTrade) – (InTrade PDF file – CFTC PDF file):

Nearly all leading academics, not known for their attraction to unanimity, have publicly supported event markets. A great majority of these academics have been supplied with Intrade market data in the past, a service that Intrade intends to continue, for all study leads to an increase in transparency and understanding of event markets. It seems that the leading event market academics make no distinction between the benefits derived from academic owned markets like Iowa Electronic Markets and commercial market platforms like Intrade.

Yet many academics, with some notable exceptions, do temper their policy prescription to suggest a “safe harbor” for academic sites where research might be more generally available. As noted above Intrade has gladly supplied its event market data, typically free of charge to most of the leading prediction market academics and their students, and we are committed to encouraging the future study of event markets by continuing to supply our event market data free of charge or at very deep discounts. The academics that study event markets do a great service in developing our understanding of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade seem to be providing the greatest depth and breadth in event markets.

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth and liquidity in its event markets than any other platform, it seems strange not to be a preferred purveyor. Perhaps the predominant reason many academics have held back from advocating and treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining the optimal development of event markets is unlikely to be achievable. It seems many academics and commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal result. While the optimal result may be more challenging to achieve, for consistency, for better price discovery for the benefit of all, as well as for the development of Intrade, we encourage CFTC to apply common goals, objectives and standards for all participants.

-

Prediction Market Industry Association – (PMIA)

4) Lobby for a clear legal and regulatory environment conducive to the productive adoption of prediction markets by individuals, firms, and governments, and ensuring free access to these markets by traders.

-

The PMIA’s first board is comprised of:

[...]
Robin Hanson (George Mason University)
Justin Wolfers (Wharton School – University of Pennsylvania)

-

Nearly all leading academics, not known for their attraction to unanimity, have publicly supported event markets. A great majority of these academics have been supplied with Intrade market data in the past, a service that Intrade intends to continue, for all study leads to an increase in transparency and understanding of event markets. It seems that the leading event market academics make no distinction between the benefits derived from academic owned markets like Iowa Electronic Markets and commercial market platforms like Intrade.

Yet many academics, with some notable exceptions, do temper their policy prescription to suggest a “safe harbor” for academic sites where research might be more generally available. As noted above Intrade has gladly supplied its event market data, typically free of charge to most of the leading prediction market academics and their students, and we are committed to encouraging the future study of event markets by continuing to supply our event market data free of charge or at very deep discounts. The academics that study event markets do a great service in developing our understanding of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade seem to be providing the greatest depth and breadth in event markets.

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth and liquidity in its event markets than any other platform, it seems strange not to be a preferred purveyor. Perhaps the predominant reason many academics have held back from advocating and treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining the optimal development of event markets is unlikely to be achievable. It seems many academics and commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal result. While the optimal result may be more challenging to achieve, for consistency, for better price discovery for the benefit of all, as well as for the development of Intrade, we encourage CFTC to apply common goals, objectives and standards for all participants.

-

Prediction Market Industry Association – (PMIA)

4) Lobby for a clear legal and regulatory environment conducive to the productive adoption of prediction markets by individuals, firms, and governments, and ensuring free access to these markets by traders.

-

The PMIA’s first board is comprised of:

[...]
Robin Hanson (George Mason University)
Justin Wolfers (Wharton School – University of Pennsylvania)

-

-

A recent article in the prestigious academic journal Science (May 16, 2008, Vol 320, p. 877-8) once again makes the case for regulated prediction markets, more commonly known as “betting exchanges” to online gamblers. The authors make the case that such markets are useful in forecasting future events with less error than traditional measures such as polling. This argument is hard to ignore, with the authors including 21 top economists from such esteemed institutions as Yale, Stanford, Berkeley, and the University of Pennsylvania. Notable among the authors is Justin Wolfers from the Wharton School of business at UPenn, an economist who has gained notoriety in gambling circles due to his work on such topics as NBA referee bias (highlighted in a May 2008 article from MajorWager: http://www.majorwager.com/index.cfm?page=27&show_column=660).

The concept behind using prediction markets as a decision-making tool is simple. “Shares” are made available on an open market, and the participants use their capital (and the promise of profits) to make predictions on future events, which is incorporated into the share price. In general, information tends to be widely dispersed, and a market allows wide-ranging opinions to be gathered and consolidated into a market-wide prediction. In other words, an infinite amount of opinions can be aggregated, and an open market with potential for profit provides an incentive for individuals to make their opinions publicly known.

Prediction markets always get more than their fair share of press near the end of the 4-year U.S. Presidential election cycle. The Iowa Electronics Market, housed at the University of Iowa, is perhaps the most well-known. The authors of the Science paper show that, in the week immediately preceding the Presidential elections from 1988 through 2000, the Iowa Electronic Markets erred by an average of only 1.5 percentage points from the actual vote results, while the traditional Gallup poll was off by 2.1%. Numerous other studies have shown the superiority of markets compared to other forecasting tools.

Of course, there have been some dust-ups regarding prediction markets in the past, most notably the “terrorist strike market”, unveiled a little too close to 9/11 to be palatable to the general public. The official name was the “Policy Analysis Market“, and it was established by the Pentagon to act as a prediction market for Middle East political events. It was quickly scuttled after heated comments from U.S. Senators, calling it “grotesque” and “stupid”, due to the perception of using catastrophic events such as assassinations as profit-making tools. Regardless of its political correctness (and the misinformed opinions of a few politicians), such a prediction market still holds value as a glimpse into the collective mindset of everyone with an understanding of political currents in the region. Utilizing such a prediction market as a component of foreign policy decisions may have ultimately spared the U.S. much grief in Iraq.

In recent years, prediction markets have grown beyond academic and government roles. Dublin-based InTrade is rapidly growing and provides many more options than the Iowa Electronic Markets. Others such as MatchBook have focused more on sporting contests, but provide coverage of other events as demand calls. Of course, those outside the U.S. have access to the largest betting exchange of them all, the massive European markets of BetFair. The success of these exchanges speaks to the public interest and feasibility of prediction markets.

One factor holding back the growth of online prediction markets is their close association with the quasi-legal world of sports betting and internet casinos. InTrade has been fairly proactive in this regard, spinning off from Tradesports to clean up its corporate slate, but it is still knee-deep in the legal sludge surrounding offshore “gambling”. All have to deal with the legal and financial hurdles of operating offshore.

The authors of the Science paper propose that clarification of internet gambling laws is needed to exploit the benefits of prediction markets within the United States. Clearly, the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 is one such mechanism restricting the widespread use of prediction markets. Another is the Commodity Futures Trading Commission (CFTC), the regulatory agency which oversees futures markets in the U.S. The CFTC has provided a “no-action letter” to the Iowa Electronic Markets, an assurance that they will not seek any enforcement action against the exchange. However, this protection is not absolute and may not trump state and federal law if challenged. The Science authors propose a number of legal reforms which will allow prediction markets to begin to gain acceptance within the U.S. financial regulatory structure.

By no means does the Science article condone large-scale public markets, at least not initially. They take a (typically academic) conservative approach, recommending new legal framework to allow for the establishment of small markets with limited scope so as to evaluate the promise and use of prediction markets. But baby steps are going to be a necessity in the growth and acceptance of regulated public markets.

Clearly, there are negative aspects to financial markets, and regulation certainly has its place. Bear Sterns, Enron, the S&L scandal of the 80s, and the current housing bubble all caused tremendous loss of wealth resulting from missteps in the financial markets. The current oil crisis is due at least in part to speculation, leading to the introduction of no less than 9 separate bills in the U.S. Congress seeking tougher regulation over the trading of commodities. However, the existence of problems in the financial markets does not necessitate their dissolution. Likewise, prediction markets are sure to encounter bumps in the road, but their utility should far outweigh the risks.

Should prediction markets be legalized in the U.S.? Almost certainly. They would have benefit across numerous industries, from business decisions to political policies to financial forecasting. Unfortunately, this would require building an unlikely bridge over the Puritanical moral moat placed around gambling in the U.S. But there is no inherent difference in betting on who will win in an election than what the price of oil will be in 6 months, or what the S&P 500 will close at on a particular date. Distancing prediction markets from “illegal” gambling, and instead likening them to regulated financial markets, will be a necessary first step towards broader acceptance.

The academic groundwork on prediction markets has already been laid, and offshore exchanges have begun to turn these concepts into functioning businesses. As these markets grow and begin incorporating more diverse opinions, we can expect their success rate at predicting the future to only grow. To restrict such a promising tool simply due to its perception that it is a gambling outlet is silly indeed.

6-25-08
Jay Graziani
MajorWager.com
graziani@majorwager.com

-

[This article is cross-posted from Major Wager.]

-

New York Times:

“Insider trading is a bigger deal in sports than in the financial markets,” said Justin Wolfers, a professor of business and public policy at the Wharton School at the University of Pennsylvania, who studies gambling. “We have the Securities and Exchange Commission here. Why not the same for what is a multibillion-dollar sports gambling market?”

-

Previously: BetFair’s Mark Davies on sports betting and the fight against corruption

-

PREDICTION MARKET INDUSTRY ASSOCIATION IS BORN

Monday, Oct 22, 2007

PREDICTION MARKET INDUSTRY ASSOCIATION IS BORN

Industry and thought leaders join forces to help promote and grow the field of prediction markets.

London (Oct 22 2007) – The recent Prediction Market Summit held in London, UK, concluded with the creation of an international industry association tasked with promoting awareness, education and validation for the rapidly growing field.

Participants at the summit reflected the rich international and dynamic texture of the field, including veteran industry leaders such as Hollywood Stock Exchange (US), Intrade (IRL), NewsFutures (US), and Pro:kons (AU), as well as newer entrants such as Gexid (DE), Mercury (UK), Nosco (DK) and Xpree (US). Also present were many members of the international academic community from institutions in the UK, Scandinavia, Germany, Ireland, and Japan, as well as representatives of Schlumberger, Microsoft, Nokia and other companies using or considering the use of prediction markets in the operation of their business.

The Prediction Market Industry Association (“PMIA”) will focus on initiatives that can benefit all stake-holders while not hampering the healthy competition and rapid innovation that characterizes the field. Concretely, its first priorities are to:

1) Create a central, standardized registry of available prediction stocks and contracts from different prediction markets. This open central resource will help demonstrate the wide coverage of available predictions, facilitate search, and make prediction market data more easily available to researchers, the media, and the public at large. Participation will be entirely voluntary, and the program will leave each publisher in complete control of the commercial terms for accessing its data.

2) Offer a directory of its members, a library of core readings, and other such resources enabling newcomers to quickly learn about the field and find their way among the various worldwide offerings.

3) Provide a consensual venue for sharing industry-relevant information and announcements, and organize regular meetings of the industry to discuss common opportunities.

4) Lobby for a clear legal and regulatory environment conducive to the productive adoption of prediction markets by individuals, firms, and governments, and ensuring free access to these markets by traders.

To lead the collective effort on these initiatives, the summit participants chose a five member board of directors: three from industry and two from academia. Participants immediately came to consensus on the two academic members. The three industry board members, however, were elected in a secret ballot where voters could nominate any industry player whether present at the meeting or not. The PMIA’s first board is comprised of:

Emile Servan-Schreiber (NewsFutures) Chairman
Jed Christiansen (Mercury Research & Consulting) Treasurer
John Delaney (Intrade)
Robin Hanson (George Mason University)
Justin Wolfers (Wharton School, University of Pennsylvania)

The board’s first task will be to establish the association’s bylaws, which will naturally include provisions for the regular rotation of the members of the board. A first draft will be published within the next two weeks and will be open to comment by all interested parties.

As it pursues the PMIA’s collective benefit agenda, the board looks forward to drawing heavily from the prediction market community’s extraordinarily rich and diverse pool of talent and experience. Comments, suggestions, and offers to help are most welcome. (We thank our friends at Nosco for graciously designing the association’s logo.)

As of today, the Prediction-Markets Google Group is the official discussion venue of the association. (Thanks to John Maloney for turning over the keys of this valuable resource.) This discussion group will act as the de facto virtual home of the association while this website is in construction.

In recognition of the inspiration provided by the river Thames, on the banks of which it was born, and the fact that London is both the financial capital of the world and a historical bridge between the United States and Europe, where most of the activity in the field currently takes place, the PMIA board has chosen this city as its physical home.

###

For additional information contact:

Emile Servan-Schreiber T: +1 (443) 321-2700 E: ejss@newsfutures.com
Jed Christiansen T: +44 796 358 3663 E: jed.christiansen@mercury-rac.com
John Delaney T: +353 1 6200 300 E: john.delaney@intrade.com
Robin Hanson E: rhanson@gmu.edu
Justin Wolfers E: jwolfers@wharton.upenn.edu

NEXT: MIDAS ORACLE STATEMENT ON THE PREDICTION MARKET INDUSTRY ASSOCIATION

UPDATE: Their new website is born, EJSS tells us: Prediction Market Industry Association

External Link: The full list of all the industry associations at CFM.

Justin Wolfers, an assistant professor of business and public policy at the Wharton School of the University of Pennsylvania who studies prediction markets, said that if Simon & Schuster relies on the traders’ judgments to select a book, it could skew the bets themselves. “If they say we find it really persuasive that everyone bet on book A, they’re just looking at a book that everyone bet that everyone else bet that everyone else thinks is the best book,” Mr. Wolfers said. “So you don’t end up with the wisdom of crowds, but the infinite reflection of crowds looking at crowds.”

Media Predict

—

MIT Center for Collective Intelligence:

CCI Spring 2007 Seminar Series

All seminars will be held in NE20-336 (3 Cambridge Center).
CCI seminars are on Mondays and Thursdays during the spring semester of 2007
- Mon Mar 5, 4:00-5:30 Richard Hackman and Stephen Kosslyn, Harvard University, Brains and Groups: Findings from a Cross-Level Research Program
- Thur Mar 15, 4:00-5:30 Fernanda Viegas and Martin Wattenberg, IBM Research, Visualizing Wikipedia: Then and Now
- Thur Mar 22, 4:00-5:30 Brewster Kahle, Director and Co-Founder, Internet Archive, Universal Access to Human Knowledge (Or Public Access to Digital Materials)
- Thur Apr 5, 4:00-5:30 Marty Tenenbaum, Founder and Chairman, CommerceNet, Healthcare 3.0: Transforming medicine through collective intelligence
- Mon Apr 9, 4:00-5:30 Henry Jenkins, MIT Comparative Media Studies Program, How Collective Intelligence is Transforming the American Entertainment Industry
- Thu Apr 19, 4:00-5:30 Talk rescheduled for April 24
- Mon Apr 23, 4:00-5:30 Kevin Crowston, Syracuse University, The Developmental Arc of Participation in Massive Voluntary Collaboration
- Tue Apr 24, 4:00-5:30 Bo Cowgill, Google
- Thu May 3, 4:00-5:30 Seminar changed to Monday May 14
- Mon May 7, 4:00-5:30 Tara Lemmey, Chair, Technology Committee of the Markle Taskforce on National Security in the Information Age, Vast Innovation in Intelligence: The Collective Approach to National Security
- Mon May 14, 4:00-5:30 Justin Wolfers, Wharton School, Prediction Markets
- Thu May 17, 4:00-5:30 Doug Engelbart, The Augmentation of our Collective IQ

Keith Anderson, do you have something to wear?

Justin Wolfers, Wharton School
(talk based on joint work with Eric Zitzewitz)
Monday, May 14, 2007 — 4:00-5:30 pm
3 Cambridge Center, MIT Building NE20, Room 336 Conference Room, MIT, Massachusetts, USA

Paper: PDF file

Assistant Professor of Business and Public Policy at The Wharton School, U. Penn and Public Policy Consultant
Greater Philadelphia Area

Current
* Assistant Professor of Business and Public Policy at The Wharton School, U. Penn
* Visiting Scholar at Federal Reserve Bank of San Francisco
* Faculty Research Fellow at National Bureau of Economic Research

Past
* Assistant Professor of Economics at Stanford GSB
* Economist at Reserve Bank of Australia

Education
* Harvard University
* Harvard University
* University of Sydney

[*] According to our Midas Oracle online survey, which David Pennock suspects is erroneous or biased or worse.

Keynote Speakers
Robert Engle = Michael Armellino Professor of Finance at New York University Stern School of Business, 2003 Nobel Prize in Economics
Charles F. Manski = Board of Trustees Professor of Economics, Northwestern University
M. Hashem Pesaran = Professor of Economics; Director, Center for International Macroeconomics and Finance, Cambridge University
Kevin E. Trenberth = Head, Climate Analysis Section, National Center for Atmospheric Research
Featured Speakers
J. Scott Armstrong = Professor of Marketing, Wharton School of Business, University of Pennsylvania
Robert Fildes = Professor, Dept of Management Science, Lancaster University
Paul Goodwin = Professor of Management Science, University of Bath
David Hendry = Professor of Economics, Oxford University
Stephen Penman = George O. May Professor of Accounting; Morgan Stanley Dean Witter Research Scholar, Columbia Business School
Allan Timmermann = Professor of Economics, Dept of Economics, UC San Diego
Victor Zarnowitz = Senior Fellow and Economic Counselor, The Conference Board
Arnold Zellner = Distinguished Prof Emeritus, Economics and Statistics, University of Chicago; Adjunct Prof, Dept of Agriculture & Resource Economics, UC Berkeley

Workshop #1
Title: A Bottoms-Up Approach to Time Series Analysis
Instructor: David P. Reilly, Automatic Forecasting Systems
Workshop #2
Title: Neural Networks: From Theory to Practice
Instructor: Dr. Hans Georg Zimmermann, Siemens AG, Corporate Technology
Workshop #3
Title: Implementing the Demand Review as Part of Sales and Operations Planning
Instructor: Colleen “Coco” Crum, Managing Principal, Oliver Wight

Past ISF attendance has ranged from 300-400.