Robin Hansons blah blah on futarchy (using conditional prediction markets to govern a country) – [VIDEO]

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Robin Hanson debates a Mencius Moldbug on prediction markets, decision markets, and&#8230- futarchy:

Foresight 2010 debate: Futarchy from Monica Anderson on Vimeo.

Download this post to watch the video &#8212-if your feed reader does not show it to you.

Who cares about that Mencius Moldbug anyway?


Debate is raging between Robin Hanson and the futarchy critics

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Robin Hanson comments on Paul Hewitt&#8217-s blog.

Paul Hewitt comments on Eric Crampton&#8217-s blog.

Paul Hewitt comments on Robin Hanson&#8217-s blog. Many exchanges with Robin Hanson. Read it all.

Paul Hewitt:

[…] My point is that the case for prediction markets has not been made, at all. There is a tiny bit of proof that they are as good as alternative methods, and in a very few cases, very slightly better. Also, you need to be aware that even the slightly better prediction markets had the benefit of the alternative forecasting institution available to it. That is, the official forecasters at HP were also participants in the ever-so-slightly better prediction markets. […]

&#8211-&gt- I personally stay away from any discussion about conditional prediction markets (and futarchy). I prefer focusing on the &#8217-simple&#8217- prediction markets.

If he had balls, Robin Hanson would debate Paul Hewitt, instead.

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Paul Hewitt: The Essential Prerequisite for Adopting Prediction Markets

It is a long text, so I will post again about it, in the near future. (Happy Xmas, by the way.)

ADDENDUM: Saturday, January 16, 2010: Debate between Robin Hanson and Mencius Moldbug

Futarchy Lite 2008

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Below is a copy of a post yesterday on my personal blog. First, a couple asides for Midas Oracle readers.

After 2008

Two of Peter McCluskey&#8217-s four sets of contracts produced interesting results while all of Polimetrics&#8217- were duds. (Not complaining- I&#8217-ll take the successes.) What should we take from this, other than a subsidy being helpful? (How helpful?)

It would be nice to see improved versions of the two successful sets offered for 2012 and perhaps for control of the US Congress in 2010. The Iraq contracts could be generalized to expected number of troops killed, number of troops abroad, or even size of the military budget.

It would be great to see conditional contracts for non-US jurisdictions as well.

On Intrade&#8217-s part, I&#8217-d really, really like to see implied outcomes and graphs of same built into the Intrade interface. Their lack is a huge barrier to understanding conditional contracts, both for journalists and bloggers who might come to appreciate their importance, and even for traders who need to understand them, even really smart traders.

Futarchy Lite?

Futarchy imagines that constituents or their representatives specify (presumably democratically) desired outcomes and prediction markets evaluate whether specific policies further desired outcomes, neatly captured in the phrase vote on values, bet on beliefs. One could imagine a variety of implementations, in particular concerning how policies are proposed, but that&#8217-s the basic framework.

So what does the guide have to do with futarchy?

It encourages voters to govern their own vote as a policy making body would govern policies. Presumably individuals have values or can decide on them, so there&#8217-s no voting, but one can use prediction markets to determine how they should vote in order to further their values. So the catchphrase for the futarchist voter guide below or what I&#8217-ll call &#8220-Futarchy Lite&#8221- is vote with your values, consensus beliefs. Ok, that&#8217-s not at all catchy. And I&#8217-m afraid to too many people interpret values and beliefs to be roughly the same, but that&#8217-s a bigger problem.

Mike&#8217-s Futarchist Voter Guide (also posted on Mike&#8217-s blog)

Four years ago I used play money contracts traded at the Foresight Exchange to provide a Futarchist Voter Guide (though I didn&#8217-t call it that). This U.S. election cycle relevant real money contracts are traded on Intrade.

The first set was instigated and subsidized by Peter McCluskey. Two have attracted a fair amount of interest and seem to be informative. They have consistently indicated that a Democrat will result in a smaller (but still approaching US$1 trillion!) increase in the US federal government debt over one year and a smaller number of US troops in Iraq. (The others, regarding the movement of oil and interest rate futures on election day, have shown no difference between expected election outcomes.)

Above: Expected increase in US Government debt between 30 Sep 2010 and 30 Sep 2011 if party wins US presidency.

Above: Number of US troops in Iraq on 30 June 2010 if party wins US presidency.

Note that briefly in early September the contracts indicate lower debt and fewer troops in Iraq with a Republican candidate. I suspect this is due to McCain&#8217-s brief surge following the GOP convention &#8212- the implied outcomes above depend on election winner contracts, and with a much lower volume, presumably take awhile to fully respond to rapid shifts in election outcome expectations.

A second set of relevant contracts instigated by Polimetrics have unfortunately attracted almost no trading and probably tell us nothing. Note however they also reflect the brief McCain surge, at which point they implied a greater than 100% chance of growth, low unemployment, and lower crime with a McCain win. They have since reverted to showing essentially no difference between Obama and McCain. Note that each series only starts when there have been trades.

Above: Percent chance that economic growth averages 2.5% or more for 2009-2011 if individual wins US presidency.

Above: Percent chance the US unemployment rate is less than 5.0% at the end of 2011 if individual wins US presidency.

Above: Percent chance the number of violent crimes committed in 2010 is lower than the number of violent crimes committed in 2007 if individual wins US presidency.

Peter McCluskey has automatically updated pages showing implied outcomes for each set of contracts given their latest trades.

(I intended to make a page with frequently updating graphs, but got lazy when Peter published the aforementioned pages, and only collected the data until now, which is available in a spreadsheet.)

Subsidizing real-money prediction markets and real-money conditional prediction markets

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&#8217-s internal prediction exchange at a marginal cost of zero US dollar. No need for him to &#8220-subsidize&#8221- 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.]

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&#8217-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&#8217-s idea. Or vaccinated the whole African continent against Malaria. See Peter&#8217-s comment, at the middle of the webpage, here.

Philanthropy and prediction markets are not mixing well &#8212-yet.

Implied Prices for Presidential Decision-Aid Markets

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Via our good friend Mike Linksvayer: &#8212- Implied Prices for Presidential Decision-Aid Markets &#8212- Implied Prices for Presidential Decision-Aid Markets

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 &#8220-GadFly&#8221- Masse

PostScriptum: When the CFTC refreshes its webpage that indexes the comments to its concept release on &#8220-event markets&#8221-, you will see that that issue has been raised by some &#8220-gadfly&#8221-. :-D

The Marketing Of The Reading Of The Public Prediction Markets = What Robin Hanson has deep trouble with, and what the prediction exchanges (e.g., InTrade-TradeSports, BetFair-TradeFair) havent fully computed yet

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Robin Hanson on &#8220-silly&#8221- 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 […].

Decision markets and decision-aid markets are 2 great concepts pushed by Robin Hanson, the world&#8217-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&#8217-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.

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&#8217-t seem to bode well for fielding decision markets on the biggest organizational decisions.

Allow me to digress from there. I think that the reading from the prediction markets is like an advice &#8212-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&#8217-t think you&#8217-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.

[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.]

Robin Hanson on decision-aid markets:

I don&#8217-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&#8217-m missing, do let me know.

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