Comments on: Tacit knowledge

By: logo

logo — Tue, 13 Jan 2004 21:57:40 +0000

Mein Hobby ist es Gästebücher zu besuchen. Das ist immer ganz interessant und widerspiegelt so, was die Leute im Internet wirklich denken. War auch interessant bei Dir ! Bis zum nächsten Mal. All The Best OfNew Year. Sorry for my english i’am from Germany.

By: jimbo

jimbo — Thu, 31 Jul 2003 20:58:09 +0000

Even worse – what futures markets really measure is what Keynes called “the average opinion of average opinion” – in buying a contract, I am hoping, not that the contracted event will actually take place, but that more people will come to think that other people will come to think it will take place (and so on, ad infinitum) It doesn’t really “aggregate information” – it just codifies conventional wisdom…

By: Dan Hardie

Dan Hardie — Thu, 31 Jul 2003 11:39:30 +0000

Just to spell out some of this model’s absurd problems: One is that a futures market is subject to distortions due to moral hazard, herd behaviour etc, and is thus a lousy basis for prediction. Leading on from that, this particular market would be especially subject to moral hazard (all those spooks and oil companies enabled to quite legally buy the opinion of the US govt), and even more so to asymmetric information (since good intelligence is by its nature kept secret). But I think the most fundamental error of all is that a futures market works by rewarding investors who make the correct guesses about future events. If the US Government does use this market as a source of warnings about the future, it will do precisely the opposite. Very simply: in a normal futures market I put money down to say that the price of copper per tonner will be x in August 2003, and if it does turn out to be x I make money, whereas if it is >x or US Govt takes this market seriously it will take security measures to foil the attack. So, if I did correctly guess the terrorists’ intention, the US Govt’s action will mean that I lose money by being right. On the other hand, I would have kept my money if I guessed incorrectly. ‘Perverse incentives’, anyone?

By: Dan Hardie

Dan Hardie — Thu, 31 Jul 2003 11:36:59 +0000

>Dan has hit on the real weakness of the model here< D-squared, I am moved. If peace has broken out between you and me, can Israel and the Palestinians be far behind? In the new spirit of amity, I wish to state that the only decent jokes I have ever seen in the blogosphere are a)on Brad Delong’s website concerning this DARPA futures market, and b) D-squared’s take on haikus, especially the bit about ‘Agadoo’.

By: dsquared

dsquared — Wed, 30 Jul 2003 22:00:07 +0000

>>So- given the fact that markets do develop bubbles- we’re going to see, for example, air strikes on the Bekaa Valley because everyone in the Darpa Terrorist futures market has decided to buy the ‘Hezbollah to strike Chicago’ shares. Dan has hit on the real weakness of the model here; I’ll be posting something which expands on this point soon.

By: Dan Hardie

Dan Hardie — Wed, 30 Jul 2003 16:59:22 +0000

Just as well these people weren’t around in World War 2, one feels. Would they have been issuing futures in ‘Bletchley Park decrypts all U-Boat codes by April 1943’?

By: Dan Hardie

Dan Hardie — Wed, 30 Jul 2003 16:45:34 +0000

Work out the moral hazard problem. If this market did get up and running, and if it did start to predict ‘a coup in Turkey’ then if its predictions had any credibility at all there would be serious problems for the Turks (fall in share values, downward revision of their S&P’s and Moodie’s ratings, etc). This would make it well worth the Turkish govt’s while to manipulate the market in the other direction, which it could quite easily do. And people like the Saudis, with their huge resources, would have to be assumed to be manipulating the market in whichever direction most suited them. I can’t see the big institutional funds getting involved in such a whacko idea. If the market does develop credibility, the Saudis or the big oil firms, or other players with plenty of currency, will want to finance big shifts in value to influence the Pentagon in their preferred direction. If it doesn’t develop credibility, the market will just become an another forum for the fantasies of Den Beste and LGF fans, and suchlike ignorant loons. Finally, the point of this is presumably to provide intelligence analysis in time for policy to be changed. You didn’t get any kudos for predicting an Islamicist attack on the US on September 12th, 2001. What the US wants is better advance warning than it got last time. So the underlying logic of this market is: markets process information better than bureaucracies; we set up a market to predict coups, wars, or terrorist attacks; when the market ‘predicts’ a coup, attack, etc, but before that event has taken place the government should change policy to forestall the event. So- given the fact that markets do develop bubbles- we’re going to see, for example, air strikes on the Bekaa Valley because everyone in the Darpa Terrorist futures market has decided to buy the ‘Hezbollah to strike Chicago’ shares. No doubt on the basis of hot tips from the rightwing blogs. Madness.

By: Tom

Tom — Tue, 29 Jul 2003 20:23:46 +0000

Chun the Unavoidable posted”: “It’s interesting that you mention Hansen, whose “How to Live in a Simulation” article auto-obsoleted many potential ideological critiques of transhumanism/simulation hypothesis by negative projection.” That’s easy for you to say, what with your robe of eyeballs and all. (sorry – couldn’t resist the jack Vance reference)

By: dsquared

dsquared — Tue, 29 Jul 2003 12:21:57 +0000

Of course, reading off from these prices of futures to percentage chances is highly problematic, a subject on which I will at some point write at length.

By: Matthew

Matthew — Tue, 29 Jul 2003 11:32:19 +0000

Newsfutures is another one. I quite like the Tony Blair will remain PM until 2004—it currently is at $75, ie a 75% forecast of his still being there on Jan 1 2004, having risen from just over 60% after the david Kelly death, but down from a peak of 90%+ in mid June. This also has some liqudity with 13,998 contracts outstanding. If you are pessimistic for his chances you can sell ‘muttley’ 105 contracts at $73 (the point being that if he resigns the contract becomes worthless so you make rather a lot of money, but if he stays on the contract will cost you $100 to buy). If you are optimistic you can buy 50 contracts off ‘guillespie’ at $75.

By: Chirag Kasbekar

Chirag Kasbekar — Tue, 29 Jul 2003 10:50:06 +0000

Sorry for the shabby double posting. That should be Robin Hanson, not Hansom, of course…

By: Chirag Kasbekar

Chirag Kasbekar — Tue, 29 Jul 2003 10:45:44 +0000

There’s also futarchy (‘Vote Values, But Bet Beliefs’): ————————- from Robin Hansom’s home page

By: Chirag Kasbekar

Chirag Kasbekar — Tue, 29 Jul 2003 10:45:17 +0000

There’s also futarchy (‘Vote Values, But Bet Beliefs’): ————————- from Robin Hansom’s home page

By: dsquared

dsquared — Tue, 29 Jul 2003 10:32:54 +0000

Erratum: sorry, tradesports’ javascript navigation confused me. The July contract is the one with no bids; the September contract has buyers for 4 contracts@20 and 500 contracts@18.

By: dsquared

dsquared — Tue, 29 Jul 2003 09:30:42 +0000

Oooh. just looked at the “lifetime” chart of that contract. 75% chance as of 23 April, rising to 80% shortly after. Better than evens as late as end-May. So actually, this contract appears to have lagged the news, not led it.