Daniel

We’ve had more than a few things to say about the Iowa Electronic Markets over the life of Crooked Timber. In particular, John and myself have defended the view that these markets do not appear to offer marginal information above and beyond published opinion polls.

Some would say that this is fighting talk, and that if we really thought this, we ought to be trying to make some money out of it. So here goes …

Big thanks to Nasi Lemak for sharing a dataset of historical poll data with me. I have used that data to construct and backtest a trading system for the IEM Kerry vote-share contract (KERR) which uses only published poll data and generates favourable backtesting over the last four months. The equity curve for this system so far is below the fold; I plan to use it to trade the IEM vote-share market over the rest of the campaign.

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I don’t really want to make this look like a Hitchens pile-on, but one cannot allow things like this to pass without comment. Via Roger Ailes, we have Christopher Hitchens making the following claim:

Shall we say that this is quite radically at odds with most mainstream histories of Vietnam? Hitchens may here being confusing the North Vietnames Army and the Communist Party of Viet Nam with some other force which fought a purely heroic war of liberation in a gentlemanly manner and had no links to totalitarianism. Perhaps he was thinking of the Hobbits, or somebody. It makes you wonder why several hundred thousand boat people decided to take their chances on the open seas rather than live under such a “civilised” regime.

Meanwhile, if it’s comparisons with Vietnam you’re after, this historic document (Col. Robert Heinl’s Armed Forces Journal article on the collapse of morale) is pretty good on the long-term consequences of being stuck with no hope of exit in a war nobody really wants to fight. It is profoundly to be hoped that things won’t be allowed to get this bad again; it took years to rebuild the US Army as an organisation.

If I were to criticise James Wolfensohn as a World Bank President, then I’d say that if he has a failing, it’s probably that he errs on the side of being a worthless globetrotter far more adept at schmoozing politicians than getting his hands dirty with policy issues, blaming his staff for failures while taking personal credit for successes and that his nine years at the WB have been associated with a general slump in morale that would make Field-Marshall Haig look like Anthony Robbins. Apart from that, he’s pretty much sucked.

So when I saw his name in the story linked above, I thought to myself “I wonder if this might possibly be a plausible-sounding think tank idea which pushes a lot of currently popular political hot-buttons but which is regarded by anyone who knows a bit about the subject area with abject terror?”. Ladies and gentlemen, let me introduce to you the concept of “Rights-Based Lending”.

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Given the current revelations from Abu Ghraib, it is worth remembering that a major reason for the USA’s attempts to undermine the International Criminal Court was that making American troops accountable would impede them in the War on Terror. I personally don’t have much time for the Hague tribunal; I think that the US opposition to it on grounds of national sovereignty were valid and I don’t like unaccountable international institutions. But hell … isn’t it just a bit ironic that the US Army managed to achieve what nobody thought was possible (a successful war with minimal civilian casualties) and then fouled up on the kind of “war crimes” that nobody ever so much as imagined that the US Army would commit?

Just a quick note to the fairly large proportion of our readers who also run weblogs. The photographs of Iraqi prisoners being humiliated and tortured are important historical documents, but the faces of those being victimised are not particularly important details. Nothing important is lost by linking to a version of the photographs in which the victims’ anonymity is preserved rather than one in which they are clearly identifiable. While some of the torture victims were extremely nasty people, many weren’t (apparently, many of them had been picked up simply by mistake), and in any case it is not good form to condemn the practice of humiliating prisoners while simultaneously disseminating pictures which increase the humiliation.

The genie is out of the bottle, obviously (thanks to quite scandalous insensitivity on the part of the world’s newspaper), but we can at least show willing ourselves. This will be doubly important, obviously, if and when the currently “secret” (and apparently much more distressing for the victims) photographs become public.

Update: When I rather loftily said above that “nothing is lost by linking to version of the photographs in which the victims’ anonymity is preserved”, I assumed that I’d be able to find such versions pretty easily, but apparently not. I’ve tried all sorts of search terms, but can’t find a single instance of publication of the photos in which anyone bothered to blur the faces. Christ. Did literally nobody stop to think about this last week? Last time I take a holiday.

Mylast couple of goes at a solution to the Adjunct Problem were, to be honest, more in the nature of an extended buildup to a slightly mean joke than a real attempt at social policy. But post-Invisible Adjunct, I remembered that shortly after posting the joke solution, a real solution occurred to me, which has been festering at the back of my mind for a while.

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I realise that this is about the fourth time I’ve had a hit-and-run shot at an Airmiles column, while crying off doing the proper Globollocks analysis for lack of time. I am a bit short of time at the moment, but the real reason is thatit’s so dispiriting; the general miasma of Globollocks overwhelms any specific instance. Check out today’s example.

Friedman believes that it would be a danger to the USA on a par with global terrorism if someone in India working for a US-owned firm were to invent something useful. Think I’m joking? Read the bugger. He actually uses the phrase “war for innovation”.

Apparently the USA isn’t bringing through enough research scientists. What’s the solution? Presumably the rush to global competition of the free market. Nope, sorry, wrong, the solution is massive amounts of government money. In the Airmiles world, agricultural subsidies are terrible, awful anticompetitive, protectionist. But massive subsidies to the science industry are imperative, because of globalisation or something.

Wretched analysis. Someone has told Airmiles that “basic research” is a phrase meaning “science that it’s OK to want a subsidy for”. And he’s taken it as the intellectual equivalent of a Sapphire Class Admiral’s Club pass to support the contention that we need to incentivise domestic private research to keep its facilities onshore. What about “Susie Smith at the pillow factory?”, who would also presumably like a say in how this tax-funded largesse is to be distributed? Scrwe her, apparently; her role in Friedman’s weightless globalised world is a source of funds and a punchline to jokes. What a piece of work.

I thoroughly recommend this article in the New York Times. While I have no particular opinions on the management of the Maine state pension fund (well, if you really needed one, I daresay I could get some for you cheap rate), it’s a nice and clear explanation of an interesting little part of an issue that I’ve always thought the plain man should be more interested in than he in fact is.

I’m working on a piece on the Iowa Electronic Markets in my copious spare time at the moment. Just as a warm-up, here’s a few questions for finance mavens.

1. In the 1996 Presidential vote-share market, after the candidates have been nominated and adopted, what should the sum of the values of the CL|DOLE(Clinton vote share given Dole as opponent) plus V.DOLE (Dole vote share) contracts be?

2. What percentage return would you have made in the 2000 winner-takes-all market by buying the BUSH contract at the point when DEM was at its peak and holding to maturity?

3. You hold a porfolio in the current 2004 Presidential vote-share market long BU|KERR but short BU|CLINT. If George Bush were to announce tomorrow that he had decided to withdraw from the race, what would be your profit or loss?

Answers below the fold. Historical price and prospectus data available on the IEM website.

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Back in December I wrote:

“[…] the proposed “Policy Analysis Market” (which claims on its website that it’s going to launch in March; sadly there is no currently existing futures market which allows me to bet that it won’t)

Historical note; it didn’t.

BTW, for those who care about that sort of thing, while we’ve expressed plenty of scepticism over the marginal value of election betting numbers in the past, they are probably no worse than polling numbers and available with greater frequency. Bush is currently more or less holding steady on IEM, but weakening on Tradesports. Note that these two figures are not directly comparable, as the IEM contract is for vote share while the Tradesports one is “winner take all”.

Big news for people who are interested in that sort of thing: the Hayek-L mailing list, the main online forum for discussion of Hayek, has gone over to weblog format. One health warning I’d make is that the new blog is run by the same guy who runs the PrestoPundit blog, which is in my mind an example of exactly the sort of kneejerk Republicanism-dressed-up libertarianism that I for one take Hayek much too seriously to have any patience with. But the new Hayek blog seems to have kicked off with a couple of good book reviews and Hayek-L was a good mailing list, so I wouldn’t be prejudiced agaisnt them on that ground alone. Good luck to them.

I’ve put off this promised update because up until today, it seemed as if there was nothing to add. The Human Rights Watch/US State Department figures of 300,000 murders in the period 1988-2003, the majority of which occurred during 1988-91, seems to be settled. However, Johann Hari has published an article in today’s Independent which seems to be working on a much higher figure for the other crucial number I was looking for; the likely number of deaths in 2003 if the war had not taken place. Sourced to the Human Rights Centre in Kadhimaya, via the Iraqi Prospects Organisation (a UK-based Iraqi exiles organisation), the claim is that analysis of the Ba’ath Party archives reveals that there would have been 70,000 killings if the war had not taken place.

Update, below fold

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In Latin, a lucus is a “dark grove”. In the eighteenth century, British etymologists decided that the word lucus came from the root verb lucere, meaning “to shine”. The idea was that a lucus was called a lucus because there was no lucendo going on there. The fact that this explanation achieved currency among schoolmasters gives you some sort of idea of the desperate state of Classical scholarship in Britain in the eighteenth century[1], by way of an introductory toccata to a short but ill-tempered discussion on another field in which truly terrible explanations are par for the course; Evolutionary Psychology. People who have read Henry’s comments in the same area are excused this one.

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Thomas Friedman of the New York Times has another attractively barking column up (potted summary: There’s nothing wrong with Mexico that couldn’t be cured with a combination of “real leadership” and vast amounts of money from America. Well I suppose it worked for Chile). But once more, he salts the sauce with plenty of good old Globollocks. Due to time constraints, I haven’t been able to carry out a full Globollocks analysis. But I picked up this gem, which will serve as an indicator of the sort of thing the New York Times will print these days.

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