I am a fan of prediction markets. They have typically done much better than polls at predicting the outcome of elections. Why? Here’s a thought experiment. Consider who you think is going to win the election (not who you want to win). Now consider that I was going to bet you $10,000 of your hard earned money on whether your prediction comes true. Did that change your thinking at all? Some of you might have even switched candidates once money was on the line. That’s the difference between a poll and a prediction market.
Archive for September, 2008
So as not to waste my expensive schooling, I still keep up with economics as a hobby. I don’t expect other people to generally share this interest, but it occurred to me that the current financial crisis is an excellent example of what happens when a complex adaptive system experiences a shock. Is anybody curious to have us discuss this topic? If so, what is specifically interesting to you? My short answer is to read everything by Arnold Kling at EconLog. Of course, I have a lot more thoughts if anyone wants to hear them.
verb ( –fies, –fied) [ trans. ] formal
make (something abstract) more concrete or real
Imagine if an alien landed on Earth to study modern society and you were assigned the task of being its local guide. You get to the subject of money and the alien is perplexed. What is money? Is it paper currency? Clearly not, since you can exchange that paper for other forms of currency, such as coins, foreign bank notes, electronic funds, treasury bills, and all sorts of derivatives, assets (both tangible and intangible, liquid and illiquid), services, promises, and so on. After hearing all of the various aspects of money, the alien tells you that money doesn’t really exist.
I apologize for the posting lull. I actually spotted an issue than I wanted to address a few weeks ago, but I’ve been pondering how to approach it. It’s pretty complicated and subtle. I even ran a couple of drafts by Rafe to refine my thinking. So please bear with me.
As I’ve mentioned before, I am a fan of Dave Zetland. When I saw him propagate what I think is a fundamentally false dichotomy in this post, I knew I had to take on the concept of Knightian uncertainty. It crops up rather often in discussions of forecasting complex systems and I think a lot of people use it as a cop out.
Jay makes a thoughtful comment to my last post on the Ascetic Meme. While I’m pleased that I was able to affect Jay enough to write such a comment, I’m dismayed that the effect was not the one I intended. I don’t mean to be either insulting or hostile to the vast majority of regular people that are concerned about the environment. Heck, I’m one of them.