Bob Hahn turns lead into gold.
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Via Google’-s Bo Cowgill, Robert Hahn and Paul Tetlock’-s Op-Ed in the Wall Street Journal (mirror at AEI-Brookings – mirror at AEI):
[…] These markets often predict more accurately than experts. Why? They draw on the knowledge of people who might otherwise be ignored. Their anonymity frees participants from pressures to agree with opinion leaders. And they create straightforward profit incentives that encourage participants to search for better information. […] A consensus plan, endorsed by more than 20 leading researchers, including Nobel economics laureates Kenneth Arrow, Daniel Kahneman, Thomas Schelling, and Vernon Smith, and published by the AEI-Brookings Joint Center, suggests the creation of a safe harbor for small-stakes, not-for-profit prediction markets to encourage experimentation. One could, for example, introduce exemptions for research-focused markets in which the size of individual investments does not exceed $2,000 per participant. The Commodity Futures Trading Commission (CFTC) could provide this safe harbor in the form of a “-no-action”- letter. Alternatively, the commission could create formal guidelines that make it cheaper and easier to start these markets. […] Prediction markets have become more than fodder for television news features on what those zany Internet folks will think of next. They are coming of age as serious tools for information gathering and analysis —- tools with great potential for improving the efficiency of government and the productivity of industry. To help achieve that potential, Washington needs to nurture their development and keep them from becoming collateral damage in the endless war over who can gamble and where.
Step #1: Make some gullible economists sign a “-petition”-, entirely engineered by Bob Himself, and which is flawed and too timid.
Step #2: Make the gullible Wall Street Journal readers believe that a “-no-action letter”- is the solution, claiming that that’-s the “-consensus”-.
Robin Hanson, who is at heart a free-gambling-for-all economist, took part of this pitiful farce. Bad judgment, doc. If Robin Hanson wants to stay the “-reigning expert”- of the field of prediction markets, he will have to mind a more pertinent industry analysis in the future. Viva Steve Levitt.
Previous: Steve Levitt of Freakonomics: I WON’T SIGN YOUR PETITION, BOB. + Chris Masse’s comment on the Freakonomics’ blog post about the legality of US prediction markets + Safe Harbor Letter too Timid – by Chris Hibbert + The limitations of logic (and the need for passion) – by Caveat Bettor + Jason Ruspini on the Economists’ Petition
Is it possible that someone could say:
and
in the same op-ed?
Make up your mind –either profit incentives are good for markets and the price information they yield … or they are not.
Excellent remark, mister Caveat Bettor.
The full Hahn-Tetlock article is available from AEI-Brookings at: http://www.aei-brookings.org/p…..php?id=289 .
My initial reaction to Levitt’s remarks was to approve of the effort to distinguish between PM and gambling more generally. (See post here: http://www.knowledgeproblem.co…..02033.html)
But why “not for profit”? Why primarily for “research”? Obviously, when gathering a “consensus” from a bunch of academics (and one think tanker), it doesn’t cost them much to sacrifice a possibility for potentially profitable, commercial PMs — it isn’t the business that they are in.
In fact, at some level commercial PMs are competitors to not-for-profit & research oriented ventures. In this respect, it begins to sound like a traditional rent-seeking petition to the government, rather than the public spirited campaign to free PMs.
It’s not contradictory in the sense that while the exchange will not be run for profit, the traders will have a (capped) profit motivation. But yes, the pragmatic question aside, for-profit exchanges should be run better than non-profit ones.
… and *non-capped* exchanges create “profit incentives that encourage participants to search for better information”.
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Economists Speak Out on Prediction Markets
by Steven D. Levitt on 08 May 2007
http://www.freakonomics.com/bl…..n-markets/
Chris Masse’s comment on the Freakonomics blog post about the legality of US prediction markets
http://www.midasoracle.org/200…..n-markets/
PREDICTION MARKET PETITION: Robin Hanson vs. Steve Levitt
http://www.midasoracle.org/200…..ve-levitt/
The limitations of logic (and the need for passion)
http://www.midasoracle.org/200…..r-passion/
TechDirt
Economists Want Legal Protection For Prediction Markets
http://techdirt.com/articles/20070507/115848.shtml
10 comments (including our Mike Linksvayer
)
Safe Harbor Letter too Timid – by Chris Hibbert
http://www.midasoracle.org/200…..-big-wins/
Bob Hahn turns the PETITION into a CONSENSUS.
http://www.midasoracle.org/200…..consensus/
Squawk on Prediction Markets
http://www.midasoracle.org/200…..n-markets/
The string “profit incentives that encourage…” is trivially true for any business, say one that threatens local merchants while selling them “insurance”.