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Prediction markets can tell the future. Why is the US so afraid of them?

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Re: Prediction markets can tell the future. Why is the US so afraid of them?

#11

Post by kibwen »

johnfn wrote: post #9
kibwen wrote: post #7

The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymize…

In theory the same thing is true with horse race betting; you can just assassinate the horse. Or the jockey. Or if you want to be more subtle about it, just slip something into the horse feed. But this doesn't really happen in practice.

Match fixing happens regularly, so regularly that we have the term "match fixing" with a Wikipedia article dedicated to it. The presumption that match fixing doesn't happen in practice is unfounded.

Here, from two months ago: "Over 180 professional tennis players participated in a global match-fixing ring" https://www.npr.org/2023/09/10/1198675541/over-180-professio...

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#12

Post by nitwit005 »

johnfn wrote: post #9
kibwen wrote: post #7

The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymize…

In theory the same thing is true with horse race betting; you can just assassinate the horse. Or the jockey. Or if you want to be more subtle about it, just slip something into the horse feed. But this doesn't really happen in practice.

A quick Google search shows a number of accusations of poisoning horses: https://www.espn.com/moresports/news/2003/0709/1578661.html https://www.telegraph.co.uk/news/2019/06/21/dressage-poisoni...

Plus apparently a huge amount of drugs given to their own horses trying to cheat.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#13

Post by blibble »

jawns wrote: post #2

Prediction markets and bookmakers really strongly expected a Clinton win in 2016. Irish bookies were so sure Trump would lose that one firm began paying out to those who bet Clinton even before the election. And we all know how that turned out. Nov. 7, 2016: "Hillary Clinton’s odds of winning the presidency rose from 78% last week to 91% Monday before Election Day, according to CNN’s Political Prediction Market." htt…

brexit was similar

I remember several people IRL saying "well the market thinks it's a 90% chance of remain so I'm not worried"

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#15

Post by aidenn0 »

johnfn wrote: post #4
jawns wrote: post #2

Prediction markets and bookmakers really strongly expected a Clinton win in 2016. Irish bookies were so sure Trump would lose that one firm began paying out to those who bet Clinton even before the election. And we all know how that turned out. Nov. 7, 2016: "Hillary Clinton’s odds of winning the presidency rose from 78% last week to 91% Monday before Election Day, according to CNN’s Political Prediction Market." htt…

You can go look at the old Predictit market if you like - it's still around[1]. You can also check election betting odds[2]. Clinton hovered around 60-80 in the week or two before the election. Even if it were 90%, I'm not sure that's an indictment of prediction markets. A probability of 90% means that 10% of the time, the other thing happens. It's a bit like saying "wow, it's cold today; I guess global warming isn't…

#3 makes it look like things predicted as "very likely not" (10-20%) and "very likely so" (80-90%) tend to be biased towards the contrarian view. Does Metaculus have limits that make it unprofitable to make bets things that would push them outside the window? Anecdotally I've seen quotes from prediction marktets that show a surprisingly high chance for things that are incredibly improbable (to the point that I would call them "impossible" in casual conversation).

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#16

Post by johnfn »

kibwen wrote: post #11
johnfn wrote: post #9

Earlier quoted context omitted.

In theory the same thing is true with horse race betting; you can just assassinate the horse. Or the jockey. Or if you want to be more subtle about it, just slip something into the horse feed. But this doesn't really happen in practice.

Match fixing happens regularly, so regularly that we have the term "match fixing" with a Wikipedia article dedicated to it. The presumption that match fixing doesn't happen in practice is unfounded. Here, from two months ago: "Over 180 professional tennis players participated in a global match-fixing ring" https://www.npr.org/2023/09/10/1198675541/over-180-professio...

OK, fair; a stronger argument is "it doesn't happen enough that we need to shut down horse racing". Or tennis betting, in your case.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#17

Post by qznc »

kibwen wrote: post #7

The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymize…

Insider trading is illegal because the non-insiders would stop trading otherwise.

Prediction markets have some problems but this isn't the biggest one. One can even use it for good. If a company gives its associates stocks but prevents them to sell for some time, this is essentially the same mechanism.

For example, we could make prediction markets about upcoming policy and laws and their impact. Then we can tell the policy makers to bet that their proposed changes actually have the good outcomes they promise.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#18

Post by not2b »

johnfn wrote: post #4
jawns wrote: post #2

Prediction markets and bookmakers really strongly expected a Clinton win in 2016. Irish bookies were so sure Trump would lose that one firm began paying out to those who bet Clinton even before the election. And we all know how that turned out. Nov. 7, 2016: "Hillary Clinton’s odds of winning the presidency rose from 78% last week to 91% Monday before Election Day, according to CNN’s Political Prediction Market." htt…

You can go look at the old Predictit market if you like - it's still around[1]. You can also check election betting odds[2]. Clinton hovered around 60-80 in the week or two before the election. Even if it were 90%, I'm not sure that's an indictment of prediction markets. A probability of 90% means that 10% of the time, the other thing happens. It's a bit like saying "wow, it's cold today; I guess global warming isn't…

We have no way of exploring the multiverse or running the same election more than once, so there isn't any evidence that the payout from a prediction market matches the probability of something happening. It's just collecting the predictions of people who are willing to bet money, weighted by how much they spend, and calling that the prediction. I don't think rich people are necessarily better than not-so-rich people in predicting something not related to their expertise, but prediction markets are weighted according to how much was bet.

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#19

Post by johnfn »

blibble wrote: post #13
jawns wrote: post #2

Prediction markets and bookmakers really strongly expected a Clinton win in 2016. Irish bookies were so sure Trump would lose that one firm began paying out to those who bet Clinton even before the election. And we all know how that turned out. Nov. 7, 2016: "Hillary Clinton’s odds of winning the presidency rose from 78% last week to 91% Monday before Election Day, according to CNN’s Political Prediction Market." htt…

brexit was similar I remember several people IRL saying "well the market thinks it's a 90% chance of remain so I'm not worried"

Same response I gave the other guy - you can go look up the market here rather than conjecturing [1]. It was about 25% the day before. In any case, it seems very silly to discount prediction markets because the probability didn't work the way you expected it to in a single event. The whole point of probability is that it's probabilistic!

[1]: https://www.predictit.org/markets/detail/1413/Will-the-UK-vo...

Re: Prediction markets can tell the future. Why is the US so afraid of them?

#20

Post by roenxi »

qznc wrote: post #17
kibwen wrote: post #7

The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymize…

Insider trading is illegal because the non-insiders would stop trading otherwise. Prediction markets have some problems but this isn't the biggest one. One can even use it for good. If a company gives its associates stocks but prevents them to sell for some time, this is essentially the same mechanism. For example, we could make prediction markets about upcoming policy and laws and their impact. Then we can tell the…

Not so, I would just buy whatever the insiders are buying a bit later. The argument against insider trading is a bit weak because it seems impossible to enforce effectively and I don't see why anyone would assume insiders are anything but active in the market.

Picking on stocks as an example, there is a background fair market rate that everything should theoretically achieve. Insiders way outperform that - but most people are in the market to target the background rate, not the outlier rate insider traders can achieve.

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