Was Intrade being manipulated over the last month?

Post by yummyfajitas » Thu, Nov 08, 2012, 1:49 PM UTC

CamperBob2 wrote: post #5

hooande wrote: post #3

The author brings up some good points about the potential for arbitrage between prediction markets. But in my experience, intrade has a strong conservative bias. This is more likely a case of people betting on their (incorrect) political convictions as opposed to intentional manipulation. I remember observing a similar thing around the betting on the supreme court healthcare decision. The odds were 3-4 points more ag…

In addition to what you're saying, it could have made sense to buy Obama calls, so to speak, if you think your taxes are going to go up significantly under his second term. That behavior would severely distort Intrade's purpose as a prediction market.

Hedgers are giving money away (on average) in order to hedge against undesirable outcomes.

If speculators respond to incentives and take their money, markets will be pushed back to normal. I think Robin Hanson even has a paper or two proving this is the equilibrium strategy. As the article indicates, he even put his money where his mouth is.

Post by 001sky » Thu, Nov 08, 2012, 2:09 PM UTC

gjm11 wrote: post #28

001sky wrote: post #23

Earlier quoted context omitted.

Your use of the word 'conservative' is ill-advised, both technically and rhetorically. Free-market Economics is rooted in [l]iberal traditions in the first instance, not conservative (see: repeal of the corn laws)[1]; and in the second: Modern [L]iberals (ie, interventionists) require near-perfect rationality as an operating behavioural assumption, ex-ante. Not to be pedantic, but this is an important point. [L]ibera…

You appear to be arguing that because (1) the historical foundations of free-market economics come from a group different from the one now called "conservative", and (2) the people now called "liberal" also make overoptimistic assumptions about people's rationality, it's wrong to say that (3) the people boosting markets like Intrade as reliable information sources tend to be the ones now called "conservative". But th…

If you throw out strong-form rationality, why would you believe someone has (a) a perfect model; (b) knows when the 'perfect' is missing; and (c) can fix it back to perfect? Empirical evidence of 'imperfection' should not lead you to conclude 'this is stupid, i am smart'. In this regard, and others, there are pretty big differences in worldview between the Nobel prize winners of 2008 and 2009. [1] And what happened in-between? The financial crisis. Is that a co-incidence? Probably not.

The main point of this thread -- about the price of X being one thing or another -- does not (appear to) need a critique of rationality to explain, however. In that regards, it is superflous. Whether this price is 'belief' or 'manipulation' (ie, strategy), the market would be needing to evidence preferences for the prefernces to be revealed. Manipulation in this sense is a variation of strategic preferencing.[2] Again, this is a notion more consistent with than its opposite. Whether or not Market A and Market B have the same price is also simply explained by lack of common market participants. A textbook 'inefficiency' may result, but again this is not anywhere near a critique of rationality, proper.

Lastly, thinking orthogonally to the orthodoxy is not 'conservative' its actually 'liberal' but this requires omission of capital letters [3] and some sense of history to understand. Which is the larger point about rhetoric. And closer to my personal worldview.

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[1] ie, Krugman vs http://www.nytimes.com/2009/10/13/business/economy/13nobel.h...

[2] preferences are to orthdox economics, as its practised by keynesian-style interventionists and neo-liberals (er, Conservatives) alike.

[3] Liberal is now a modern brand, not a reference point of clear thinking.

Re: Was Intrade being manipulated over the last month?

Re: Was Intrade being manipulated over the last month?