Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

I Championed Prediction Markets. Look What They've Become

newsletter.platypuseconomics.com

Post reply on HN
Print view View original

41–50 of 81 posts

Re: I Championed Prediction Markets. Look What They've Become

#41

Post by Glyptodon »

This reminds me of how people who worked for Facebook despite it being obvious that nobody with moral fiber should work for Facebook are more listened to when criticizing Facebook than people who realized the obvious to begin with. It's such a farce.

But it also reminds me that prediction markets are one of those things that are transparently a terrible idea because they create problematic incentives, and not just because people ruin their lives gambling. If you can make $1 million by triggering something that or getting somebody to trigger something that basically has no business happening, whether it's stripping on the Senate floor, causing a volcano to erupt, or crops yields to reduce by secret herbicide dusting, or any other bologna, somebody will do it if the balance makes it worthwhile. Likewise, they give people reasons to vote that are negative - "I have $100 on prop XYZ passing, of course I support it." (Though side note: the ubiquity of betting being super terrible for society because people can't handle gambling at all is one of those things that I've been super surprised by that seems to have good evidence now. I guess because gambling mostly just doesn't do it for me to the degree that I find it shocking just how addictive it is and just how much it exacerbates bad situations for many people.)

And I can't see how there's any benefit that's bigger than the problems. If prediction markets are better than Nate Silver, why is it worth all the problems to society for that extra accuracy margin? I can see why individual actors might find value, but I don't see how their value accrues to society in any way that makes it worth it.

Re: I Championed Prediction Markets. Look What They've Become

#42

Post by pbohun »

I read a sci-fi story years ago that had prediction markets in it that helped markets become more efficient. I thought it was a good idea at the time.

What neither I nor the author anticipated was that the easiest way to make the markets "efficient" was to rig them.

In hindsight it's obvious, but optimism is one of the most powerful blinders out there.

Re: I Championed Prediction Markets. Look What They've Become

#43

Post by satvikpendem »

runarberg wrote: post #40
fwipsy wrote: post #20

Earlier quoted context omitted.

Sometimes gambling has some social value then. Isn't trading on the stock market gambling? Do you also support abolishing the stock market? What about issuing loans to someone with poor credit?

> Do you also support abolishing the stock market? An anti-capitalist here: Yes... Oh heavens, yes. There are few things I desire more then to see all the stock markets in the world burn and never to be rebuilt. For me, people who make money at the stock market are participating in a systematic exploitation of the working classes. The siphoning of profits away from the workers who created them and earned them, and in…

What is the alternative? I'm sure there will still be trade of labor even in a socialist economy. This is assuming the labor theory of value is right, which it isn't, but I'll be charitable.

Re: I Championed Prediction Markets. Look What They've Become

#44

Post by hahahaa »

00dazzle wrote: post #27
Planktonne wrote: post #4

The author was instrumental in a colleague ruining their life through a gambling addiction. Then they helped make the case for prediction markets, which also went wrong. Their track record is not great, and I don't think they fully realise that the issue is them: the principles and axioms they rely on don't lead to good results. > I don’t claim to know the exact right policy answer for America. Perhaps start by rever…

I don’t think we should hold a transaction worth $5 someone did as a teenager over their head as a dark mark on their character for the rest of their life

Jesus. Literally. Can any HNer really throw a stone at this?

Re: I Championed Prediction Markets. Look What They've Become

#45

Post by Glyptodon »

mind-blight wrote: post #33

I don't like prediction markets, but I think a lot of people in this thread are assuming that gambling vs. not is clear cut. Insurance was illegal at different times in history because it was considered gambling. Ditto for commodity trading. Even you look at the structure of a futures contact, the basics look really similar to a bet that can be traded with someone else. The main differences are the regulatory environ…

I mean I get how there are benefits to society from crop futures and insurance. I don't get how there are from an election prediction.

Re: I Championed Prediction Markets. Look What They've Become

#46

Post by weakened_malloc »

beloch wrote: post #25
Fizz43 wrote: post #12

>Trump Media may soon sell early access to the president’s Truth Social posts. Think about what this means. This is how the president announces war; every embassy on earth has to maintain a Truth Social account just to stay informed of American policy. He is already so beyond the pale this doesnt even move the needle.

If they try this, multiple random people will write bots to republish everything instantly . The cash gusher they expected will turn into a trickle and the white house will look like a bunch of greedy Ferengi that lack the lobes to pull off a basic swindle. It's guaranteed to be an instant loss. I'll laugh pretty hard if they go ahead with it.

Whilst true, that extra 0.5-1 second edge is huge for HFT firms.

Re: I Championed Prediction Markets. Look What They've Become

#47

Post by Nursie »

> We built a superior information aggregation machine for the economy

Wow, no you built an avenue for corruption, insider trading and problem-gambling, and you should have known this beforehand. Would have known it beforehand if you'd bothered to consult with non-economists.

Re: I Championed Prediction Markets. Look What They've Become

#48

Post by hahahaa »

jongjong wrote: post #30

My position is that prediction markets are bad and harmful but so are all mainstream stock markets. They're all prediction markets. People collaborate to pump up the value of specific assets or contracts, leading to undesirable outcomes. It would be dishonest to ban prediction markets without banning stock markets. The best which can be done, under the current system, is to punish unfair information asymmetries, whic…

You could ban stock market trading but the market itself is a very useful vehicle for investment and has democratized wealth and retirement planning to some extent.

How to ban trading? You could heavily addon tax profits from short term trading under 3 months at 90% say, tapering to zero as time increases maybe 2 years. With zero ability to offset any losses with other tax forms.

Shorts, options et. included unless it can be proven as part of a bigger trade or insurance but then apply to bigger trade.

This could also apply to market makers making that closer to a public service.

Re: I Championed Prediction Markets. Look What They've Become

#49

Post by saghm »

fwipsy wrote: post #13
Planktonne wrote: post #9

Earlier quoted context omitted.

If you're consistently wrong, then it's time to stop being a thought leader, and really examine the lens through which you view the world. The author still thinks they were "freeing prediction markets from unnecessary restrictions", but clearly some restrictions are necessary, and totally free markets aren't actually an economic panacea. This is not really new information, so the flaw is in the thinker, not the data.…

You're mischaracterizing. He said that he helped build a case for it -- not that he still supports it. As far as I can tell, prediction markets went from totally illegal to basically unregulated. Presumably the author was arguing for a middle ground.

> He said that he helped build a case for it -- not that he still supports it.

I would expect that if they didn't think they were unnecessary anymore, they would have said something like "I helped build the case for freeing prediction markets from restrictions that I thought were unnecessary". Their description of the predictions being unnecessary is still stated as a present tense fact (and the entire clause is in bold-face, making it clear that it's something they want to draw attention to).

Re: I Championed Prediction Markets. Look What They've Become

#50

Post by Glyptodon »

fwipsy wrote: post #16

I'll admit that I still see some value in prediction markets in theory, but in practice the way they were implemented seems to have caused an order of magnitude more harm. In retrospect their misuse as a loophole for sports gambling was an obvious outcome. Seems like every promising new technology inevitably is used for evil. Cryptocurrency is mostly used for criminals. Social media displaced more meaningful forms of…

So I will admit the idea of "maybe you could make some guesses about the future and if you're right it's worth something" sounds appealing - like if I guessed people would get perfect nutrition by IV and not bother with eating and it came true and I made money from it, or the same about making money speculating on when the first Mars colony is founded, etc. But what I don't get, taking a step back, and never have, is what society and the world get out of having more accurate guesses about this. Even setting the obvious negatives (if you have your retirement savings sitting against a Mars colony before 2030 maybe you have some incentive to sabotage a launch in early 2029) aside, what are the positive values supposed to be? And I've never really understood this.
Post reply on HN