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I Championed Prediction Markets. Look What They've Become

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

#61

Post by fwipsy »

Glyptodon wrote: post #50
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…

If we knew the COVID pandemic was coming, we could have prepared better. If we knew what AI would look like in 5 years, we could write laws for that proactively rather than reactively. The Fed could look at prediction markets to decide whether to raise the interest rate.

Basically, it depends on there being competent, good-willed people in power using them to inform their decisions. That feels like a bit of a joke right now, but things weren't always this way.

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

#62

Post by intended »

runarberg wrote: post #60
intended wrote: post #58

Earlier quoted context omitted.

Eh. Stock markets serve(d) a function as vehicles to invest in risky ventures. In other words, a way to channel investment. In the average case scenario, removing the stock market results in rich people being the ones who can afford to fund projects, and thus owning the outcomes. The underlying case would be for wealth concentration and therefore power concentration. Addressing that would give the working class more…

If they ever served such a function, they no longer do so. Today’s risky ventures are funded by venture capital and the results are disastrous. I propose an alternative system where you fund your risky venture by taking out a loan at your local credit union, by crowd-sourcing it, or better yet, just don’t. I think we can give risky ventures a brake for 20-100 years. Maybe concentrate our efforts on undoing the damage…

They definitely served that function.

The sucky rule about history seems to be - “is this better than what was there before.”

Equity markets can definitely be made more competitive, and being ungodly rich needs to be more expensive than it currently is.

Loans don’t work the same way as equity investments, because loans are essentially low risk tools. They have a fixed payoff every month/year, whereas something like an expedition or new product launch can recoup its investments only post a certain period, if at all.

As a result loans originators don’t invest in high risk ventures.

This is a rule of thumb, there are many instruments you can create which will fill the gap.

We definitely need more competition and user protection in markets (and in general). The pendulum has swung very far in favor of firms in the US, and that needs to be balanced.

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

#63

Post by mind-blight »

Glyptodon wrote: post #45
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.

Election prediction is an interesting one. The first digital prediction market on the US was election only, and it has a $500 cap. It was run by a university and had a limited scope, but it still be a surprising amount.

It did a better job of predicting election outcomes than the polls. For markets without a cap, companies have used them to have against a politician that would pass policy that's can for their business.

This doesn't mean we should have them, but there is utility. It's just not worth the trade-offs

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

#64

Post by qlte »

avaer wrote: post #6
ggm wrote: post #2

Put the same energy into championing regulation then. Don't walk away from a mess you claim to have helped create. (which the OP may indeed be doing, but it isn't clear they are, hence the chiding)

The people regulating this are the people profiting from it. Championing change isn't too different from prostrating in front of the King. Your advice might work in a different world.

Substitute “regulating” with “lobbying Congress”

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

#65

Post by qlte »

fwipsy wrote: post #61
Glyptodon wrote: post #50

Earlier quoted context omitted.

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…

If we knew the COVID pandemic was coming, we could have prepared better. If we knew what AI would look like in 5 years, we could write laws for that proactively rather than reactively. The Fed could look at prediction markets to decide whether to raise the interest rate. Basically, it depends on there being competent, good-willed people in power using them to inform their decisions. That feels like a bit of a joke ri…

What would the COVID pandemic market have been before COVID existed, and what information would have been available to steer the market towards a useful prediction?

“Will there be another coronavirus mutation resulting in a pandemic in 2005, 2006, 2018, 2019…” doesn’t seem like it would have been helpful, except in the like two month or so window after detection and the WHO announcement when alarm bells were already going off but it still hadn’t diffused into popular consciousness yet.

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

#66

Post by satvikpendem »

runarberg wrote: post #54
satvikpendem wrote: post #43

Earlier quoted context omitted.

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.

There is no need for an alternative. Trading stocks is not a necessary precondition for trading goods and services. Most of mine, and probably your businesses are done without anybody holding stocks in the stuff you are buying or selling. You can abolish the stock market, and pretty much everything stays the same... except the rich lose one (of many) avenues of systemic exploitation.

They'll just exploit you another way. At least those invested in the stock market actually have upward mobility from being poor or middle class, see Bogle heads or the FIRE movement.

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

#67

Post by satvikpendem »

runarberg wrote: post #60
intended wrote: post #58

Earlier quoted context omitted.

Eh. Stock markets serve(d) a function as vehicles to invest in risky ventures. In other words, a way to channel investment. In the average case scenario, removing the stock market results in rich people being the ones who can afford to fund projects, and thus owning the outcomes. The underlying case would be for wealth concentration and therefore power concentration. Addressing that would give the working class more…

If they ever served such a function, they no longer do so. Today’s risky ventures are funded by venture capital and the results are disastrous. I propose an alternative system where you fund your risky venture by taking out a loan at your local credit union, by crowd-sourcing it, or better yet, just don’t. I think we can give risky ventures a brake for 20-100 years. Maybe concentrate our efforts on undoing the damage…

Good luck with that pause. Things like the climate disaster require risky ventures these days like carbon sequestration at scale, you can't undo it just by doing the same things as today, which is basically what you're advocating for, upholding the status quo, for 20 to 100 years. You'll probably say that's not what you mean but that's what the outcome will become.

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

#69

Post by Ferret7446 »

Glyptodon wrote: post #45
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.

Prediction markets are a superior method for determining public sentiment, and understanding public sentiment is useful for many reasons. It can guide economic decisions, picking policy, etc.

Basically, prediction markets are for public sentiment what free markets are for supply and demand. They create an emergent system that balances/optimizes variables across a large domain.

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

#70

Post by Ferret7446 »

qlte wrote: post #65
fwipsy wrote: post #61

Earlier quoted context omitted.

If we knew the COVID pandemic was coming, we could have prepared better. If we knew what AI would look like in 5 years, we could write laws for that proactively rather than reactively. The Fed could look at prediction markets to decide whether to raise the interest rate. Basically, it depends on there being competent, good-willed people in power using them to inform their decisions. That feels like a bit of a joke ri…

What would the COVID pandemic market have been before COVID existed, and what information would have been available to steer the market towards a useful prediction? “Will there be another coronavirus mutation resulting in a pandemic in 2005, 2006, 2018, 2019…” doesn’t seem like it would have been helpful, except in the like two month or so window after detection and the WHO announcement when alarm bells were already…

It was quite clear covid was potentially a danger months before the "full outbreak". There were short news articles "in the margins" about a disease in Wuhan, with conspiracy theorists talking it up. It would plausibly have given us a month early notice. Hard to say how much that would have helped, but it might have improved the total outcome somewhat.
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