Leamer’s 1986 Idea Futures Proposal

In 1990 I started publishing my "idea futures" concept of using betting markets to improve science incentives (see here, here, and here.)   It wasn’t until a few years later that I found that in 1986 the economist Edward Leamer‘s published this "half-baked scheme":

The interpretation of inferences reported in scientific journals is made difficult by the muddled incentives of the authors.  … 

The publication of bid-ask spreads for lotteries contingent on interesting and decidable events … might have a remarkable effect on the quality of empirical work that gets published.   Authors would be expected to propose new lotteries or to offer new bid-ask spreads for existing lotteries.   Journals would make editorial decisions concerning the degree of interest in new lotteries and would commit journal space only if they anticipate sufficient interest.  Lower selling prices or higher buying prices would be automatically published.  If the analysis which led to these prices were sufficiently amusing and if the author were willing, an article describing the method could be published as well. 

Subscribers would be allowed to contract with authors at the stated prices, though authors would be free to retract prices at any time, …  The great benefit of a scheme like this is it allows clear determination of professional progress as the probability intervals get narrower and move toward one or zero. 

Leamer’s vision of the social benefits of clear betting offers and prices was very similar to mine.  But since he allows authors to immediately retract their prices, it is not clear to me what incentives Leamer had in mind to make it happen.   My vision was of patrons subsidizing betting markets to promote research, of advocates making offers to persuade audiences of their claims, and of researchers responding to the prospect of profiting from their bets.   But no matter; my hat is off to Leamer’s insight and foresight. 

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  • Perry E. Metzger

    There is also the science fiction novel “The Shockwave Rider” which featured idea futures markets under another name — the novel was published in the early 1970s.

    An aside on Idea Futures more generally:

    I watched the TradeSports contracts on the most recent congressional election quite closely in the few days around the election. Even through most of election day, the senate contracts did not well reflect the final outcome of the election. A lot of real money was at stake, so one would think that if the market participants had a good sense of what was going to happen that the news media lacked the market would have reflected that, but in the end, the traders don’t seem to have been particularly prescient.

  • Perry, Shockwave Rider described a future with a lot of betting on current events, but the prices weren’t described as being socially useful. In fact, if I recall the elites there were supposed to have used the markets to manipulate public opinion.

    Perhaps you can profit from improving prices in the next election.

  • Martin Striz

    The problem is that in science, especially within specialist fields, negative results are often just as important as positive results. To specialists, knowing what isn’t true is just as important as knowing what is, so that you don’t keep sampling the same research space over and over. In fact, negative results can inform other people’s research in unexpected ways.

    That might not seem hot and sexy to the lay public, so they wouldn’t evaluate it the same way. They would devalue potentially important findings.

  • Martin, Leamer’s proposal was for a market among specialists. And I note that potentially important negative findings would not be underpriced, but simply unpriced – a market would not generate incrementally misinformative prices, but simply failing to advance on some questions. Not even the Earthweb is interested in predicting what you’ll have for breakfast.

  • Martin, Leamer’s proposal would not seem to change how much we encourage publishing negative results. After all, the author of those papers also have opinions, they are just opinions closer to a zero effect.

  • Martin Striz

    I see, duly noted.

  • Martin Striz

    BTW, nice blog, I’m learning a lot myself.