What happens today is that any impending news, good or bad, must be bottled up until some official news is released, typically a quarterly report. The result in the market is always an underdamped reaction to the delta function. The little guy, and even the big guy, has limited control of his destiny during this rude shock.

I submit that allowing for insider trading might lead to a properly damped response to the change in condition. Maybe you make things fairer by taxing gains made by execs on their own stock at a higher rate, but you don’t stop the information transfer. You might argue against the implementing the proposal if you think that the underdamped nature of securities is somehow preferrable … I’d bet that the CBOE would take that side.

I’m pretty sure Patri is not claiming that sports as a whole are zero-sum. But the outcome on which we typically *bet*, is zero-sum.

The total value produced in the world by an NBA season in which Detroit wins the eastern conference championship is little different from that produced when Boston does. In addition, the difference is completely intangible. In this sense, a bet on this series is a bet that has little connection to the real world.

Now that I say that, though, I have to back off a bit. There is surely a redistribution that happens depending on who is in the finals, or wins the championship, in that that team will sell more paraphernalia etc. It’s not a big a difference as 10 billion stolen in Iraq in that the people who get the money in either situation are investing it in roughly similar ways. But it is a difference.

And bubbles eventually burst. That does not prevent them all from being formed in the first place.

I suppose a company can try to create reputation and legitimacy during a Ponzi scheme, but it’s hard to imagine that Enron needed any more. I also suppose it’s possible that Enron expected to pay its operating losses with occasional windfalls, like in CA, but that was just too small to be a serious business model.

Enron was a case of bad incentives. The salesmen cooked the books and exited. The behavior of the executives makes me doubt they knew they were playing a Ponzi scheme (until the prosecuted fraud) and ever had an exit plan.

That just-so story simply isn’t true, in my observation. Lots of “Ponzi schemes” transition to legitimate profitability and pull it off. A good argument could be made that Enron was attempting the same thing, and with better and luckier timing could have pulled it off, too. Beware of any “eventually” narrative, because it leaves room for intervention and transition before the purported inevitable outcome.

Also would differentiate insider trading from manipulation of outcome or prices.

The fact that a not-insignificant proportion of our economies are consumed by sport affects my life directly, whether or not I care about it.

Interesting. But if investors and betting organisations become sophisticated enough to detect potential fixing, might not cheats become better at falsely implying match fixing? After all, profits can be made from bets being voided, or from investors pulling out of the betting.

Will this result in a cycle of escalating cheaters and cheater detectors, or will the cheaters hit a wall? My feeling is that the returns for cheaters would diminish as the system gets more advanced; but that’s just a gut feeling.

Sports are much more like entertainment. Just as the music industry generates utility through consumption of music, the sports industry generates utility through fans consuming sporting events. But there is a zero-sum nature to sports which is not present in music. The existence of sports may create net positive utility, but is that true of who wins a particular game? There will always be a winner and a loser, why does it matter which is which?