Tag Archives: Prediction Markets

Renew Forager Law?

By Robin Hanson · December 6, 2010 11:00 am · Comments (32)

Foragers lived close, in groups of a few dozen. They slept close, and hunted and gathered in groups. They knew each other very well. So when one had a complaint against another, “law” was basically the rumor mill. The group would discuss the problem, taking everything they knew about the parties into account, form an informal consensus on what to do, and then do it. Punishments ranged from warnings to cold shoulders to exile to death.

Farmers developed stronger social norms, and then created formal law to standardize those norms on larger social scales. But since we seem to be returning to foraging ways in many ways as we’ve become rich, it is interesting to consider adopting a more foraging style law.

Imagine that whenever anyone had a complaint about another, we convened a jury of a dozen to study the issue full time for an entire year. (Forget about the cost of this for a moment, and just consider the kinds of decisions that would result.) This jury would have a budget to hire experts of various sorts, could interview all the people involved, and browse ubiquitous surveillance videos. They would have complete discretion to offer any punishments or rewards they thought appropriate; any precedents or written rules would only be suggestions.

Yes, you might want to discourage jurors taking bribes, favoring folks like themselves, or deviating too arbitrarily from precedent, but such complaints would be dealt with through exactly the same system – yet another jury would be convened to deal with each complaint. Same goes for complaints on excessive complaining.

Now let’s deal with the costs. Given a complaint, let’s convene such a jury rarely and randomly, perhaps as one in a thousand times. Before we “roll the dice” to see if a jury will be convened, let us have an open betting market on the jury’s decision. If we happen to convene a jury in this case, the bets will pay off, and punishments will be enacted, according to that decision. If we don’t convene a jury, the bets are called off and we’ll randomly select a punishment using the probability distribution given by the betting market odds.

OK, now that we have the outlines of a workable system, the most interesting question is: would you want a legal system like this? Even setting aside the issue that this might work especially badly for very specialized or technical complaints, I think most folks are rather uncomfortable with the idea. Which just shows how deeply we have internalized certain key farmer values.

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VCU Futarchy Talk

By Robin Hanson · December 4, 2010 10:00 am · Comments (3)

Last Monday I gave a talk (slides, audio) at VCU econ, on decision markets and futarchy.

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Boo Dark Powers

By Robin Hanson · October 30, 2010 9:15 pm · Comments (39)

To mark Halloween, I hereby endorse mild regulation to discourage the summoning of dark supernatural powers which might destroy us all. Seriously. Anders Sandberg:

The San Marino scale for assessing the significance of messages that could be received by aliens … is a scale from 1 to 10 based on how easily detected the transmission is, and how much information about humanity it contains. Past deliberate transmissions have managed to reach 8, ‘far reaching’. Even planetary radar manages to reach a level of 6, ‘noteworthy’.

So, how far does these [recent] advertisements go? The Deep Space Communications dish is apparently 5 meter in diameter … The Dwingeloo telescope used for the Klingon invitation is a bit larger, 25 meters, but again the transmission power is unclear. … The level 8 signal from the Arecibo used about half a million Watts of power, making it far more powerful than anything these telescopes can achieve. … It hence seems that compared to past messages these adverts are unlikely to matter: we are already transmitting other messages, these just add to the choir. …

How much should small groups of people be allowed to risk the future of humanity with low probability? Not everyone agrees that the risk from alien contact is negligible: even a very low probability times a great harm can be relevant. … Should we be equally concerned with occultists trying to summon world-changing supernatural powers? There are probably many more people today who believe in supernatural entities than mere aliens, and that some interactions with them could be harmful. Yet there are no attempts at formulating risk scales for ritual magic. … Even if we were to analyse them rationally, we need to have an ‘ultraviolet cut-off’ for the infinite number of possible-yet-exceedingly-unlikely possibilities we could worry about. How to rationally decide on this cut-off seems problematic.

Even if the risk from recent ads is only 1/1000 of the risk of other prior transmissions, since I’m not sure how big was their risk I’m reluctant to conclude that the smaller ones are “unlikely to matter.” Perhaps 1/1000 of a bigger risk is still big enough to matter. So I’d support mild regulation to discourage such transmissions, big and small.

On which risks should matter, I’d prefer to use odds from a prediction market to decide. And my guess is that they’d give non-trivial (well over one in a million) odds both that our transmissions might alert hostile aliens, and that one could “summon world-changing supernatural powers.” So I’d also support mild regulation to discourage actions that might risk our descruction by terrible supernatural dark lords. Perhaps that sounds silly, but to disagree you either have to support our destruction by dark powers, or disagree that policy should be based on market odds.

Added 1Nov: Many of you talk as if one would have to go through a phone-book length list of potential disasters before one came to this one.  But surely this is one of the top ten disasters of concern in fiction, and would be similarly high in surveys.  Yes, you might not take it seriously, but others clearly do. The question is: what probability to use in policy when people disagree on probabilities. Surely the right answer is some sort of weighed average of opinion, and while willingness to bet is a great way to weight opinions, surely most any neutral approach will give a high enough probability of disaster here to justify substantial concern.  And this justifies “mild” regulation, which looks for the easy wins of large harm reduction at low cost.  Now it might turn out that there just don’t exist any feasible mild regulations, but we should at least consider some options before drawing that conclusion.

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Track Records

By Robin Hanson · September 29, 2010 10:40 am · Comments (7)

More evidence that a huge way to improve your accuracy is track records: simply write down your forecasts and check their accuracy later:

In the context of a Super Bowl loss (Study 1), a presidential election (Studies 2 and 3), an important purchase (Study 4), and the consumption of candies (Study 5), individuals mispredicted their affective reactions to these experiences and subsequently misremembered their predictions as more accurate than they actually had been. … This recall error results from people’s tendency to anchor on their current affective state when trying to recall their affective forecasts. Further, those who showed larger recall errors were less likely to learn to adjust their subsequent forecasts and reminding people of their actual forecasts enhanced learning. These results suggest that a failure to accurately recall one’s past predictions contributes to the perpetuation of forecasting errors. (more)

What we need are techs to make it very easy for record our forecasts as we go about our lives, and to review them later for accuracy.

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Academics Like Nations?

By Robin Hanson · September 17, 2010 6:00 am · Comments (15)

Why are some nations rich and others poor? Decades ago many thought a big part of the answer was “formal institutions.” Folks understood in rough outline many ways in which institutions could go wrong, which suggested many ways to evaluate institution qualiy. And rich nation institutions do tend to get higher marks in such evaluations. The hope was that if poor nations were fitted with formal institutions like those from rich nations, poor nations would also get rich. But academic consensus has moved well away from that view today, as so many attempts to transfer formal institutions from rich to poor nations have failed miserably. Now most see “culture” as a big part of the answer, and culture is not so easily copied, or even measured.

Why are some communities of intellectuals productive at accumulating insight and accuracy, while others instead become dead, distracted, and dysfunctional? We understand in rough outline many ways that intellectual communities can go wrong, and these suggest many ways to evaluate community health. Furthermore, especially productive intellectual communities of the past do seem to get higher marks in such evaluations. This has led many to proclaim certifiers of intellectual accuracy, such as peer review or randomized experiments, which can give observers confidence in a community’s intellectual authority. To decide which conflicting communities to believe in a confusing controversy, one merely need check for official certifying marks.

Unfortunately, just as with nations, quality markers based on broad features of formal institutions are pretty weakly correlated with actual intellectual productivity and insight.  Whether an intellectual community works well depends much more on complex details of its culture, details that are hard for outsiders to discern.  Choosing who to believe based on weak indicators such as the use of peer review would be like guessing which nations are rich using the text of their constitutions. If there were nothing better, of course, its what you’d have to do. But in intellectual controversies you’d do far better to rely on estimates from prediction market, if such were available; they’d do much better at eliciting honest insider assessments about the health of their communities.  Relying on prediction market estimtes would be much more like moving to a nation that is actually rich, instead of one with a rich-sounding constitution.

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Sample Odds

By Robin Hanson · September 10, 2010 4:00 pm · Comments (31)

Chances of some future events, from Intrade.com:

70-71% Republicans win US House in 11/2010
42-47% California legalizes marijuana in 11/2010
6-16% California credit default by 2011
10-20% US overt strike on N. Korea by 4/2011
24% US or Israel overt strike on Iran by 2012
10-19% US Sup. Court bans med. mandate by 2012
16-18% Palin is Republican nominee in 2012
11-30% Japan says it has nuke by 2013
45-48% US Cap & Trade system by 2013
12-14% China war act on Taiwan by 2013
15-38% Higgs Boson seen by 2014

If you think any of the above in error, please do go get paid to correct the error.

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How Long A Leash?

By Robin Hanson · May 24, 2010 7:20 pm · Comments (24)

While prediction markets on project completion dates often give spectacular accuracy improvements over official forecasts, hearing about this doesn’t make most organizations interested in adopting them. A plausible explanation for this is that managers often try to induce employee effort by manipulating the perceived chances of making the deadline. Employees will slack off if either the deadline seems impossible, or if it will be easily achieved; they work hardest when there is only a decent chance of success.

Similarly, it seems to me that many women (often unconsciously) try to keep their men maximally motivated to please them by giving them some but not too much sex. Men who think getting sex is easy, or impossible, don’t try as hard. At a party this weekend, I heard two middle-aged women lament that they had given away sex too easily in college; they envied the high prices young high-class prostitutes command.

This is why I predict the new “pink Viagra” will sell far less than its blue cousin. This new drug will be demanded by women who find it hard to offer their men enough sex to keep him near that optimal most-hungry point. But most women do not find this difficult.  In fact, I suspect some high-libido women have affairs in part to help them offer less sex to their men. Also, many women avoid sex with their man because they’ve decided (often unconsciously) that he’s just not good enough. Consider:

A German pharmaceutical giant wants to sell … “flibanserin.” … The company has sponsored studies involving more than 5,000 premenopausal women ages 18 to 50 in the United States, Canada and Europe in whom HSDD had been diagnosed. A 100-milligram daily dosage increased the number of satisfying sexual experiences that women had reported from the previous month — a key benchmark the FDA has set for such drugs — from an average of 2.7 to 4.5, compared with 3.7 among those taking a placebo. …

Critics say … “People think they are sick when they are not.” … For many women, waning sexual desire is a normal part of aging. For others, it could be a sign of other medical problems, a dysfunctional relationship or even an abusive partner. … “Is this going to make women desire an abusive partner?” asked Liz Canner, a documentary filmmaker who produced “Orgasm Inc.,” about the pharmaceutical industry’s role in developing drugs for female sexual disorders. “Is it going to make us desire every guy who walks by?”

I very much doubt men were as concerned that blue Viagra would make them too attracted to abusive women.

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RIP Medical Hypotheses

By Robin Hanson · May 9, 2010 5:15 pm · Comments (26)

Medical Hypotheses was established with the express intent of allowing ideas outside the mainstream to be aired so that they could be debated openly.

My article on medicine as a way to show we care was published in this (not especially prestigious) academic journal. Alas its editor Bruce Charlton has been sacked, its editorial policy ended, and two papers withdrawn, because it published a paper by UC Berkeley’s Peter Duesberg’s saying official South African mortality statistics seem at odds with a particular previous study’s estimates of the harm of their not using anti-HIV drugs. (The author of that previous study responded, suggesting official statistics are unreliable, and citing other sources that agreed with him.)  Duesberg’s inexcusible crime was suggesting at the end of his article that available data might be better explained if HIV is not the main cause of AIDS:

“Is academic freedom such a precious concept that scientists can hide behind it while betraying the public so blatantly?” asked John Moore, an Aids scientist at Cornell University, on a South African health news website last year. Moore suggested that universities could put in place a “post-tenure review” system to ensure that their researchers act within accepted bounds of scientific practice. “When the facts are so solidly against views that kill people, there must be a price to pay,” he added.

So how sure would we have to be of an academic claim for it to be reasonable to ban any academic publications offering evidence questioning that claim?  And how sure would be have to be before we could reasonably revoke the tenure of any academic who attempted such a publication?  I doubt we are that confident in the HIV-AIDS connection, and would love to see prediction market odds here.  Are there any offers to bet on record here?

HT Arnold.

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Fight The Fighters

By Robin Hanson · May 5, 2010 6:30 pm · Comments (19)

My undergrad public choice class ended with a lecture on futarchy. (Bryan Caplan says he did something similar in grad Public Finance.)  I think I convinced most students that futarchy is promising and worth trying, first on a small scale, and mostly met their objections to their satisfaction.  But I didn’t perceive much enthusiasm.  As usual, people don’t go to the barricades for efficiency; they get passionate about fighting enemies.  If only more people would object violently to futarchy, maybe we could inspire more interest in it. But just getting most folks more of what they want, who can get excited about that?

But consider: passion about pacifism.  There have been times, when the world was divided into sides fighting vicious and deadly wars, that some folks took the side of stopping the fights.  They took the natural passion of fighting an enemy and channeled it into fighting the fighters. I’d like to get folks to similarly see the wasteful pointlessness of today’s political battles. Today we induce millions of people to make up mostly-random political opinions on hundreds of diverse complex policy topics they hardly understand, split into warring factions based on shared opinions, and then fight vicious political battles over which factions get to make the government implement their random opinions. I’d rather folks focused on generating meta-political-opinions, not about particular policies like wars or bank bailouts, but about what political processes best choose effective policies.

Some folks are concerned that the public will feel dissed by Vote on Values, Bet on Beliefs, in that their opinions would no longer be solicited, via voting, on how to get what they want; they’d only be asked about what they want.  While anyone could speak on how to get stuff, those contributions would face stiff penalties for inaccuracy (as well as rewards for accuracy). But rather than seeing this as disrespect, I’d like folks to see it as a mark of status:  high status folks tend more to just tell their underlings what they want, and to say less about how to do that.  Better quality household servants, or exectutive assistants, need less instruction on how to do their job.  You can more just say you want scrambled eggs and toast for breakfast at 8am, and they’ll figure out how to make it happen.

Similarly, nations where citizens can effectively control their government by just specifying a national welfare function, and tweaking it a bit periodically, should be higher status than nations where ordinary citizens must continually form opinions on the effectiveness of hundreds of rapidly changing policies. For example, many Californians, who every few months face another thick booklet of direct democracy initiatives, complain they shouldn’t have to wade through such detail; isn’t that the politicians’ job? If political servants can’t be trusted to choose well without heavy monitoring, well then yes voters are forced to monitor them. But people with access to more trustworthy servants should gain the benefits both of having to pay less attention to details, as of the respect owed those who achieve such efficiency.

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Being Right Too Soon

By Robin Hanson · April 30, 2010 10:30 am · Comments (27)

Charles Peters … had a slogan … “If you’re not afraid of being right too soon.”  But of course, everyone is afraid of being right too soon. It’s bad politics, being out of step with the herd; it looks like you’re greedy if you profit from being wise while others suffer from their stupidity. People want to be “right” at the same time everyone else is — with the result that they delay action until the crunch hits with devastating force. Take the case of Goldman Sachs, this week’s favorite whipping boy. “Goldman Sachs sought to protect itself from a collapsing housing market by selling mortgage investments that it knew were likely to fail,” read the lead of a Post story posted on the Web Monday. Scandalous! Why didn’t they wait and get cratered like the folks at Lehman Brothers, R.I.P.?

The herd gallops toward the precipice for a simple reason: It’s lonely and unpopular to go the other way. Take the question of tax policies that could avert the next big U.S. financial disaster, which is our ballooning federal deficit. The sensible real-world answer, many economists argue, is a value-added tax that would encourage saving at the same time it pays down the deficit to manageable levels. But politicians are terrified of being right too soon on this one.

David Ignatius is right; this applies in politics, news, and even academia. Being into a topic or a position well before others gets you much less than being into it just as others are getting in. Arnold Kling echos:

Here are some of the phrases that are used to describe the Outsiders, the money managers who were right about the subprime bubble: ”rude”  blunt” ”bothers people” ”socially cut off” ”isolated” ”not hearing the signals”.

More emphasis on institutions like prediction markets would create more incentives to be right before others.  But, alas, I suspect this is a big reason why folks are reluctant to create them; they don’t want people to be rewarded for being right before they were.  They don’t like Goldman Sachs being rewarded for being right first.

In general, we don’t mind rewarding the fashion-savvy; those who pick up a fashion just as it is getting popular signal that they are well connected with fashion leaders.  But be too far ahead and you just look random, weird, and lucky; not well connected.  We also don’t mind rewarding “leaders” who know when our crowd is going where, and who “lead” by jumping out and marching in front of us; forager leaders did that all the time.  But we distrust folks who are rewarded for opposing our crowd; they are not leaders but are outsiders and enemies, and must be crushed.

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