Some new ideas I want to explain start with a 2000 paper on Taboo Tradeoffs. (See also newer stuff.) So I’ll review that paper in this post, and then I’ll explain my new ideas in the next post. In Experiment 2 of the 2000 paper, each of 228 subjects were asked to respond to one of 8 scenarios, created by three binary alternatives. All the scenarios involved:
Thank you for the quick reply!If I follow the arguments from the paper right, the accuracy would only increase if the market doesn't limit participation and size of trades too much. The accuracy would increase as long as the additional volume of trading attracted by manipulation outweighs the manipulation itself.However, as the market volume grows, it becomes possible to benefit from insider trading. Such market could be then used to finance the activities that result in unlikely outcomes by betting on them. Does this make sense?
In the article on the PAM project (https://www.mitpressjournal... you suggest that terrorists wouldn't be able to manipulate markets if the trading is not limited but then later go on to state that the terrorists wouldn't be able to benefit from betting on the outcomes they have more information about (perhaps because they control them) because "trades there were going to be limited to a few tens of dollars—hardly enough to find a major terrorist attack".
It seems that resistance to manipulation and resistance to insider trading are at odds here and we can't have both at the same time, at least not to the full extent. If the amount of trades is limited, manipulation becomes cheap and if the trades are not limited, insider trading becomes profitable.
Interesting. When reading about the taboo example where John was chosen easily, I immediately came up with a narrative that could plausibly explain away the norm violation. My story was the hospital was financially distressed and was needed to ensure the continuation of medical care in the region. The administrators knew about the looming financial crisis and knew that any costly procedures like this would push the hospital into bankruptcy.
On further reflection, there are other plausible narratives which are less forgivable. But my first instinct is to attribute the taboo-breaking to mitigating circumstances would would make the choice less controversial.
I think that something similar is going on with President Trump. He has violated more taboos than any president I can think of, but his base supporters continue to stand by him. His taboo violations always appear easy. This makes me wonder if his supporters are excusing his behavior by appealing to a narrative which offers some excuse.
Thank you for the quick reply!If I follow the arguments from the paper right, the accuracy would only increase if the market doesn't limit participation and size of trades too much. The accuracy would increase as long as the additional volume of trading attracted by manipulation outweighs the manipulation itself.However, as the market volume grows, it becomes possible to benefit from insider trading. Such market could be then used to finance the activities that result in unlikely outcomes by betting on them. Does this make sense?
Manipulation makes prices MORE accurate, even in small thin markets: http://www.overcomingbias.c...
In the article on the PAM project (https://www.mitpressjournal... you suggest that terrorists wouldn't be able to manipulate markets if the trading is not limited but then later go on to state that the terrorists wouldn't be able to benefit from betting on the outcomes they have more information about (perhaps because they control them) because "trades there were going to be limited to a few tens of dollars—hardly enough to find a major terrorist attack".
It seems that resistance to manipulation and resistance to insider trading are at odds here and we can't have both at the same time, at least not to the full extent. If the amount of trades is limited, manipulation becomes cheap and if the trades are not limited, insider trading becomes profitable.
Interesting. When reading about the taboo example where John was chosen easily, I immediately came up with a narrative that could plausibly explain away the norm violation. My story was the hospital was financially distressed and was needed to ensure the continuation of medical care in the region. The administrators knew about the looming financial crisis and knew that any costly procedures like this would push the hospital into bankruptcy.
On further reflection, there are other plausible narratives which are less forgivable. But my first instinct is to attribute the taboo-breaking to mitigating circumstances would would make the choice less controversial.
I think that something similar is going on with President Trump. He has violated more taboos than any president I can think of, but his base supporters continue to stand by him. His taboo violations always appear easy. This makes me wonder if his supporters are excusing his behavior by appealing to a narrative which offers some excuse.