X-Message-Number: 24179
Date: Wed, 2 Jun 2004 14:14:16 +0200
Subject: Re: Idea Futures
From: David Stodolsky <>

On Tuesday, June 1, 2004, at 03:53  PM, Thomas Donaldson wrote:

> Would Mr. Stodolsky explain the fundamental logical flaws with
> "idea futures" as he sees them?
>

While it isn't clear that this is the same venture that I had contact 
with before, the objection I had was that there was a reification 
error, as I recall. That is, that current mechanisms already 
incorporated the information seeking to be bet on.

There was an attempt by "Homeland Security" to set up a market where 
people could bet on whether, for example, foreign leaders would be 
assassinated by a certain date. This was shut down as morally 
reprehensible, as I recall.

It is known that large bets were placed that airline stocks, etc. would 
go down after the attacks on the WTC and Pentagon. About 30 billion USD 
was made on that. So, it is clear the current markets can capture the 
value of these types of events.



>     Intrade has long-term offers like "where will the Dow close at 
> year end" and short term offers like "will the Dow close higher on the 
> day. "

This type of offer is already available thru index funds. Intrade seems 
to justify it by lower trading costs. However, there is probably a lot 
less security for your money too.


>
> Oct2004 Unemployment to be ON or BELOW 5.0% and GW Bush to win election

I don't see how anyone could win against the people preparing the 
unemployment statistics. In general, insider information will determine 
the winners on these types of bets and there doesn't seem to be any 
protection against that at all. There is a vast amount of evidence that 
this is true on the stock market, where there is considerable 
regulation.


In general, these are not Idea Futures as originally presented, which 
had to do with a certain scientific development being available in 30 
years, etc. For those type of predictions, cross-impact analysis and 
other specific forecasting techniques are more appropriate than markets.


dss


David S. Stodolsky    SpamTo: 

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