This almost seems too obvious to mention in one of Robin’s threads, but I’ll go ahead anyway: success on prediction markets would seem to be an indicator of rationality and/or luck. Your degree of success in a game like HubDub may give some indication as to the accuracy of your beliefs, and so (one would hope) the effectiveness of your belief-formation process.
I would expect success in a prediction market to be more correlated with amount of time spent researching than with rationality. At best, rationality would be a multiplier to the benefit gained per hour of research; alternatively, it could be an upper bound to the total amount of benefit gained from researching.
Prediction markets tend to be zero-sum games. Most rational agents would prefer to play in a real stock market—where you can at least expect to make money in line with inflation.
The relevant category is constant-sum games, and stock markets are that as well if liquidity traders are included in the relevant trader set. One can subsidize prediction markets so that all traders can gain by revealing info.
Tim: but don’t prediction markets have a lot of benefits compared to stock markets? They terminate on usually set dates, they’re very narrowly focused (compare ‘will the Democrats win in 2008’ to ‘will GE’s stock go up on October 11, 2008’ - there are so many fewer confounding factors for the former), and they’re easier to use.
Well, you don’t have to use the fake-money ones. Intrade and Betfair have always seemed perfectly serviceable to me, and they’re real money prediction markets.
On a related point, fake money could actually be good. There’s less motivation to bet what you really truly think, but not wagering real money means you can make trades on just about everything in that market—you aren’t so practically or mentally constrained. You’re more likely to actually play, or play more.
(Suppose I don’t have $500 to spare or would prefer not to risk $500 I do have? Should I not test myself at all?)
This almost seems too obvious to mention in one of Robin’s threads, but I’ll go ahead anyway: success on prediction markets would seem to be an indicator of rationality and/or luck. Your degree of success in a game like HubDub may give some indication as to the accuracy of your beliefs, and so (one would hope) the effectiveness of your belief-formation process.
I would expect success in a prediction market to be more correlated with amount of time spent researching than with rationality. At best, rationality would be a multiplier to the benefit gained per hour of research; alternatively, it could be an upper bound to the total amount of benefit gained from researching.
Prediction markets tend to be zero-sum games. Most rational agents would prefer to play in a real stock market—where you can at least expect to make money in line with inflation.
The relevant category is constant-sum games, and stock markets are that as well if liquidity traders are included in the relevant trader set. One can subsidize prediction markets so that all traders can gain by revealing info.
Tim: but don’t prediction markets have a lot of benefits compared to stock markets? They terminate on usually set dates, they’re very narrowly focused (compare ‘will the Democrats win in 2008’ to ‘will GE’s stock go up on October 11, 2008’ - there are so many fewer confounding factors for the former), and they’re easier to use.
Prediction markets as implemented in the real world mostly use fake money, which is a drawback.
Well, you don’t have to use the fake-money ones. Intrade and Betfair have always seemed perfectly serviceable to me, and they’re real money prediction markets.
On a related point, fake money could actually be good. There’s less motivation to bet what you really truly think, but not wagering real money means you can make trades on just about everything in that market—you aren’t so practically or mentally constrained. You’re more likely to actually play, or play more.
(Suppose I don’t have $500 to spare or would prefer not to risk $500 I do have? Should I not test myself at all?)