Prediction market sequence requested
Related to: Eliezer’s Sequences and Mainstream Academia, Intellectual insularity and productivity, I Stand by the Sequences, Why don’t people like markets?
Looking at some of the more recent arguments against them showing up in discussions I’ve been quite disappointed, they seem betray a sort of lack of background knowledge or opinions built up from a bottom line of “markets are baaad therefore prediction markets are baaad”. The casual arguments for them are lacking as well. I will say the same of other discussions on economic, since it is apparently suddenly too mind-killing or too political to talk about markets and similar things at all. We didn’t use to have tribal alerts flying up in our brains discussing such matters.
The Overcoming Bias community started with an assumption of certain kinds of background knowledge, this included economics and things like game theory. In the early days of LessWrong/Overcoming Bias Eliezer did a whole sequnece on filling in people on Quantum mechanics which despite his claims to the contrary doesn’t seem that vital (if still important).
We now have a different demographic that we used to. Not only that, we now have young people basically using the sequences as their primary source for education on matters of human rationality, quite different from the autodidacts exploring the literature on their own terms who where common in previous years. We’ve recognized this to a certain extent. We wrote a series of introductory sequences and articles to fill in such background knowledge explicitly such as Yvain’s recent one on Game Theory. Also part of the reason we now have a norm of more citations that EY originally did is to give study and research aids to people. Indeed I think adding comments to old articles featuring more citations or editing those in would be wise so as to avoid misconceptions.
I think we need several sequences on economics, and a good one to start would be one systematically investigating prediction markets. To a certain extent just reading Robin Hanson’s relevant posts on this topic would do much the same, but unfortunately we don’t have an organized series of sequences by him (beyond the tags he uses on his articles). I still hope Karmakaiser or someone else will one day undertake a project of writing up summary articles that organize links to RH’s posts into sequences so new members will read them as well.
I’d write these myself but I just don’t have a good background in what works and studies influence the positions of early key LW authors on economics and its relevance to rationality. I’m also only beginning my studies in that area since my background is in the hard sciences with only some half-serious opinions formed from Moldbuggian insights and 20th century social science.
I study/teach economics for a living, this made my try to think about why it is useful (besides that it gives me a job).
How To Run A Government
Economics has a lot to say about which government policies will make people better off or worse off. This is a big reason I got interested in economics, but its not very practical for the vast majority of people, who have essentially no influence over government policy (and in fact it is economists who are famous for arguing, perhaps incorrectly, that votes don’t matter).
Understand How The World Works
It’s always nice to just understand more, but in particular I think some insights are likely to make you happier. For instance, you may worry about not being a good person because you are selfish, but economics argues that in market settings being selfish often helps others too. Several insights of economics make you appreciate other people more: knowing that their specialization and labor is what makes the world, and you, so rich- people of different countries, religions, et cetera cooperate to make everything from your computer to your pencil. Whenever I get annoyed at the crowd in a coffeeshop or on the subway, economics reminds me that if it weren’t for the other customers, there would be no coffeeshop or subway. Learning about subjective value helps you not to look down on others so much for “bad taste” in music, books, et c.
Practical Skills
Econometrics (basically our word for data analysis) is the main practical skill of economics. It is a great tool for figuring out how the world works. I use it for academic research, but many private sector realize the value of econometrics (though they may call it analytics or data science or forecasting or something else). Another skill that only a few economists really master is mechanism design, which has been used to sell ads and spectrum and allocate kidneys, students, and medical residents.
Save Money
A lot of people get the idea that economics is about “how to make money”, but anyone seeing my paychecks would realize I’m not the one to teach that. We do have some things to say about how not to throw money away though. By learning about the Efficient Markets Hypothesis and investing in broad index funds, you will avoid losing money to fund managers fees and brokerage trading costs, and avoid the possible catastrophic failure of an undiversified portfolio. Sometimes you can use efficient markets to save time as well. If I want to know whether the recent jobs numbers were better than expected, I could read a lot about it, or just look at how the stock market reacted in the 15 minutes afterward. If I want to know who is going to win the US presidential election, I could follow the news for hours and hours and make a guess, or just look on Intrade for one minute.
Act Rationally
Economics teaches a model of how “rational people” act. This helps you notice when you are departing from the model of rationality and think about doing things differently. For instance, write off sunk costs and make decisions at the margin.
All in all, I’m not sure if economics is the most useful subject to learn (what are other contenders?), but it does seem to have a fair amount of practical utility.
(crossposted)
So, I think I’m going to write a sequence called “Economics in 5 concepts,” which tries to give a description of opportunity cost, prices carrying information, feedback and equilibria, specialization of labor / comparative advantage / gains from trade, and the seen and the unseen. Anything I’m missing / shouldn’t write about / should consider?
I’m currently retraining from a moderately successful career in IT into econ/maths, and explaining my motives for this is always an uphill struggle against people’s misapprehension of what economics is even about.
In many ways it’s kind of an invisible discipline. There are all sorts of benevolent aspects of everyday life which are clearly the product of chemistry or engineering or medical science, but it’s hard to assemble a collection of concrete, object-level stuff and say “all these things were made by economists!”
There’s also a problem of motive when it comes to a lay appreciation of economics. No-one develops an amateur interest in physics because they have a crazy partisan political agenda, but in r/Economics/ there are thrice-weekly arguments on the gold standard you can set your watch by. It takes a special kind of nerdery to be interested in something for the sake of interest, but a lot of cranky trouble-causers speak with great unearned authority on economic subjects because they’re really pissed off about something.
There is a book, “Better Living Through Economics”, (the title inspired, I assume, by “Better Living Through Chemistry”) that explains some of this. It is largely stories about economists getting the government to work better- ending the draft, stabilizing prices, et cetera.
I think we need a sexy fictional economist who solves crimes. If Robert Langdon can uncover millenia-old religious conspiracies and save Rome with an art degree, imagine what someone numerate could do.
Good post. Programming would be my vote for higher level subject most useful to individuals. Then economics (given my bias that it’s my area of focus). And really it’s helpful to be proficient in both so you can be a good data analyst.
But I do think you underestimate how important economics is for “how to run a government.” Yes, there are a huge number of near Pareto efficient policies that economists recommend that politicians don’t implement for political reasons, but one of the biggest differences between the wealth of nations is how well they apply the lessons of economics. For the most part, countries have access to the same level of science and technology; some rich countries (Hong Kong) have far less natural resources than many that are much poorer; but some countries do a much better job of implementing a good economic collection of rules and regulations and that’s why they’re so much richer. Teaching economics (especially to the ‘elites’ who will run day run the country) is hugely important for maintaining those policies.
Care to at least take a stab at outlining what should be in it? Nate Silver’s book has some discussion of prediction markets, including
how prediction markets arise from Bayesian thinking
the efficient market hypothesis in various strengths
limitations of prediction markets (e.g. liquidity issues, manipulations, transaction costs)
markets and irrationality (“irrational exuberance”)
What else should such a sequence cover?
Can you point to some examples of those “recent arguments” you’ve seen?
I’ve mentioned prediction markets to a few people in the context of learning how to make well calibrated forecasts, and the reaction is generally “ugh, gambling! no way!”.
I came here looking for some information on implementing a prediction market at work. I happen to already have Nate’s book, so I’ll have to check that out. Thanks!
Cool! Where do you work?
For a while now I’ve also taken part in the Good Judgment Project prediction contests, since Season 2 as a “super-forecaster”. I’ve scaled back my involvement this year for various reasons. But I do know that they’re working on a commercial offering; depending on what you’re looking to do, this may or may not be relevant to your efforts...
How about a sequence on math? In fact there’s room for lots of math sequences: we don’t even have a proper sequence on the math of probability going beyond Bayes’ theorem, not to mention statistics, logic, set theory, number theory, information theory, computer science, and programming… All of those and many other subjects are at least as related to rationality as a non-mathematical presentation of quantum mechanics.
If there’s interest (e.g., this comment is upvoted), I’ll follow up with a poll asking what other sequences people might want. Please suggest other subjects in comment replies, including non-math ones, and I’ll include them in the poll.
Eliezer certainly could have written such sequences. Possible reasons he didn’t:
He didn’t have time, and it wasn’t essential. But now we have many contributors, not just Eliezer. Do we have community interest? I would happily contribute to the extent of my abilities—it sounds like a fun project.
Other resources already give good presentations on these subjects. They are important to rationality, but they don’t need to be presented in a rationality-specific way. Math sequences would not be strongly tied to LW and the other sequences. (This is also true of many other posts outside the Sequences, but that doesn’t and shouldn’t stop them from being posted here on LW rather than elsewhere.)
He assumed most or all readers already knew most or all of these subjects. That may be less true of the bigger LW audience today.
They’re good things to know, but they don’t contribute strongly to rationality. I would disagree, but that’s just my anecdotal personal experience.
Some of the subjects may have fallen under the umbrella of the Subject That Was Forbidden when LW was young.
It’s really hard to write introductory mathematics.
Erratum:
It’s really hard to write good introductory mathematics.
(writing normal or poor introductory mathematics is only mildly strenuous; tons of writers do it regularly)
It’s also not necessarily a good idea. There are tons of introductory materials like the OLI Statistics course I just finished. Why succumb to NIH?
In the open thread comment I’m preparing, I wrote this:
Many subjects already have excellent material elsewhere on the Web, though, so posts would need to take advantage of LW common knowledge or special interests to add new value.
This wasn’t upvoted much at first, so I concluded there wasn’t much interest. But now I’ve come back and there are more upvotes, though not enough to conclude there’s significant interest. So I’ll put a poll on the open thread, as I promised.
Agreed. I’d like to see this too.
Coming from an Econ background, I’m amazed that people don’t understand how much information a properly functioning price mechanism conveys and how valuable it is. For me, thinking about the implications of I, Pencil was valuable in helping me understand this and I’d recommend it. People need to understand how the invisible hand and profit motive work (and have some confidence that they do) before they can understand how a prediction market can aggregate all the relevant information into a meaningful probability because prediction markets are a logical extension of those ideas.
I agree. I assumed any prediction markets sequence that would be undertaken would include this. Even one that didn’t would at least be useful to the economically literate who haven’t considered prediction markets yet.
That’s a good point too. which brings up the question of why they’re not as well accepted. I’ve kind of figured it was because prediction markets are a new(er) idea and “science advances one funeral at a time.” I predict the next wave of economists will all think in terms of prediction markets, p=80%.
In case the link to my comment inadvertently implies otherwise:
I also agree it would be fantastic to have sequences which explain economics from first principles, especially the results of informed consensus, such as the value of markets, which are not yet non-expert consensus. Educating people, even on controversial topics, would be much less mind-killing than starting from the question of how we can fix all those mistaken people. Keep the Principle of Charity in mind.
When you compare market- and non-market-oriented economics you’re talking about centuries-old disagreements that contributed to wars and the Cold War, mistakes that led to massive famines, philosophies that underpin whole political parties, and concerns that still have angry people marching and camping out in political protests in cities around the globe. If you think that the topic isn’t political or that its connection to politics was a sudden development, you haven’t been paying attention. Maybe no amount of careful reasoning from first principles will convince Charlie Stross (or anyone already committed to anti-market beliefs) that those “smugly self-satisfied hypercapitalists” might be on to something after all, but it’s important to at least write while keeping in mind that your audience and theirs overlap.
Nitpick: when it comes to social sciences, probably no amount of careful reasoning from first principles should convince anyone. Theory is useful, but when it comes to applying it to something as messy as human behavior, you’ll want to have lots of experimental data to back it up before being convinced.
Sticking to micro avoids most politics.
I was talking about this site not the world. We are non-mindkilled on many things that are incredibly political in the wider world. One of the few things we are mindkilled and tribal about is Feminism/PUA/Gender relations. I want to make sure economics doesn’t join it.
I think it would be hard to forget considering 2/3s of LW are either “liberal” or “socialist”. While we have extremely high quality thinkers with right wing ideas and they are a key feature of our community they are still a minority (Vladimir_M for example) so most readers are if anything probably biased against such ideas. But I think I see your point when it comes to economics in particular since we have many “libertarians” and our “liberals” being mostly American are likely more pro-free market than is the center in Europe let alone say some Third World countries.
There is this strange relationship between politics, mindkilling, and education...
When a topic becomes political, people get mindkilled about it. Then they tell many stupid things. And the sane person, who wants to avoid discussing with idiots or even the risk of being pattern-matched as one of the idiots, avoids the topic. But if sane people avoid the topic, all information is replaced by noise. And if people are uneducated about the topic, but they still think parroting a phrase of their leader makes them smart, of course politicians will use the topic for their advantage.
You cannot use “2+2=4” as your party banner, if everyone agrees with that. And you also cannot use “2+2=5″ as your party banner, if everyone disagrees with that. But you can use “evolution” or “free market”, because people are divided about this topics, because many of them just lack the basic knowledge. Of course by using these topics as party banners, the education becomes more difficult; or more precisely it becomes trivially easy to label people as “parrotting their party line” even in those situations where they just honestly evaluate the evidence. Also, such environment makes honestly evaluating the evidence more difficult for humans.
Sometimes I feel like smart people avoiding the mindkilling topics indirectly contribute to the topics being mindkilling, by leaving the politicians of various kinds unopposed. Though of course I understand the motive to avoid toxic things. Also I understand that there are too many things fucked up with this world, and one has to pick their battles. But we really should educate people at least about the basic, easiest to understand stuff. Because many of them didn’t hear even some trivial ideas; or they heard them once and then forgot.
Raising the sanity waterline while avoiding sensitive topics—maybe it’s like trying to clean your room without entering the room.
Let’s just take each topic as far as we have solid evidence. Just like there is no “conservative” or “liberal” position on whether 2+2=4, we could try to see how far this neutral region of knowledge can go.
http://xkcd.com/263/ (read the tooltip text). (Anyway, didn’t Ayn Rand use “A=A” or something like that as a slogan?)
Yeah, you are right. Somehow the level of “2+2=4” was skipped in political discourse (nobody argues against that, except some villains in Orwell’s novel), but some people go more meta and deny that there is such thing as a correct answer or truth, etc.
In their case there is probably no bottom level where the education could start. Just like you can’t educate rocks. It still can be worth educating the people who did not fall that deep.
The Soviet Union, during the first Five Year Plan, had the motto “two plus two equals five,” meaning “we will achieve the five year plan in four years.” Real totalitarians are nearly as creepy as the ones Orwell imagined.
Victor Hugo used 2+2=5 politically before Orwell. In Hugo’s case, the dictator playing silly-buggers with the math was Napoleon.
Evolution is true, in the sense that there is overwhelming evidence that men evolved from apes, and that likenesses between kinds is a literal family resemblance, the result of ancestral shared blood or sap. “Evolution” is untrue, in that use of the word “evolution” tends to be almost perfectly correlated with distaste for the implications of Darwinism, and complete disbelief in the implications of Darwinism for humans and human nature, tends to be a codeword for denial of Darwinism.
Darwinism, however, is true, for the same reasons as evolution is true, and, unlike “evolution”, is not a codeword for a collection of pious politically correct beliefs. Hence Dawkins, despite his otherwise progressive beliefs, calls himself a Darwinist, not an evolutionist.
However any discussion of the difference between “evolution” and Darwinism would produce a mind killing response that makes the discussion of gender differences harmless by comparison.
Um, I’m completely unaware of any difference between evolution and Darwinism. Are you using the latter to mean “The theory of evolution is true, plus eugenics is desirable”?
Evolution was fairly popular (at least, in some places) before Darwin and arguably many modern people have a pre-Darwinian (teleological) understanding of the idea. Darwin’s grandfather wrote poems about evolution before Charles was born, and some of his school mates were followers of Jean-Baptiste Lamarck. There seem to be many people that wear “evolution” as attire (presumably to identify with some “educated”, “scientific”, or “secular” tribe), but that don’t really understand natural selection or think it stopped operating on humans some tens-of-thousands of years ago.
“Common descent”, “natural selection”, and “speciation through reproductive separation” are distinct elements of evolutionary theory. The idea of common descent is a lot older than the idea that effectively all biodiversity stems from variable survival and reproduction, and the formation of isolated gene pools.
But it did! Look at the decrease in height, weight, and bone and dental health just after agriculture took off.
Might this not just mean it changed direction, faced with an environment where strength size and intelligence were all now less reproductively important than resistance to disease?
I’m pretty sure MixedNuts was joking.
If you mean that there was no such decrease, then that contradicts what I’ve read.
I think they mean MixedNuts drew the opposite conclusion to the one his referenced facts support.
I do not mean that. I assumed MixedNuts was parodying the people I was referring to that don’t understand Darwinian evolution (but think they do), since his argument makes the same kind of error (“directional”, teleological evolution) I was lamenting.
The same is true of religion, but that doesn’t stop us from talking about it.
Yeah. I’d guess the key difference between religion-on-LW and economics-on-LW is a more boring one: opinion homogeneity. As of a year ago we had something like consensus on atheism (92.3% atheist & agnostic vs. 6.3% deist/pantheist/theist) but a more even split on politics, a proxy for economic opinions (32.3% libertarian, 27.1% socialist & communist, 34.5% liberal, and 2.8% conservative).
Were 92% of us libertarian, but >25% theist, we might regard economics as a basically solved issue that rarely caused arguments, while repeatedly bickering about theism and wondering why theism was relatively mindkilling.
This is because of selection effects more than anything else.
I would advise you to be careful about deciding whether an issue is solved on the basis of whether the people on the other side of it happen to hang out in the same place you do.
I’m describing what could happen on a counterfactual LW, not what should happen.
I don’t intend to decide whether an issue’s solved on the basis of whether people I hang out with agree with me. But I recognize that I’m human (as are you), with the accompanying cognitive biases, and the reference class forecast isn’t a sunny one.
You’re absolutely right, but how would we avoid talking about it if we wanted to?
Religions are typically anti-reductionist in some way. You generally can’t can’t discuss how to take reality apart into pieces without conflicting with someone’s religion.
Religions typically specifically deal with eschatology. There’s little room for agreement about instrumental rationality or existential risk if your utility function is overwhelmed by “what happens to their souls for eternity after death” or if you consider the fate of humanity to be an actual fate decided by higher powers rather than our own actions.
(There might still be room to talk about religion more politely, though.)
Speaking as a man who is dubious enough about the “invisible hand of the free market” that I universally refer to it in sarcasm-quotes, I would be very interested in such a sequence.
I’ve been much less active in the past two years. Have there been any interesting articles on related topics since?