This is tricky. On one hand, what you said. On the other hand, this feels inevitable in long term—if we want the prediction markets to become more than an obscure game for a new nerds, the stupid people will sooner of later find them.
I am not sure what would be a reasonable regulation here. I want smart people to be able to bet their salary on something. And I’d prefer stupid people not do the same. How to achieve that, without testing for IQ directly?
My first thought was something like: we could use your history of bets and outcomes to determine how much you are allowed to bet. Some kind of “prediction credit score” that only allows you to make small bets first, and only increases if you demonstrate sufficient sanity.
But the disadvantage is, if you have insider information, and you haven’t already built up your “prediction credit score”, you are also excluded from the market in short term.
Interesting, and I appreciate your thoughts. Why do you say we want PMs to “become more than an obscure game for nerds?” Dumb money is just a way for uninformed people to pay random people from CT in a very complicated fashion. If the goal of PMs is accurate predictions, having extra dumb money floating around won’t improve the calibrations.
I’m not sure what your stance is on the purpose of PMs, but assuming it’s more accurate foresight I think the ultimate goal is going to be finding the optimal incentive models for play-money markets.
Why do you think avoiding insider trading is a disadvantage? I don’t disagree, but I’m curious to hear what you have to say.
Why do you say we want PMs to “become more than an obscure game for nerds?”
Prediction markets need money as a fuel. The incentive for people to provide correct predictions is to gain money. More money in prediction markets means more people have an incentive to spend their time figuring out the correct answers. Or maybe the same people have an incentive to spend more of their time figuring out things, so they can answer more questions.
I am not really sure on the impact of extra dumb money. Perhaps the extra dumb people need to be told repeatedly that they are wrong? But preferably in a way that doesn’t take their entire salaries away.
Why do you think avoiding insider trading is a disadvantage?
No, I didn’t mean it that way. Actually, the other way round; insider trading is good—well, as long as the insider has a “read-only” access to information.
It becomes different when the insider is incentivize to create chaos and make money on predicting their own chaos most reliably. Like, I wouldn’t want a world where e.g. Trump suddenly nukes a random unimportant place as a way to make money, like in the morning he creates a bet saying “what is the chance that Trump will nuke this irrelevant place of out the blue this evening?” and when people respond “very low”, he says “lol, watch me, losers” and collects the jackpot. (But of course if people responded “very high, this seems like his usual pattern of insider trading”, then he would make money by betting “no, he definitely won’t” and not nuking the random place today. So he makes money either way.)
But the thing I wanted to say in the previous comment was that it seems good to have a rule “noobs can’t make very high bets”, but that would turn against many cases of insider trading, if the insider happens to be a noob.
This is tricky. On one hand, what you said. On the other hand, this feels inevitable in long term—if we want the prediction markets to become more than an obscure game for a new nerds, the stupid people will sooner of later find them.
I am not sure what would be a reasonable regulation here. I want smart people to be able to bet their salary on something. And I’d prefer stupid people not do the same. How to achieve that, without testing for IQ directly?
My first thought was something like: we could use your history of bets and outcomes to determine how much you are allowed to bet. Some kind of “prediction credit score” that only allows you to make small bets first, and only increases if you demonstrate sufficient sanity.
But the disadvantage is, if you have insider information, and you haven’t already built up your “prediction credit score”, you are also excluded from the market in short term.
Interesting, and I appreciate your thoughts. Why do you say we want PMs to “become more than an obscure game for nerds?” Dumb money is just a way for uninformed people to pay random people from CT in a very complicated fashion. If the goal of PMs is accurate predictions, having extra dumb money floating around won’t improve the calibrations.
I’m not sure what your stance is on the purpose of PMs, but assuming it’s more accurate foresight I think the ultimate goal is going to be finding the optimal incentive models for play-money markets.
Why do you think avoiding insider trading is a disadvantage? I don’t disagree, but I’m curious to hear what you have to say.
Prediction markets need money as a fuel. The incentive for people to provide correct predictions is to gain money. More money in prediction markets means more people have an incentive to spend their time figuring out the correct answers. Or maybe the same people have an incentive to spend more of their time figuring out things, so they can answer more questions.
I am not really sure on the impact of extra dumb money. Perhaps the extra dumb people need to be told repeatedly that they are wrong? But preferably in a way that doesn’t take their entire salaries away.
No, I didn’t mean it that way. Actually, the other way round; insider trading is good—well, as long as the insider has a “read-only” access to information.
It becomes different when the insider is incentivize to create chaos and make money on predicting their own chaos most reliably. Like, I wouldn’t want a world where e.g. Trump suddenly nukes a random unimportant place as a way to make money, like in the morning he creates a bet saying “what is the chance that Trump will nuke this irrelevant place of out the blue this evening?” and when people respond “very low”, he says “lol, watch me, losers” and collects the jackpot. (But of course if people responded “very high, this seems like his usual pattern of insider trading”, then he would make money by betting “no, he definitely won’t” and not nuking the random place today. So he makes money either way.)
But the thing I wanted to say in the previous comment was that it seems good to have a rule “noobs can’t make very high bets”, but that would turn against many cases of insider trading, if the insider happens to be a noob.