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Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don

Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading? (Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).

tlb 9mo ago
Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises. I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed to bet on their own games.
- thaumasiotes 9mo ago
  > Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? He didn't say that it doesn't. It obviously does make stock markets more accurate. But it tends to drive down the total amount of money available to be invested in stocks, which is compatible with the claim that it makes the market worse at funding productive enterprises.
  - JasonADrury 9mo ago
    > But it tends to drive down the total amount of money available to be invested in stocks That seems like a big claim. For most market participants, there's always a counterparty that's so much more sophisticated that it doesn't make a difference if they're an insider or not.
  - bjackman 9mo ago
    Yeah exactly. Allowing insider trading makes adverse selection too high.
- lxgr 9mo ago
  > I guess there could be second-order effects when insiders can actually change the outcome You don't need to guess. That's exactly why it's illegal: It creates bad incentives, similarly to e.g. taking out a life insurance policy on a random person you have no financial dependence on.
  - FireBeyond 9mo ago
    Didn’t Walmart (and perhaps others) used to do that? May even have been referred to as Dead Peasants Insurance.
- JasonADrury 9mo ago
  In the US insider trading is typically illegal because you're misappropriating that information from someone else. For example, if you happen to be a bartender or a waiter who accidentally overhears material non-public information, you're free to trade on that.
dweinus 9mo ago
Lol. Why should we make car ownership fair? I want cars to reveal facts about the world. I don't think it would serve that goal to forbid people from stealing your car.
DANmode 9mo ago
> Why should we want prediction markets to be fair? I want them to reveal facts about the world. Nice in theory, in practice, the money begins creating the facts about the world. Sometimes to the detriment of innocents.
scoofy 9mo ago
>Why should we want prediction markets to be fair? I want them to reveal facts about the world. I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider information, and you've a recipe for disastrous externalities.
- vintermann 9mo ago
  And to spell it out, you can then go burn your neighbours house down and profit from it. Predictions markets don't just predict, they can cause "unlikely" things to happen because they give a way of profiting from making "unlikely" things happen. This is a problem with plain old stock market insider trading too, and with sports betting when the participants take out bets on themselves.
- bjackman 9mo ago
  You can say you don't want prediction markets and that's fine. It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world. If you think prediction or stock markets should be "fair" then you have a very bizarre definition of fair (one that's compatible with a game that only rich people can win). Also desiring "fairness" implies that to imply the market's primary purpose is as a game. If it's just a game, it's nothing but toxic gambling. ANYWAY: pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO. Hopefully you can tell I'm not a prediction market booster, there's a lot about them that I think it's pretty suspect. But this is a pretty lame line of reasoning IMO. "Someone might shoot people with it" -> valid reason for gun control. Guns are for shooting people. "Someone might stab someone with it" -> not a valid reason to ban knives. We already ban stabbing people. We take precautions to try and mitigate the dangers of knives, because they have a very big upside.
  - jen20 9mo ago
    They aren’t predicting anything if the result is known a priori. Words matter - “prediction markets” just smooths over grift by making it sound reasonable.
lxgr 9mo ago
If you think this through, while "fairness" might not be an end itself, it's extremely hard to imagine a market that's both unfair and efficient.
PoignardAzur 9mo ago
In this case the insiders only made their bets a few hours before the kidnapping was publicly announced, so it's not clear whether the betting "revealed facts about the world" in any publicly useful way.
predictthis 9mo ago
[dead]
UncleMeat 9mo ago
> I want them to reveal facts about the world. What facts were revealed here?
mtlmtlmtlmtl 9mo ago
The only "facts about the world" revealed by prediction markets are facts about what people betting in prediction markets believe. Which I guess is interesting in itself if you're a sociologist. Otherwise, not so much.

tlb 9mo ago

Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises. I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed to bet on their own games.

thaumasiotes 9mo ago
> Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? He didn't say that it doesn't. It obviously does make stock markets more accurate. But it tends to drive down the total amount of money available to be invested in stocks, which is compatible with the claim that it makes the market worse at funding productive enterprises.
- JasonADrury 9mo ago
  > But it tends to drive down the total amount of money available to be invested in stocks That seems like a big claim. For most market participants, there's always a counterparty that's so much more sophisticated that it doesn't make a difference if they're an insider or not.
- bjackman 9mo ago
  Yeah exactly. Allowing insider trading makes adverse selection too high.
lxgr 9mo ago
> I guess there could be second-order effects when insiders can actually change the outcome You don't need to guess. That's exactly why it's illegal: It creates bad incentives, similarly to e.g. taking out a life insurance policy on a random person you have no financial dependence on.
- FireBeyond 9mo ago
  Didn’t Walmart (and perhaps others) used to do that? May even have been referred to as Dead Peasants Insurance.
JasonADrury 9mo ago
In the US insider trading is typically illegal because you're misappropriating that information from someone else. For example, if you happen to be a bartender or a waiter who accidentally overhears material non-public information, you're free to trade on that.

dweinus 9mo ago

Lol. Why should we make car ownership fair? I want cars to reveal facts about the world. I don't think it would serve that goal to forbid people from stealing your car.

DANmode 9mo ago

> Why should we want prediction markets to be fair? I want them to reveal facts about the world. Nice in theory, in practice, the money begins creating the facts about the world. Sometimes to the detriment of innocents.

scoofy 9mo ago

>Why should we want prediction markets to be fair? I want them to reveal facts about the world. I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider information, and you've a recipe for disastrous externalities.

vintermann 9mo ago
And to spell it out, you can then go burn your neighbours house down and profit from it. Predictions markets don't just predict, they can cause "unlikely" things to happen because they give a way of profiting from making "unlikely" things happen. This is a problem with plain old stock market insider trading too, and with sports betting when the participants take out bets on themselves.
bjackman 9mo ago
You can say you don't want prediction markets and that's fine. It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world. If you think prediction or stock markets should be "fair" then you have a very bizarre definition of fair (one that's compatible with a game that only rich people can win). Also desiring "fairness" implies that to imply the market's primary purpose is as a game. If it's just a game, it's nothing but toxic gambling. ANYWAY: pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO. Hopefully you can tell I'm not a prediction market booster, there's a lot about them that I think it's pretty suspect. But this is a pretty lame line of reasoning IMO. "Someone might shoot people with it" -> valid reason for gun control. Guns are for shooting people. "Someone might stab someone with it" -> not a valid reason to ban knives. We already ban stabbing people. We take precautions to try and mitigate the dangers of knives, because they have a very big upside.
- jen20 9mo ago
  They aren’t predicting anything if the result is known a priori. Words matter - “prediction markets” just smooths over grift by making it sound reasonable.

lxgr 9mo ago

If you think this through, while "fairness" might not be an end itself, it's extremely hard to imagine a market that's both unfair and efficient.

PoignardAzur 9mo ago

In this case the insiders only made their bets a few hours before the kidnapping was publicly announced, so it's not clear whether the betting "revealed facts about the world" in any publicly useful way.

predictthis 9mo ago

[dead]

UncleMeat 9mo ago

> I want them to reveal facts about the world. What facts were revealed here?

mtlmtlmtlmtl 9mo ago

The only "facts about the world" revealed by prediction markets are facts about what people betting in prediction markets believe. Which I guess is interesting in itself if you're a sociologist. Otherwise, not so much.