more on Online predictive markets (IEEE Spectrum)

[Dave Farber <dave () farber net>]

> Date: Sat, 09 Aug 2003 07:03:10 -0700
> From: Ian Lance Taylor <ian () airs com>
> Subject: Re: [IP] Online predictive markets (IEEE Spectrum)
> To: Steven Cherry <s.cherry () ieee org>
> Cc: dave () farber net
>
>
> Steven Cherry <s.cherry () ieee org> writes:
>
> > At 10:46 PM -0700 8/8/03, Ian Lance Taylor wrote:
> > >As others have pointed out, the PAM presumes that everybody has the
> > >same goals--essentially, to make money.  If something like PAM were
> > >taken seriously by the police, a well funded terrorist group with a
> > >bunch of sympathizers could and would spend money to distort the
> > >market.  It wouldn't work every time, but it could sure work when
> > >there was something big planned.  Of course if you know they are
> > >terrorist sympathizers you discount their contributions--but then
> > >terrorist sympathizers look an awful like the sort of people who might
> > >actually know something and want to make a little cash on the side.
> >
> > Of course, commercial and gambling markets are subject to similar 
> manipulation.
>
> Yes, as we've seen with the large number of corporate schemes to
> inflate their stock prices over the last few years to enrich
> executives at the expense of other shareholders.  Many, hopefully
> most, of those people were caught eventually, thanks mainly to
> corporate disclosure requirements.  Of course, if the issue had been
> terrorist acts, they would probably have been caught too late--after
> the act had occurred.
>
> There is a sense in which the existing financial markets already
> predict terrorism: after all, major terrorist acts affect the economy
> and a lot of specific companies.  So far I don't think their track
> record is particularly good.
>
> > My understanding is that if a market is set up correctly, it's
> > sometimes (perhaps not always) possible to discern and filter out such
> > manipulation. Once the market was set up, it would be possible to
> > simulate such activity and test that. Let's remember that Darpa is a
> > *research* agency and such experiments are its reason for being.
>
> *shrug* You seem to be suggesting that DARPA should experiment with
> market manipulation schemes while other people are playing with real
> money.
>
> Your article lists a number of other exchanges not being financed by
> the government.  If this approach is viable, then there is money to be
> made in it.  Why not let the market set up the market?
>
> Ian

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