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back to article Gambling and prediction markets gamble on growth

Ever since the DARPA "Terror Casino" went down in flames a couple of years ago in the face of Congressional scorn, the idea that prediction markets can evaluate risk better than pundits or policymakers has been pushed nearly out of the public imagination. The idea still has adherents among economists, however, and companies …

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Voo Do You Think Your Are?

The more arcane the maths the less like the underlying theory is robust. I had to take a fair helping of stats courses and apply the knowledge in the real world. The money I managed wasn't big by world standards but it was enough to make me sweat on occasion and carry errors & omissions insurance.

In the 90's I read a lot of the stuff coming out of the study of Complexity. The Santa Fe Institute was the center for the founders of Complexity. The economist Brian Arthur mingled with Stuart Kauffman, M. Gell-Mann, John Holland, Per Bak and others. IIRC Mr. Arthur was doing work in an area loosely defined as non-equilibrium economics. Open, non-equilibrium systems figured large in the readings I managed. Early on a meeting took place which featured many of the players with, the late Danish physicist, Per Bak taking center stage with his Sand Pile model of self-organized criticality. Economists present brought up some ideas Per Bak recognized as derived from Spin Glass theory. The economists showed the maths backing up their ideas and Per Bak was floored by the elegance and correctness of the maths. Per Bak said (loosely recalled) that physicists use every dirty math trick imaginable and never approached the elegance and rigor demonstrated by the economists. The point I'm after is that recondite maths backing arcane theories should set off alarms.

The Canadian born 60's king of Economics, J.K. Galbraith said, "People should listen to me because I'm taller." When it comes to economic predictions maybe he had it right.

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Very interesting article

I congratulate Mr. Hansen on a very interesting, consice and informative interesting article. Although it is my opinion that most of The Register's articles follow some high standards, this one stands higher by approaching in a very lay manner a highly complex subject, without loosing its focus or significance.

I also thank Mr. Nelson for his comment, which coalesces a fringe dimension of the story. I say coalesce instead of add, because once his point is taken, you can see it superficially alluded at by the main spirit of Mr. Hansen's article: From his description of Steven Levitt's talk, to the mention of the presentation on William Hill, the subcontext appears to suggest, as Mr. Nelson has, that grand theories of market analysis are of questionable value.

-dZ.

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