[extropy-chat] silent night

[Harvey Newstrom]

On Dec 22, 2004, at 7:21 PM, Robin Hanson wrote:

> On 12/22/2004, Harvey Newstrom wrote:
>>> Yet of all the ideas that are circulating in transhumanist circles  
>>> the one that is the most interesting to me personally at present is  
>>> Robin's futures market idea.
>>
>> Has anyone gotten any evidence that futures markets really can  
>> predict the future?  I keep hearing the Iowa markets referenced as  
>> predicting political elections, but I can't see it in their  
>> historical data.
>> Everything I found seems to show bad results or regular flip-flopping  
>> to the point that they don't predict anything.  I would sure love to  
>> see real historical data showing predictions.
>
> Did you actually go look at the IEM web site and the many papers they  
> have there?  If so, you might have found:  
> http://www.biz.uiowa.edu/iem/archive/forecasting.pdf

That is still a draft.  I will read it and see if it has anything new.   
However, the abstract does seem to confirm that the Iowa prediction  
markets were previously known to predict elections only a day or so  
ahead.  It states that no long-term analysis had previously been  
performed.  If this paper has something new, that would be great news.   
Otherwise, the state of the art up until this paper, and confirmed by  
this paper, seems dismal.

> Did you look at any of the papers mentioning such claims and look up  
> their citations?

No, I took a more direct route of looking at their historical data and  
analyzing it myself.  I could find no predictive value.  Most of them  
converged on the wrong answer or flip-flopped so much that no answer  
was chosen until just before the election.  If new analysis methods can  
be discovered to extract any predictive value out of this mess, I will  
be happy to utilize it.

> For example, re an extropian angle you might have found:   
> http://hanson.gmu.edu/moretrue.pdf

Thanks, I will look a this as well.

>> My experience with future prediction in general is that it is wrong  
>> more often than not.
>
> I predict the sun will come up tomorrow.  I will keep making this  
> prediction everyday for the next year.  Go ahead, collect stats on how  
> well I do.  Betcha I'm right more often than not.

If you think that is really a good counter-example to my complaints, I  
must not be making myself very clear.  I am not looking for obvious  
predictions that anybody can make, or predictions that add no new  
information above what everyone knows or assumes.  What I want is new  
information, or predictive value of something that is not obvious.   
This would be a useful prediction.  The history of such "useful"  
predictions of the future are more often wrong than not.

>> All those people who believe in this market stuff need to face the  
>> fact that current markets don't believe it will work.  Current  
>> investors aren't funding such a market.  Current companies aren't  
>> researching such a market.  The free-market forces are currently  
>> steering away from such a market.  Maybe the free-market is wrong or  
>> doesn't work.  But it certainly isn't pushing for future markets  
>> right now.  Only a few rare visionaries are pushing this idea.
>
> You are making this stuff up.  You apparently have no idea what  
> investors are doing.  Try:
>
> Barbara Kiviat,  
> <http://www.time.com/time/insidebiz/article/0,9171,1101040712 
> -660965,00.html>The End Of Management?, Time, Inside Business, A4,  
> July 12, 2004. http://hanson.gmu.edu/PAM/press/Time-7-12-04.htm

I'm not talking about you or some investors.  Most investors are not at  
the level that you have achieved.  Most investors are not aware of,  
participating in, or clamoring for futures markets.  You are an  
intelligent, but sadly, rare individual.  Most investors are not so  
much.

> There are many standard models of market microstructure which need  
> little modification to apply to these markets.  These models have been  
> around for decades and make verifiable predictions about lab  
> experiments and field data.  For example, I applied such a model to  
> the case of manipulators http://hanson.gmu.edu/biashelp.pdf and  
> verified a prediction in a lab experiment
> http://hanson.gmu.edu/biastest.pdf

I meant models that can predict individual stocks or make futures  
predictions.  If there really were a model that consistently beat the  
market, everybody would be using it to get rich.  I did not mean to say  
that there are no models in economic theory or of the market.  I meant  
that there aren't clear cut predictive methods that can be shown to  
people how to predict the market and get rich.  Or, in the case of  
futures markets, determine which predictions are right and which are  
wrong ahead of time.

>> Right now, the existing futures markets aren't making any  
>> well-publicized predictions that beat out other predictors.
>
> By "well-publicized" you mean you haven't heard of them.  You really  
> need to do a little homework if you want to have anything useful to  
> say about this topic.

As I said, I researched the Iowa markets, and could not see any  
predictive value in them.  Maybe they have more complicated  
mathematical analyses that can prove a statistical edge in predictions  
that were not available before.  But a quick-and-dirty look at their  
predictions and the outcomes didn't show any obvious trend.  I would be  
happy to stand corrected.  I would love to latch onto any tool, market  
or method that consistently predicts the future.  But past claims have  
failed to pan out when I looked at them.  I will be glad to review the  
references you give to catch up on new claims and new methods.

--
Harvey Newstrom <HarveyNewstrom.com>
CISSP, ISSAP, ISSMP, CISA, CISM, IAM, IBMCP, GSEC