The human time constant

Over at BritannicaBlog, a spark of realization that prediction markets might be a good thing, after all. Welcome to the party!

This reminds me of a technology consultant that worked with me, who always cited "the human time constant" for reasons why it took so long for people to arrive at the good and obvious decisions.

At this rate, prediction markets will be fully legal and liquid by the time my grandkids arrive (and my kids aren't even in middle school yet).

UPDATE: Oh, I just noticed that it’s good ole Bryan Caplan writing.

Jim Geraghty pretty much sums up my thoughts...

on the debate


My thoughts:

Paul- I don't even know why you run as a republican and not as a libertarian/independent.
Romney- I want to believe him but I just can't, too slick.
Guliani- ups and downs; strongly disagree with him on abortion (think huckabee framed debate very well); bitch-slapped ron paul
McCain- decent performance; disagree on the torture issue (nation-states think about the Geneva convention, terrorists don't); stuck to his positions
Hunter- impressed me at times; but just wont win it
Brownback- im a religious conservative too; but i am not voting for him
Gilmore- dont really remember
Thompson- is he from wisconsin or something?
Huckabee- i like him; hes personable; reminds me a little bit of John Edwards in presentation/looks; I've seen him speak in person as well; likeable (possible VP choice)

My Conclusion:
Don't really care for another debate until august/september or so; lets throw guliani, mccain, romney, fred thompson, and gingrich in to see what comes out of it.

Gawker on the 2008 presidential candidates

Funny stuff.

Obama drops the auto industry. Does he lose the UAW?

Barack Obama talks tough to the U.S. auto industry. Is it courageous or foolhardy--conventional wisdom holds that the Dems need the unions, not so much for their donations, but for their grassroots manpower and high voting turnout. But Obama, who has some free trade sentiment in past elections, is not sticking with the tried and true. Kevin Naughton reports:

"Sen. Obama embarrassed himself in Detroit with his lack of understanding of the problems facing the automobile industry, and what it will really take to fix them," the conservative-leaning Detroit News said in an editorial beside a political cartoon mocking Obama for criticizing a Detroit SUV that turns out to be a Toyota Land Cruiser. During his speech, the auto execs in the crowd—and there were many—began muttering that he didn't know what he was talking about. (One factual gaffe getting a lot of traction is Obama's assertion that Japanese cars average 45mpg, when the actual mileage is closer 30mpg). "It was definitely uncomfortable," says Eric Foster, a Detroit political consultant who sat near tables full of auto execs. "The mood lightened when he took on the oil industry."

Obama had barely left Detroit's Cobo Hall before lobbyists for the automakers and the United Auto Workers began churning out stats to counter his argument. From the UAW: the jobs of 17,000 workers will be put at risk by Obama's proposal to require a 4 percent annual increase in gas mileage (a suggestion, by the way, first made by President Bush). From Chrysler: Obama's offer of $7 billion to help with the automaker's health-care costs translates to $29 per car, compared to a benefits burden of $1,500 per car the U.S. automakers now bear. "Twenty-nine dollars," says Chrysler spokesman Colin McBean, "is really not a lot of help."

Indeed, dismissing Detroit as a relic of the bygone American Century is politically popular just about everywhere at the moment. In fact, Obama didn't even have to leave town to find support on that front. After his speech, he raced off to two fund-raisers in Detroit, including a $2,300-a-plate dinner at Seldom Blues, a hip jazz restaurant atop the General Motors headquarters building along the Detroit River. The restaurant was packed with about 250 people, but the crowd didn't include auto execs, UAW leaders or Mayor Kilpatrick. That might work for now, as Obama attempts to define himself as an independent thinker. But ultimately, like Al Gore, Obama will have to make nice with those he criticized in Motown. Why? For the last four presidential elections, Michigan has gone Blue, unlike most Midwestern states. "In the end, the presidential race is all about electoral votes," says Kilpatrick. "If Michigan is not important to a particular candidate, that's fine. But we've got 18 electoral votes. That's pretty significant." If Obama hopes to win the White House, he might make his next drive through Detroit more of a joy ride.

When Gambling Is Good

I think a distinction between gamblers and traders needs to be made (so I made it here). That said, here is a WSJ op-ed (subscription required) by Hahn & Tetlock:

The crystal balls are called prediction markets or information markets, and they help forecasters, for example by allowing traders to vote with their money on the future unemployment rate or the winner of the next presidential race. If you visit the Iowa Electronic Markets, you can take a financial position on the Democrats' chances of winning the White House in 2008. As this is being written, a contract purchased for $6.15 would yield $10 if a Democrat wins, allowing analysts to infer that the "market" believes the Dems have a 61.5% chance of taking the election.

Some businesses, meanwhile, use internal information markets to predict outcomes of specialized interest. Hewlett Packard asks employees to predict revenues and operating profits, believing the exercise can add useful information to conventional forecasting methods. HP is even pondering the sale of a commercial version of its BRAIN (Behaviorally Robust Aggregation of Information in Networks). Eli Lilly has used these markets to help predict which newly developed chemical entities will become successful drugs. Google has used the approach to forecast product launch dates.

These markets often predict more accurately than experts. Why? They draw on the knowledge of people who might otherwise be ignored. Their anonymity frees participants from pressures to agree with opinion leaders. And they create straightforward profit incentives that encourage participants to search for better information.

Many academics across the political spectrum are excited that prediction markets could improve decision making in a whole host of arenas. Yet regulatory restrictions imposed by federal and state anti-gambling laws make these markets risky to operate. The Iowa market -- deemed by regulators to be a teaching device -- is the only public forum in the United States where the technique can be used with great flexibility, low cost and little fear of government intervention.

But when did politicians actually move the ball forward? They are too busy shaving points for their donors and voters. Points that the silent majority pays for. As usual.

Quote of the day

Atheism not only keeps the guilt, but it also keeps the confusion.

From Douglas Wilson, responding to Christopher Hitchens. Or, as WuzzaDem cleverly nicknames him (scroll to bottom), Xopher Hitchens.

Still No GOD.EXISTS contracts listed. (Nor GLOBAL.WARMING contracts, either--I'm dead serious about those).

Time to short Edwards?

From Tigerhawk, this was pretty amusing and also trade-provoking:

{Edwards} claims he went to work for a hedge fund in "order to learn about the relationships between financial markets and poverty."

Yeah. Hedge funds are full of people who think deeply about the relationship between their business and the distribution of wealth. You know, just like soup kitchens are full of people who understand that volatility is a tradeable asset.

What a maroon.

And a prescient commenter, Charlottevillian, says:

Edwards is done. He has to now cater to the lunatic fringe because its all he has. His "two Americas" meme has been completely discredited by his own absurd life. Between the disclosure of his $400 haircuts funded by his campaign, his massive compound, and now his exploration of poverty through hedge fund management, he has become our own Marie Antoinette. Talk about unforced errors!

I just hope he stays in the race long enough to engage in some real primary debates. That could be fun.

So I went and sold 1 DEM.NOM.EDWARD @ 8. (I am also long some OBAMA, RICHRDSN, and WARNER--the last 2 are underwater).

The limitations of logic (and the need for passion)

In case you need catching up, 2 of the finer prediction market intellects, Steve Levitt and Robin Hanson took different tacks on the economists petition in favor of rolling back restrictions on prediction exchanges.

Levitt wouldn’t sign, and gave his reasons here.

Hanson repudiated with Levitt’s decision with a bit of logic here.

My initial post on this at Caveat Bettor:

Levitt reminds me of Private Trip in Glory: tear it up. Tear it up! TEAR IT UP!!!

To expand a little on this, my thinking on Hanson’s fair and accurate but possibly weak argument is this: logic only holds in a given paradigm. Thus, if the paradigm is shifting, or we very much want it to shift, an illogical response may be more effective. In the film Glory, the Negro regiment was only paid $12 per month, even though they enlisted for $15 and white regiments were paid $15. Private Trip, played in an Oscar-worthy and award-winning way by Denzel Washington, says “we can stop a bullet the same as a white man”, and he encourages his comrades in arms to tear up their paychecks. Logically, Private Jupiter Sharts tells him “Twelve dollars is a lot of money”–economically speaking, these men could take their reduced wages and express them in speech and other markets, increasing their influence.

But no, they tear them up. They inspire their white officers to tear up their pay, too. An inspiring scene in an inspiring movie, that helps to change the world. The all-black regiment from Massachusetts kicks butt, inspires the creation of several more black regiments through the North, and starts a wonderful tradition of african american service and dignity that continues in american history through the world wars and even to today.

I think Levitt, in his own way, is doing the same thing that Private Trip did when he found out about that first paycheck. Good for him!

Cross posted from Midas Oracle.

Senior ESPN writer thinks Patriots should have kept Branch

What?!? This is an exact quote from Jeffri Chadiha's article:

Why didn't the Patriots just pay former wide receiver Deion Branch in the first place? It would've saved them a lot more cash this offseason. It would've given them a better chance at beating Indianapolis in last season's AFC Championship Game.

But Senior ESPN Writer Chadiha never specifies the savings. I beg to differ. This is was my analysis back in April:

Considering Deion Branch is costing the Seahawks $8 mil this year (and $22 mil in the first 3 years of his $38 mil contract), having Randy Moss for $3-5 mil for just this season looks much nicer. That means the Patriots have $12 mil in cap space that they can allocate this season and next, plus the perceived upgrade from Branch to Moss this season. Win now, plus win next season.

Had Chadiha just said "it usually takes more than a year for receiver to learn a new offensive system" instead of making false claims about money, I would not be all over him/her.

C'mon, ESPN, you are demonstrating why big media outlets need to be held accountable by wee blogger fishies like me.

My prediction of Fed Wording

"Inflation pressure appears to be moderating, market may have turned corner in mortgage lending, surprising corporate growth, keep rates steady, forsee lower energy prices"

Probably too many topics but that is what I am seeing. I offered my prediction on the hurricane season and oil prices over at Capitalism and Freedom. Hurricane season has started 3 weeks early unfortunately.

State of the US Economy? Strong.

From today's WSJ editorial (subscription required):

Here's the "surge" you aren't reading about: the continuing flood of tax revenue into the federal Treasury. Tax receipts for April were $70 billion above the same month in 2006, and April 24 marked the single biggest day of tax collections in U.S. history, at $48.7 billion, according to the latest Treasury report.

The April comparison is slightly askew because the IRS processed more returns than usual this year. But there's no denying that Americans are sending more money than ever to Washington; revenues for the first seven months of fiscal 2007 are up 11.3%, or $153 billion. This Beltway bonanza has helped to slash the projected federal budget deficit by more than half from the same point last year. Across the past three Aprils, federal red ink has sunk by nearly $300 billion. The deficit this year could tumble to $150 billion, or an economically trivial 1% of GDP.

This revenue boom certainly casts doubt on the political wails about tax loopholes for the rich. So far this year, the taxes paid on so-called nonwithheld income, which are dollars that don't come from normal wages and salaries, have climbed by nearly 30%. This is income largely derived from capital gains, dividends and other investment sources -- i.e., the tax rates that President Bush cut in 2003. Individual income taxes are also up by 17.5% -- a handsome fiscal dividend from rising wages and low unemployment.

Are recession fears overpriced? Here's the latest pricing from Intrade:

I read the most simple yet brilliant thing by Gary Becker and Kevin Murphy just now

From The Upside of Income Inequality (hat tip Greg Mankiw):

Higher rates of return on capital are a sign of greater productivity in the economy, and that inference is fully applica­ble to human capital as well as to physical capital.

For many, the solution to an increase in inequality is to make the tax structure more progressive—raise taxes on high-income households and reduce taxes on low-income households. While this may sound sensible, it is not. Would these same indi­viduals advocate a tax on going to college and a subsidy for dropping out of high school in response to the increased importance of education? We think not. Yet shifting the tax structure has exactly this effect.

Levitt does not sign economists' petition on prediction markets

Here's why (hat tip Chris Masse).

I've made similar points here, here, here, and here.

Levitt reminds me of Private Trip in Glory: tear it up. Tear it up! TEAR IT UP!!!

The good ole' days, and what of recession?

From the Everyday Economist. And the latest recession pricing at Intrade:

First GOP debate is done: 3 winners and 1 loser

The winners: Romney
McCainFred Thompson

And the loser? Rudy, Rudy ...

Ann Althouse has some wrapup commentary.

Salutations, deadissue

Here's his blog. We both love Barney Frank, but one of us really loathes Jimmy Carter, which makes most of his posts difficult for me to digest--heck, I can just go back to New England where I was born and raised to get reimmersed in the politics of Ted Kennedy.

I think I'm sticking him on my blogoll, anyways. His comments here are just too intelligent not to do so.

Sports Guy plays tribute to his muse

Rest in peace, David:

Through college and grad school, as I was slowly deciding on a career, I read it every year to remind myself how to write -- how to save words, how to construct a sentence, how to tell someone's life story without relying on quotes, how to make anecdotes come alive. It was my own personal writing seminar. ... Every two years, I read that book again to make sure that my writing hasn't slipped too much. Like a golfer visiting his old instructor to check on his swing.

Wow, there really is a journalistic conspiracy

to keep us poor and stupid!

This is the silliness I left at Greg Mankiw's blog just now

Comment 15:

I think that the NBA needs some affirmative action--all asians and latinos should get triple the points for the same scoring, because they are so underrepresented in the league.

Too frazzled with work, I guess.

This Could Change Everything

Sorry for my extended sabbatical but this was worth the wait.

Some potential big news today that Rep. Barney Frank (D, Mass) has apparently proposed what is called the “Internet Gambling Regulation and Enforcement Act of 2007" (cant believe I just posted to an MSN article)

Nothing yet at the National Right for Online Gambling.

Any lawyers out there that can share their opinions? Will TS be able to operate under the conditions proposed? How about a TS contract on this bill passing?