Sunday, October 04, 2015

Let the people bet

In casual conversations, some people will say, "I bet ....." usually revealing they have no clue. But betting is serious stuff. Forecasts with and without something on the line make all the difference in the world.

All assets held, bought or sold reveal serious forecasting because the individuals involved have a serious stake running on the outcome. This is why expanding the ambit of betting markets is a good idea. Alex Tabarrok at MR updates this thought in a recent post ("Corporate Prediction Markets Work Well"). It is the best way to get those with "inside information" (or insight) share their wisdom with the rest of us.

Philip Tetlock and Peter Scoblic write about this in today's NY Times ("The Power of Precise Predictions ... Making specific forecasts is the key to improving our nation's policies.")  Prohibitions against private betting are precisely the wrong policy.

The betting idea only applies to situations where outcomes within a specific time horizon can be clearly specified. Tetlock and Scoblic mention that they are currently sponsoring a betting tournament on the Iran deal. I am not sure what people are betting on in this case? A nuclear strike by Israel on Iran's nuclear plants in the next five years? Listen to this speech by Israel's Netanyau before you bet. Recall that the deal was sold with "peace in our time" gusto.