Technology Review Launches Futures Market

prostoalex writes "MIT Technology Review launched a futures market, allowing people to bet on ideas. A similar concept was at some point introduced by the Pentagon, but later the project was shut down. Currently you can bet on major stock indices, on answers to yes/no questions ('Will Oracle acquire PeopleSoft Inc before March 31st, 2004?') and technological achievements ('When will there be a commercially available electronic device using ultrawideband technology?')" Although the game doesn't use real money, the prizes are pretty swell. I like to think of it as the nerd's version of sportsbook.

Comments

Re:Whats to stop this

[altek]

Well, think of the opportunity for corruption. I mean, there were reasons that they gov't didn't really go ahead with the program when the original story was posted. Say there's a bet on there for "When will the next terrorist attack be?" Obviously someone is going to see the opportunity to make money off of any real situation and create a self-fulfilling prophecy...

Do you really want to live in a world where major world events are influenced by people trying to make a quick easy buck off gambling?

Re:Whats to stop this

[tessaiga]

What's to stop this from becoming real? Why can't I bet on things like this in Vegas or Atlantic City?

Much of this is already "real". You can already go to the financial markets today to try to profit from what you think is going to happen to the price of commodities (via futures contracts), interest rates (swaps), stocks (options), etc. The key line from the article is:

Innovation Futures is a prediction game. Similar to fantasy stock market games, this one lets players trade on all kinds of events.

The point of this seems to be to take a "real" game (the financial markets) and apply it in a virtual form, not vice versa. I'm sure Vegas and Atlantic City both have stockbrokers sitting around somewhere that would be happy to take your cash.

What I disagree with is this statement later in the article:

Innovation Futures, like any speculative market, aggregates the individual expertise and opinions of well-informed and well-motivated traders into a single easily understood number: a stock's trading price. This number can be taken as indicating the collectively agreed-upon likelihood of a particular outcome in the real-world. Even non-participants may thus benefit from such market signals.

Real markets (and the "terror market" which the US proposed earlier) contain information because people work very hard to make sure their investments perform well and that they don't suffer financial losses. In stock market games, on the other hand, participants aren't penalized for losing money, only for winning huge amounts of it. (The article even prevents you from going bankrupt: "When your account's net worth is below a certain level ... you'll be given a choice of contracts that you can get for free and then resell on the markets against fresh cash.".) What tends to happen here (and I've seen it plenty of times in stock market games where they offer cash prizes to the winners) is that people start loading up on risky ventures, essentially turning the whole contest into a lottery rather than a reasoned investment strategy. I really doubt that under this sort of a situation any valid information can be read from the virtual prices.

Re:OK, get it straight

[Anonymous Coward]

Oh come on, you're misrepresenting and oversimplifying the issues and you know it.

The terrorist futures market (your "U.S.A" futures market) was to allow people to bet real money on when/where the next terrorist attack was going to occur. This creates an incentive for those trading in those futures to help make sure the attacks happen so as to cash in on their investment. People would literally be betting on other peoples' lives; a rather morbid idea, don't you think? Especially considering that the terrorists themselves could (if the program were expanded to allow more than just select govn't individuals) bet on their own plans.

MIT's futures market is not betting on human life, and for that matter, does not even involve real money. You might as well be playing Monopoly; the real value gained from participating is the same (except that with the MIT futures market, you might see cool new stuff developed as a result of the interest of people who think it likely that a given idea will come to fruition).

One market bets on life, using real money. The other bets on ideas/concepts, using fake money.

Look, I'm a seriously tax-hating, free-market loving, communist-hating "economics-drives-everything" libertarian, and still I oppose(d) the terrorist futures market on the grounds that it creates financial incentive to end human life.

I read a report in some business magazine (Fortune? Forbes?) about the creator of that market - a PhD economics professor. His intentions were excellent, but the problem is that he is so far out of the loop from the rest of society that he didn't realize that people would find such a market morally-repugnant.

"Get it straight"? Speak for yourself. Get your issues straight before committing them to /. first (yada yada, insert "you must be new here" and get +5 funny for it... I'm just too lazy to create an account, but if I did, you would get modded down hardcore-style)

Re:residents of the United States and Canada

[jesser]

"English-speaking Canada"? What does that mean? If your province makes French the official language, you're suddenly disqualified for this game, even if you speak English?

Insider Trading

[gerf]

Becomes a whole lot easier. Imagine the corruption! This stuff is a lot LESS random than sports events, which can be 'thrown' are a lot easier to spot as frauds.

I'm just waiting for the disgruntled engineer to whisper to his cousin to place his money on the new Intel Hypertanic chip to be released in Q4. Then flee with the millions reaped. Puh-leez, this ==lame idea;

Speculative Bubbles = Noninformative Prices

[G4from128k]

One core assumption of these types of trading markets is that the price of the item is tied to some objective value. In an ideas market, the price should reflect the probability that the stated idea or proposition will be true. Under this assumption, people could use the price of the idea as a proxy for the probability that the idea is true (and make product development or VC decisions with the information).

But some traders act not on the intrinsic value of the item underlying the tradable instrument, they act on the movement of the price. Thus they might buy in on a idea, not because it is undervalued, but because they think the price will go up. Such speculators profit from short-term trades. Called momentum trading, it is a good way to create a bubble in the price that has nothing to do with the true value of the idea or probability that the idea will come to pass.

Markets like this ideas market and the stock market tend to reflect both rational economic facts and human subjective thought patterns. The problem is that one can never tell when the price represents reality or a mass dillusion.

Re:OK, get it straight

[danila]

still I oppose(d) the terrorist futures market on the grounds that it creates financial incentive to end human life.

That was really stupid. You can't be a libertarian if you allow your emotions to overcome your intelligence so quickly. I mean, I understand perfectly, why some people would be up in arms about the "terrorism market" (because they are idiots), but the arguments simply do not hold water. Whatever financial incentive there might be to commit the act, do you honestly believe that it can be in any way comparable to the risks and the expected value of losses? I mean, what sane person would do a terrorist act for a few thousand dollars? And you can't win more, because what would FBI think when you bet 1 million $ on a terrorist act and it happens? You call that incentive to commit the act, I call it incentive to disclose the information about it.

Nobody said (except for conservative wackos like yourself) that participants will be rewarded for successful terrorist acts and not for those that are prevented. What makes you think that the exchange would not reward people for successful predictions that would have resulted in a prevented terrorist act.