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

[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.