epistemic status—I think idea feels bad, but I can’t find a good argument. I’m moving towards there being a way to do this well
Is there a resolvable event you could run a prediction market on here? Lets imagine you decide not to publish. Soon, you or someone else could created a market for “will a major news org publish an article saying X scientist is a fraud before 2023” then you could buy shares in that market. I know vox employees aren’t allowed to gamble, but you get the picture. The more people who agree, see and buy shares in it the more likely the people with the different parts of the story come together and complete it, publish and article and then you all get money from those who voted no. (People will vote no because most markets will resolve no and it will be a way for speculators to get money)
It seems to me that fraud/scandal prediction markets are underrated.
Some responses to common criticisms:
Wouldn’t fraud markets be used to attack people? Yes, but if you know you are innocent, you bet for yourself and make money. People are incentivised towards truth because that’s how you maximise expected value
Even if the market resolves no, there will be reputational damage to having a markets sit at 10% for any length of time. This is the criticism I think is most serious. That said, at least in this system that would be held accountable. Over time we’d realise how easy it was to create a spike and that it was long term price rises that are worth following.
What if they article falsely accuses? That’s already a problem and fraud markets don’t change that
How to decide who to run fraud markets on? Allow them to be run on anyone paying a certain amount of liquidy with a certain level of public presence (eg a wikipedia page). Most people don’t have a credible article published about them, so you need a good sense before you spend the money. Most markets will resolve no
This makes me uncomfortable. Yeah, I agree, but that’s an argument for caution, not silence.
I hadn’t thought of this and I’m actually intrigued—it seems like prediction markets might specifically be good for situations where everyone ‘knows’ something is up but no one wants to be the person to call it out. The big problem to my mind is the resolution criterion: even if someone’s a fraud, it can easily be ten years before there’s a big article proving it.
Disclaimer that I’ve given this less than ten minutes of thought, but I’m now imagining a site pitched at journalists as an aggregated, anonymous ‘tip jar’ about fraud and misconduct. I think lots of people would at least look at that when deciding which stories to pursue. (Paying sources, or relying on sources who’d gain monetarily from an article about how someone is a fraud, is extremely not okay by journalistic ethics, which limits substantially what you can do here.)
I don’t think resolution criteria area problem. A published article in an agreed set of major newspapers. It’s okay if it resolves no for a few years before it resolves yes. You need relatively short time horizons (1 year) for the markets to function.
I don’t understand how your site would work. Want to describe it?
I think I would actually be for this, as long as the resolution criteria can be made clear, and at least in the beginning it can only be for people who already have a large online presence .
One potential issue is if the resolution criteria is worded the wrong way, perhaps something like “there will be at least one news article which mentions negative allegations against person X,” it may encourage unethical people to try to purposely spread false negative allegations in order to game the market. The resolution criteria would therefore have to be very carefully thought about so that sort of thing doesn’t happen.
Alice and Bob are locked away in a room with no observers and flip a coin. Both emerge and Alice states it came up Heads, Bob that it came up Tails.
Of course both cannot be right but there is no further information. The proper thing for a market to do would be to hover at 50⁄50. But would it actually do that? I suspect not, I suspect that biases in observers (perhaps the name “Alice” is culturally perceived as more trustworthy) would create a wedge and as people see that disparity developing it becomes a race to the bottom much to Bob’s dismay.
But even that is the simple case where there is no history and both Alice and Bob are just arbitrary individuals nobody knows anything about beyond their name. Life is not like that. Bob being determined a liar once becomes an input to any future fraud predictions. Are people really running through proper Bayesian analysis? Again, gut feel is that the almost never do. So now you become a self-reinforcing system in a potentially really nasty way.
And even that is a relatively simple case where all inputs are ones in the market already. What if Bob has an arrest for shoplifting when he was 18 published in a local paper? What if he’s been a target of one of those shady companies that publishes (real or fake) arrest records and extorts you for takedown money?
It’s worth considering the possibility that the sort of dynamics reinforced by a market would be far worse than the ones available without one. At the very least you would want to experimentally test exactly what sort of effects of this nature you might expect.
There will be false positives, and that will be bad, but I think most people believe on the current margin that there are more false negatives. And false negatives are quite bad collectively, even if the harms are diffuse.
Hey George, I disagree with all the all arguments here except the last one. But I do share your concern with this idea. It feels icky. But as I say, I don’t think your args hold water.
If the market was “would a newspaper publish verified accusations that Bob lied about what happened in the room” the market would stabilise much lower than 50%. Likely no newspaper would publish an article on this. It’s not about what happened it’s about whether an article will be published stating Bob has acted badly.
As for previous convictions, if Bob knows he’s innocent and that no articles are likely to be published on new events, he and those who trust him can bet “no” on the market. And they will likely win. If anything, bettors should be wary of markets based on hearsay, or where the accused has unrelated convictions. I might bet no on those markets. I think the standard for a credible news org publishing an article with verified claims of fraud is actually very high, even with previous claims.
As for a general question about the damage these markets do, what about the damage fraud does? I think it’s easy to compare to the status quo, but currently charlatans are able to operate under the radar for years. This suggestion would make it easier to combine data. If you see a market about someone you know is shifty that’s already quite high, you might be tempted to bet, then contact a journalist.
As for testing it out, I strongly agree that it should be tested. And I think science fraud is a good place to start. It’s comparatively less controversial than other scandals.
Fraud prediction markets
epistemic status—I think idea feels bad, but I can’t find a good argument. I’m moving towards there being a way to do this well
Is there a resolvable event you could run a prediction market on here? Lets imagine you decide not to publish. Soon, you or someone else could created a market for “will a major news org publish an article saying X scientist is a fraud before 2023” then you could buy shares in that market. I know vox employees aren’t allowed to gamble, but you get the picture. The more people who agree, see and buy shares in it the more likely the people with the different parts of the story come together and complete it, publish and article and then you all get money from those who voted no. (People will vote no because most markets will resolve no and it will be a way for speculators to get money)
It seems to me that fraud/scandal prediction markets are underrated.
Some responses to common criticisms:
Wouldn’t fraud markets be used to attack people? Yes, but if you know you are innocent, you bet for yourself and make money. People are incentivised towards truth because that’s how you maximise expected value
Even if the market resolves no, there will be reputational damage to having a markets sit at 10% for any length of time. This is the criticism I think is most serious. That said, at least in this system that would be held accountable. Over time we’d realise how easy it was to create a spike and that it was long term price rises that are worth following.
What if they article falsely accuses? That’s already a problem and fraud markets don’t change that
How to decide who to run fraud markets on? Allow them to be run on anyone paying a certain amount of liquidy with a certain level of public presence (eg a wikipedia page). Most people don’t have a credible article published about them, so you need a good sense before you spend the money. Most markets will resolve no
This makes me uncomfortable. Yeah, I agree, but that’s an argument for caution, not silence.
Anyway, let me know what you think.
I hadn’t thought of this and I’m actually intrigued—it seems like prediction markets might specifically be good for situations where everyone ‘knows’ something is up but no one wants to be the person to call it out. The big problem to my mind is the resolution criterion: even if someone’s a fraud, it can easily be ten years before there’s a big article proving it.
Disclaimer that I’ve given this less than ten minutes of thought, but I’m now imagining a site pitched at journalists as an aggregated, anonymous ‘tip jar’ about fraud and misconduct. I think lots of people would at least look at that when deciding which stories to pursue. (Paying sources, or relying on sources who’d gain monetarily from an article about how someone is a fraud, is extremely not okay by journalistic ethics, which limits substantially what you can do here.)
I don’t think resolution criteria area problem. A published article in an agreed set of major newspapers. It’s okay if it resolves no for a few years before it resolves yes. You need relatively short time horizons (1 year) for the markets to function.
I don’t understand how your site would work. Want to describe it?
I think I would actually be for this, as long as the resolution criteria can be made clear, and at least in the beginning it can only be for people who already have a large online presence .
One potential issue is if the resolution criteria is worded the wrong way, perhaps something like “there will be at least one news article which mentions negative allegations against person X,” it may encourage unethical people to try to purposely spread false negative allegations in order to game the market. The resolution criteria would therefore have to be very carefully thought about so that sort of thing doesn’t happen.
Sure, that’s a failure mode. I would only support it if the resolution criteria were around verified accusations. Mere accusations cannot be enough.
So what happens in the face of ambiguity?
Alice and Bob are locked away in a room with no observers and flip a coin. Both emerge and Alice states it came up Heads, Bob that it came up Tails.
Of course both cannot be right but there is no further information. The proper thing for a market to do would be to hover at 50⁄50. But would it actually do that? I suspect not, I suspect that biases in observers (perhaps the name “Alice” is culturally perceived as more trustworthy) would create a wedge and as people see that disparity developing it becomes a race to the bottom much to Bob’s dismay.
But even that is the simple case where there is no history and both Alice and Bob are just arbitrary individuals nobody knows anything about beyond their name. Life is not like that. Bob being determined a liar once becomes an input to any future fraud predictions. Are people really running through proper Bayesian analysis? Again, gut feel is that the almost never do. So now you become a self-reinforcing system in a potentially really nasty way.
And even that is a relatively simple case where all inputs are ones in the market already. What if Bob has an arrest for shoplifting when he was 18 published in a local paper? What if he’s been a target of one of those shady companies that publishes (real or fake) arrest records and extorts you for takedown money?
It’s worth considering the possibility that the sort of dynamics reinforced by a market would be far worse than the ones available without one. At the very least you would want to experimentally test exactly what sort of effects of this nature you might expect.
There will be false positives, and that will be bad, but I think most people believe on the current margin that there are more false negatives. And false negatives are quite bad collectively, even if the harms are diffuse.
Hey George, I disagree with all the all arguments here except the last one. But I do share your concern with this idea. It feels icky. But as I say, I don’t think your args hold water.
If the market was “would a newspaper publish verified accusations that Bob lied about what happened in the room” the market would stabilise much lower than 50%. Likely no newspaper would publish an article on this. It’s not about what happened it’s about whether an article will be published stating Bob has acted badly.
As for previous convictions, if Bob knows he’s innocent and that no articles are likely to be published on new events, he and those who trust him can bet “no” on the market. And they will likely win. If anything, bettors should be wary of markets based on hearsay, or where the accused has unrelated convictions. I might bet no on those markets. I think the standard for a credible news org publishing an article with verified claims of fraud is actually very high, even with previous claims.
As for a general question about the damage these markets do, what about the damage fraud does? I think it’s easy to compare to the status quo, but currently charlatans are able to operate under the radar for years. This suggestion would make it easier to combine data. If you see a market about someone you know is shifty that’s already quite high, you might be tempted to bet, then contact a journalist.
As for testing it out, I strongly agree that it should be tested. And I think science fraud is a good place to start. It’s comparatively less controversial than other scandals.
Where do you think I’m wrong here?