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.
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?