Thanks for writing this. I enjoyed it and I’d like to look more at the paper.
Causality might diverge from conditionality in the case of advisory/indirect markets.[10] Traders are sometimes rewarded for guessing at hidden info about the world—information that is revealed by the fact that a policy decision was made—instead of causal relationships between the policy and outcomes.[11]
For instance, suppose a company is running a market to decide whether to keep an unpopular CEO, and they ask if, say, stocks conditional on the CEO remaining would be higher than stocks conditional on the CEO not staying. Then traders might think that, if it is the case that the CEO stayed, it is likely that the Board found out something really great about the CEO, which would increase expectations that the CEO would perform very well (and stocks would rise). So the market would seem to imply that the CEO is good for the company even if they were actually terrible.
I don’t understand the point here. If the market is the only chooser, the traders would be stupid to assume that some other reason made the board choose. If the board chose based on the market and other features, then yes the market would be predicting given that choice. This seems like a restatement of the theory rather than an issue.
I don’t think you are misinterpreting; this issue is applicable when the market is advisory or indirect (not hard-wired to decisions, like futarchy is—that has its own issues). There’s a longer discussion of this issue in the thread that starts with Harrison’s comment.
Thanks for writing this. I enjoyed it and I’d like to look more at the paper.
I don’t understand the point here. If the market is the only chooser, the traders would be stupid to assume that some other reason made the board choose. If the board chose based on the market and other features, then yes the market would be predicting given that choice. This seems like a restatement of the theory rather than an issue.
Am I misunderstanding?
I don’t think you are misinterpreting; this issue is applicable when the market is advisory or indirect (not hard-wired to decisions, like futarchy is—that has its own issues). There’s a longer discussion of this issue in the thread that starts with Harrison’s comment.