welfare and prediction markets are used to determine which policies - - PowerPoint PPT Presentation

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welfare and prediction markets are used to determine
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welfare and prediction markets are used to determine which policies - - PowerPoint PPT Presentation

Aug 17, 2022 249 likes •673 views

futarchy a form of government in which elected officials define measures of national welfare and prediction markets are used to determine which policies will have the most positive effect. 1 Victor, Im worried we wont be taken

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futarchy—a form of government in which elected officials define measures of national welfare and prediction markets are used to determine which policies will have the most positive effect.

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Victor, I’m worried we won’t be taken seriously. Last time we showed a bunch of dinosaur pictures and discussed a mechanism that only works if you pray.

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Victor, I’m worried we won’t be taken seriously. Last time we showed a bunch of dinosaur pictures and discussed a mechanism that only works if you pray. You’re right! Maybe we should do some rigorous, intense vector calculus to show we’re smart.

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Victor, I’m worried we won’t be taken seriously. Last time we showed a bunch of dinosaur pictures and discussed a mechanism that only works if you pray. You’re right! Maybe we should do some rigorous, intense vector calculus to show we’re smart. That’s great, and of course I wouldn’t change a thing—nothing, really! But if I could make one suggestion? What about just giving the homework answers? It’s a crowd pleaser.

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No, that’s grossly unethical. No one wants us to do that.

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No, that’s grossly unethical. No one wants us to do that. OK, fair. Let’s just do our usual, clear, concise A-worthy presentation and leave the mathematical details for those interested.

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No, that’s grossly unethical. No one wants us to do that. OK, fair. Let’s just do our usual, clear, concise A-worthy presentation and leave the mathematical details for those interested. But let’s at least insert some hints that the sharp, participating students will pick up on and appreciate us for?

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Victor and Mike present

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MARKET SCORING RULE MECHANICS

Victor Shnayder & Mike Ruberry

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  • r

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HW 2 Problem 2 hints

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HOW IS A RAVEN LIKE A WRITING DESK?

Adding ``market’’ to ``scoring rule’’

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Scoring rules

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Proper scoring rule

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Market scoring rule

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Agent t’s payoff

  • Market maker’s payoff

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Example

Question: In the year 2525, (what is the probability that) man is still alive?

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Example

.5 .3 .7

Question: In the year 2525, (what is the probability that) man is still alive?

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Example

.5 .3 .7

Question: In the year 2525, (what is the probability that) man is still alive?

Case 1: Man is still alive

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MSR questions

  • Is the market maker’s loss bounded?
  • Is an agent’s loss/gain bounded?

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MSR questions

  • Why is it unreasonable for agents to have

unbounded loss or gain in practice?

  • What does Hanson predict will lead to

convergence?

  • What does Hanson’s mechanism produce?

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THE GREAT AND POWERFUL LOG SCORING RULE

(witty pop culture reference already in name)

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Will you be seated?

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Will you be seated?

p?

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Will you be seated?

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Will you be seated?

99 Table | Walk in Table | Reservation

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Log scoring rule properties

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MSR questions (2)

  • If we want to support conditional bets on x

variables, how many events are there?

  • If you only want to change the probability of
  • ne event, how would you report that in the

mechanism we have so far?

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HANSON’S PREDICTION MARKET

A different perspective

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Example

Question: In the year 2525, (what is the probability that) man is still alive?

Man is dead Man is alive .5 .5

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Example

Question: In the year 2525, (what is the probability that) man is still alive?

Man is dead .8

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BUY 1.386 “man is dead”

Man is alive .5

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Example

Question: In the year 2525, (what is the probability that) man is still alive?

Man is alive .2

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BUY 1.386 “man is dead”

Man is dead .8

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Example

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Questions

  • Does a particular probability distribution map

to a unique quantity of shares outstanding?

  • Does the cost of changing the distribution

from p1 to p2 depend on the number of shares outstanding?

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Discussion

  • In what circumstances might we want to

deploy Hanson’s MSR?

  • Does futarchy seem like a good idea?

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