
Review of Fortune’s Formula by William Poundstone: The stranger-than-fiction tale of how to invest
What is a better investment objective? Grow as wealthy as possible as quickly as possible, or Maximize expected wealth for a given time period and level of risk The question is at the heart of a fight between computer scientists and economists chronicled beautifully in the book Fortune’s Formula by Pulitzer Prize nominee William Poundstone. [...]
What is (and what good is) a combinatorial prediction market?
What exactly is a combinatorial prediction market? 2010 Update: Several of us at Yahoo! Labs, along with academic researchers, have theorized and written about combinatorial prediction markets for several years, as you’ll see below. But now we’ve gone beyond talking about them and actually built one. So the best way to answer the question is [...]
The right way to implement a multi-outcome prediction market: Linear programming
There are many examples of multi-outcome prediction markets, for example election markets with more than two candidates, or sports championship markets with dozens of teams. What is the best way to implement a multi-outcome prediction market? The simplest way is to effectively ignore the fact that there are multiple outcomes, breaking up the market into [...]
The wisdom of the ProbabilitySports crowd
One of the purest and most fascinating examples of the “wisdom of crowds” in action comes courtesy of a unique online contest called ProbabilitySports run by mathematician Brian Galebach. In the contest, each participant states how likely she thinks it is that a team will win a particular sporting event. For example, one contestant may [...]
Evaluating probabilistic predictions
A number of naysayers [Daily Kos, The Register, The Big Picture, Reason] are discrediting prediction markets, latching onto the fact that markets like TradeSports and NewsFutures failed to call this year’s Democratic takeover of the US Senate. Their critiques reflect a clear misunderstanding of the nature of probabilistic predictions, as many others [Emile, Lance] have [...]
Implementing Hanson's Market Maker
Robin Hanson invented a wonderful market maker well suited for use in prediction market applications with a long name: the logarithmic market scoring rule market maker, which I’ll abbreviate as LMSR. (In fact, Hanson invented an entire class of market scoring rule market makers, but the logarithmic variant seems the most useful.) Hanson’s two papers [...]
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Not the lesser of two evils
Every election, many voters rationalize their choice as the “lesser of two evils”.1
However, for me, this year’s election is not about the lesser of evils.
In fact, for the first time I can remember, I actually like both major candidates in the US Presidential election.
I like Obama more and I voted for him2 — I think he’s smarter, inspires optimism, and has better policies and people surrounding him. But I like many aspects of McCain including how he denounced Pat Robertson, Jerry Falwell, and the extreme religious right they represent.3
If the party of less government could ever manage to stop legislating morality, I might actually consider voting for them. By the opposite logic, I imagine some evangelicals actually hope that Obama wins, thus strengthening their argument that Republicans can’t win without them.
On a related note, I received an email chain letter from a Snopes-averse source4 warning that McCain’s campaign is sending out erroneous absentee ballot applications to Obama supporters in an attempt to disqualify voters. Initially I dismissed it as conspiracy theory. Then, a few days ago, I received an absentee ballot application in the mail myself, even though I had just finished voting! For a moment, I thought I was a target of the scam with the evidence right in my hand. I could feel the blograge composing in my head.
So I investigated. (Read: conducted a few web searches.)
The Wisconsin State Journal (in)concludes that McCain either meddled or messed up, with benefit of the doubt going to the latter. Blackboxvoting.com (not affiliated with Bev Harris’s more cited blackboxvoting.org) paints a picture of more widespread fraud and malicious intent.
And it seems that the application I received was a legitimate and well intentioned mailing from the League of Conservation Voters Education Fund, a left-leaning environmental organization. The application’s return address had one line missing and an incorrect zip code by one digit, but the address was “correct” in the sense that it would almost surely end up at the right place, so I believe this was not part of any intentional plot to mislead.5 Still, the whole ordeal got me thinking that perhaps all unsolicited applications for absentee ballots should be outlawed — there’s just too much room for error, both malicious and inadvertent.