August 03, 2004 1:18 PM

DIMACS Workshop to focus on Idea Futures

DIMACS at Rutgers University runs some interesting workshops. One that was just announced focuses on "Markets as Predictive Devices". Given that my old acquaintance Robin Hanson is one of the instigators, I assume that it will focus pretty heavily on Idea Futures.

For those unaware of the concept, it is a means to quantify predictions by using markets. The notion is to set up tradable contracts, much like futures contracts, which pay off not if guesses about the price of wheat or oil are correct, but if guesses about the future direction of technologies or world events are correct. It is hypothesized that the implied predictions given by the market price of the contracts will be more accurate than the educated guesses of pundits, because traders will have a monetary incentive to follow their heads rather than their hearts. There is some (as yet limited) evidence that this hypothesis is true.

I first saw the concept of Idea Futures under another name in "The Shockwave Rider by John Brunner (which incidently also coined or popularized a bunch of modern computer security jargon, such as the terms "worm" and "virus"). However, it was Robin who really formalized and spread the concept of Idea Futures, first in the magazine "Extropy", and later in more academic contexts.

Some of you may remember a DARPA proposal to set up betting markets on the odds of terrorist incidents, which was later withdrawn under heavy pressure. Robin's work was the basis for that idea.

(Some of you may also remember my recent blog entry about a company that is enabling trading in idea-futures like contracts.)

I'm not sure whether or not Idea Futures will have a dramatic impact on society, but the concept certainly has intellectual appeal. Perhaps someone should start trading a contract on whether Idea Futures will have a widespread effect (if only they could formulate the claim well!)

Posted by Perry E. Metzger | Categories: Economics, Science & Technology