Inspired by the ideas of Robin Hanson (see, by way of example, the video below on prediction markets), I have proposed the creation of a “truth market” in order to counteract the spread of false information on the Internet, and in my previous two posts this week (see here and here), I have compared and contrasted my proposed truth market with prediction markets, described how a decentralized truth market would work in practice, and explained why such a market could dispense with two features of prediction markets: closing dates and trusted arbiters. In summary, truth markets allow people to trade belief contracts (i.e. to bet on their beliefs about past events, such as conspiracy theories, fake news, etc.), but unlike a traditional prediction market, my truth market would remain open indefinitely and would not have any final arbiters.
Today, I will address a different concern or possible objection to my proposed truth market: the likelihood of market manipulation, either by government officials who have access to secret information or to media insiders who, in turn, have access to those officials. Fortuitously, the market manipulation or “insider trading” argument is the easiest objection to refute. Why? Because from a global or information perspective, insider trading is actually a good thing! Insider trading might be morally wrong (using secret information to make a profit) or not (what’s wrong with making a profit?), but either way insider trading makes markets more efficient and more liquid. In the case of a truth market, any attempt by government or media insiders to manipulate the market would soon be reflected in the prices of the belief contracts. Alert traders would quickly spot any unusual or unexpected changes in the market price of a belief contract and seize the opportunity presented by any distortion in the price. My slogan therefore is: the more market manipulation, the better!