prior probability

Today (1 November) is All Saints’ Day or “The Feast of All Hallows” in the Catholic calendar; I will therefore resume my series on gambling and democracy in the next day or two. More details about the history of this solemn feast day are available here.

Yesterday (10/30), the Amazing Tyler Cowen linked to this 10/27 report in the Financial Times (FT): Gambling on democracy: US regulators weigh election futures market — calling it “the best article I’ve seen on prediction market issues in DC.” (He also linked to this 10/28 ungated article in Politico.) Given my previous two blog posts on the overall theme of gambling and democracy (see here and here), and given Professor Cowen’s high praise of the FT article, I want to say a few words about that item before I press on.

In summary, both the FT report that Cowen liked so much as well as the ungated Politico article note that the Commodity Futures Trading Commission (CFTC) is scheduled to decide by this Friday, November 4, if the prediction market Kalshi can allow investors to place bets on U.S. election results. (Among other things, the CFTC regulates futures exchanges and prediction markets that operate inside the U.S.) This is (potentially) big news because real-money political prediction markets have thus far not been allowed to do business in the United States.

By way of background, although one special exchange–the Iowa Electronic Market, which somehow received a exemption from the CFTC in the early 1990s in the form of two no-action letters–allows users to place bets on specific election races, individuals and business firms are not allowed to bet on the overall results of nationwide elections, e.g. will Republicans win back control of the Senate in 2022? In 2012, for example, the CFTC rejected a proposal from a company called Nadex for “political event” futures (see here), arguing it was against the public interest. (Aside: I call bullshit! See below.)

For its part, the FT article mentioned above surveys two flimsy arguments against political prediction markets. One is that PACs (political action committees) and other large donors would be able to place bets on elections; the other is that such markets would lead to the “gamification” of politics. My reply to both concerns is, SO WHAT? Ultimately, the main argument against political prediction markets boils down to this two-part objection: (i) such markets are the same as legalized gambling, and (ii) gambling would be bad for democracy. While I readily concede part (i) of the argument, since all trades are gambles, I am skeptical about part (ii). Why exactly is gambling bad for democracy?

Is the proliferation of “fake news” and conspiracy theories a threat to democracy? If so, how should we deal with such dangerous ideas and falsehoods? Broadly speaking, there are two general approaches to this problem: one is the Mark Zuckerberg solution, i.e. some combination of censorship (content moderation) and secret computer algorithms; the other is the Elon Musk method, i.e. laissez faire principles and free speech absolutism (everyone is free to post whatever they want).

Which approach do you prefer? Zuckerberg’s or Musk’s? For my part, I won’t dwell on the pros and cons of either approach, except to make the following general observation: neither the Zuckerberg solution nor the Musk method is designed to help us distinguish truth from lies in a reliable manner. One big problem with the Zuckerberg/censorship approach, for example, is that we cannot always determine ahead of time which conspiracy theories are true and which are false, while the main problem the Musk/free speech approach is that most people on the Internet are ill-informed, ignorant, or just flat-out prejudiced. To the point, if anyone can post anything, will the truth eventually emerge from such a large cacophony of voices, or will the truth just get crowded out?

With this background in mind, here is where my proposed third-way solution comes into play. Simply put, instead of trusting our Big Tech overlords (the Zuckerberg approach) or resorting to “anything goes” as a magical panacea (the Musk method), why not allow people to place bets on conspiracy theories and fake news? That is, why not create an actual “truth market” for contested ideas? (See here, for example.) I will further describe the details of my proposed truth market in a future post.

Inspired by the work of polymath Robin Hanson (check out Hanson’s blog here), I first posed this question in August of 2021 (see here). Since then, I published “The Leibniz Conspiracy“, which surveys a wide variety of “conspiracy theory theories” and proposes a specialized betting market for conspiracy theories. In addition, many mass-market and scholarly books devoted to conspiracy theories and conspiracy thinking more generally–including Republic of Lies (2019), Conspiracy Theories: A Primer (2020), the Routledge Handbook of Conspiracy Theories (2020), and Stuff They Don’t Want You to Know (2022), just to name a few–have been published in recent years (see below for more titles), but none of these works proposes an effective or foolproof way of distinguishing real conspiracies (like the Wuhan lab-leak cover-up) with fake ones (like most 2020 election fraud claims). That is why I will be presenting a new and improved version of my conspiracy theory betting market proposal at the 13th annual Constitutional Law Colloquium at Loyola Law School in Chicago next Saturday (5 November). I will say more about my modified proposal in the days ahead; for now, it suffices to say that I will expand my betting market to include “fake news” as well as popular conspiracy theories.

Beware of Venmo too, which is owned by PayPal; hat tip: the Amazing Tyler Cowen (see here).

That is the title of this haunting exposé (subtitled “Lynch Law in All Its Phases“) written by Ida B. Wells (pictured below), who was posthumously awarded a Pulitzer Prize “for her outstanding and courageous reporting on the horrific and vicious violence against [people of color] during the era of lynching.” This landmark work, which is also available here (via Project Gutenberg), was first published in New York City on this day (26 October) in 1892. According to this report (University of Missouri-Kansas City School of Law), nearly 3,500 Blacks (and 1,300 whites) were lynched in the United States from 1882 to 1968. One of the last reported lynchings in the U.S. took place in Mobile, Alabama on 21 March 1981.

On this day (25 October) in 1971, the General Assembly of the United Nations approved Resolution 2758, which recognized the People’s Republic of China (PRC) as “the only legitimate representative of China to the United Nations.” Alas, Communist China continues to be ruled by murderous dictators and should thus be expelled from the U.N., along with Saudi Arabia, Cuba, Iran, North Korea, and Russia. At the very least, Taiwan should be allowed to rejoin the U.N. table without further delay. Change my mind! (I say “rejoin” because the Republic of China or ROC, which relocated to Taiwan in 1949, had represented China at the United Nations since 1945, the year the U.N. was founded. Taiwan, however, continues to be excluded from the U.N. table to this day. For additional information about the legal and political status of Taiwan, see here.)

I dedicate this beautiful song to my wife Sydjia!