prior probability

I have always wanted to learn how to play cricket, one of the most popular sports in the world, and now thanks to the magic of Wikipedia as well as this YouTube channel by the amazing Ninh Ly, my wish has been granted! Hat tip: @kottke.

Imagine if the Arabic numerals in your favorite book were replaced with binary numbers … (Via Wikipedia: In mathematics, a binary number is a number expressed in the base-2 numeral system or binary numeral system, which uses only two symbols: typically “0” and “1”.)

Image credit: Tom Gauld; hat tip: @pickover

Via Keith E. Whittington (Volokh Conspiracy), I just discovered this website titled “Liberty Matters” featuring a series of essays on the theme of liberty.

This is my last blog post in a multi-part series on conspiracy theories

I made a “modest proposal” in my previous post. I proposed the creation of a “Fake News Futures Market.” Because fake news and conspiracy theories can threaten liberal values, my ultimate goal is to create a kind of “early warning detection system” as well as a literal marketplace of ideas through a user-friendly market mechanism that not only assigns credible probability values to each new item of fake news or conspiracy theory but that also updates these probability values in real time. By way of background, my previous mechanism design work has extended the logic of markets to adjudication and jury trials (“The Case for Bayesian Judges,” “Why Don’t Juries Try Range Voting,” and “The Turing Test and the Legal Process”) and to many other novel settings, including politics (“Coase and the Constitution”), moral dilemmas (“Trolley Problems”), and the world of science fiction (“Clones and the Coase Theorem”). I now want to extend my work into the domain of conspiracy theories and fake news generally. To do this, I will have to address the following logistical and legal questions:

Law. A prediction market in conspiracy theories or “fake news futures market” poses a delicate legal question: Would such a market even be legal, or would the bets placed on this market be classified as illegal wagers? The answer to this threshold question often depends on State law (see here, for example). By way of analogy, sports betting is legal or on the way to becoming legal in 42 States (see image below), although as far as I am concerned, why can’t the act of placing a wager on a non-sporting event be considered a speech act, and why shouldn’t betting markets thus be protected under existing Supreme Court interpretations of the First Amendment, at the very least as a form of commercial speech? To make a long story short, I will devote myself to these threshold legal questions during my summer break.

Logistics. What would a “fake news futures market” look like? How would such a platform operate? How much would it cost to place a bet? At this early stage of my research project, I see three possibilities. One is to hand the baton to an already-established prediction market like the Iowa Electronic Markets (IEM). Another possibility is to create a new fake news betting platform with the support of a market-friendly research institution, like the Cato Institute or the Mercatus Center at George Mason University. Yet another possibility is to “go independent” by creating an entirely new and independent platform not affiliated with any existing research institution. (By way of comparison, consider the “Long Bets” website, an independent entity that was initially funded by two grants from Amazon CEO Jeff Bezos.)

Additional design questions (e.g. marketing, advertising, etc.). Lastly, for now, with the legalization of sports betting in many States (see my “Law” section above), the online betting world is becoming hyper-competitive, full of established players like DraftKings as well as many new entrants too numerous to mention here. How could a fake news market differentiate itself from this crowd and attract bettors?

However the above questions are answered, my fake news futures markets fake should resemble existing successful prediction markets, like the IEM or Long Bets, in two ways: it must contain a searchable and comprehensive database of conspiracy theory wagers, and the price of any given bet should reflect the relative truth value of the item of fake news or conspiracy theory being bet on. Again, I will consider these logistical and operational details over my summer break. The larger point I want to make here, however, is that governmental efforts to suppress fake news and conspiracy theories are not only likely to fail; such efforts will further erode and endanger our freedoms. Instead of stifling speech, we should try a different approach: we should allow people to propose–and bet on–as many items of fake news and conspiracy theories as they want to!

Alternative title: James Madison, Meet Mechanism Design

Note: This is my penultimate blog post in a multi-part series on conspiracy theories

Why are conspiracy theories so popular, and how should we respond to them? I have already spent considerable time and space on this blog trying to answer these questions. In this post, I will propose a new approach, the logic of which can be summed up in the following five words: “James Madison, Meet Mechanism Design.” In Federalist Paper #10 (available here), Madison famously identified the problem of “faction” as a great source of danger to liberal values, even going as far as to call factions a “dangerous vice.” (To the extent modern-day factions like QAnon and others are the source of fake news and conspiracy theories, Madison’s 18th-Century admonition continues to hold true today!) But at the same time, Madison explains in Federalist 10 that efforts to curb factions are always more dangerous than this disease. In Madison’s memorable words:

“Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.”

By the same token, contemporary proposals to curb fake news and the spread of conspiracy theories–either through direct regulation of social media platforms or through the appointment of a national/federal “reality czar”–are likewise dangerous. Why? Because such “solutions” might stifle or even suffocate the marketplace of ideas. Returning to Madison and Federalist #10, what was Madison’s ingenious solution to the dangerous vice of factions? More factions! Again, in the immortal words of Madison:

“Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens ….”

In other words, the more factions there are, the more they cancel each other out, making it far more difficult for any one faction to dominate politics. Likewise, perhaps the solution to the problem of fake news is not less fake news but more! Simply put, instead of trying to repress fake news and conspiracy theories and risk shutting down the marketplace of ideas, what if we encouraged people to propose–and bet on–as many items of fake news and conspiracy theories as they want to? From a theoretical perspective, ideas markets have many desirable and classical liberal properties, since such markets incentivize people to seek information and to be precise in their claims. Also, ideas markets are able to efficiently aggregate disparate sources of information and scale well with the number of people and opinions.

I will say more about my proposed “fake news futures market” and conclude my series on conspiracy theories in my next post.

Happy Easter! This 521-year-old painting by El Greco (digital reproduction courtesy of the Museo Nacional del Prado in Madrid) commemorates Jesus’ resurrection. More details about this work of art and El Greco are available here.

I will be proposing a “fake news futures market” and begin wrapping up my blog post series on conspiracy theories next week. In the meantime, I want to share two updates about my “Adam Smith in Love” paper:

1. The final version of the paper has now been published in Econ Journal Watch (EJW) and is available here.
2. Daniel Klein, the editor-in-chief of EJW, invited me on his podcast to talk about Adam Smith’s love life. A recording of the podcast is available here.

Alternative title: Alexander Hamilton, Meet Michael Jordan!

Alternative title: Happy April Fools’ Day!!!

Alternative title: A brief survey of the anti-market metaphor literature

Note: This is my 14th blog post in a multi-part series on conspiracy theories

Is there a “marketplace of ideas”, and if so, does this market really work? In my previous two posts I have mentioned how many legal scholars and public intellectuals have rejected the “marketplace of ideas” model. In the context of conspiracy theories, one can see why. After all, if truth is supposed to prevail whenever ideas are shared freely and openly, why are bogus conspiracy theories so popular? Broadly speaking, now that I have surveyed the “anti-market” literature, we can identify three main reasons why some scholars/intellectuals reject the market metaphor:

1. Ideas are not goods.

Although Ronald Coase (1974), an economist, famously concluded that no fundamental difference exists between the “market for goods” and the “market for ideas,” other scholars, by contrast, have rejected the analogy between markets and ideas. Alvin Goldman and James Cox (1996, p. 26), for example, conclude that the marketplace analogy is inapt in the domain of speech because “it is really questionable whether messages are goods or products at all,” while Robert Sparrow and Robert Gooding (2001, p. 48) concur with Goldman & Cox (1996) that “ideas are not commodities of the sort ordinarily bought and sold in markets” and propose an alternative metaphor (pp. 54-55): “the garden of ideas.” Similarly, Brazeal (2011, p. 2) emphasizes “structural dissimilarities between a market in more traditional goods and a market in ideas.”

2. Specific types of speech.

Some scholars/intellectuals have rejected the “marketplace of ideas” metaphor with respect to specific types of speech, such as hate speech and racist speech. David Shih (2017), for example, citing the landmark work of Richard Delgado and Jane Stefancic (1992), focuses on hate speech and racist speech and concludes that the marketplace of ideas “fails” because “we cannot make objective choices about racism.” Why not? Because, according to Delgado & Stefancic (1992, p. 1278, citing Bell, 1987), “racism is woven into the warp and woof of the way we see and organize the world ….” But if this were the case, then everyone must be irredeemably racist, and no amount of public policy reforms could alter their pessimistic conclusion. Alas, Shih, Delgado, and Stefancic’s critique of the market metaphor is self-refuting.

3. Specific types of information environments.

Yet others reject the market metaphor with respect to specific types of “information environments.” Claudio Lombardi (2019), for example, explains how the marketplace of ideas is distorted by the advertising revenue business models of social media platforms like Twitter and Facebook. These platforms treat news as a “product” and readers as “consumers” and distort the marketplace of ideas by lumping reliable sources of news together with fake news. According to Lombardi (2019, p. 201), “Algorithms such as those used by Facebook and Twitter are crafted … to show online content without selecting for the credibility of the source. The watchword is instead the ‘effectiveness’ of a post in generating traffic–a loophole that populist movements have used very effectively.” Lombardi (ibid., pp. 202-203) also falls into the ad hominem trap: “But just as in any other market, trade in ideas may be subject to distortion due to … bounded rationality and cognitive limitations.”

For my part, I am not persuaded by any of these criticisms. Aside from falling into the ad hominem trap, Lombardi’s analysis is already outdated, while Shih’s pessimistic analysis is empirically false. If you don’t believe me, ask “Karen.” Today, when someone is caught on video making a racist statement, they are often “cancelled” and subject to strong censure from many quarters. In any case, in my next post I will propose a new way of dealing with fake news and conspiracy theories: a futures market in fake news or “conspiracy theory prediction market.”

Works Cited

Bell, Derrick A. 1987. And We Are Not Saved: The Elusive Quest for Racial Justice. Basic Books.

Brazeal, Gregory. 2011. How much does a belief cost? Revisiting the marketplace of ideas. Southern California Interdisciplinary Law Journal, 21(1), pp. 1–46.

Coase, Ronald H. 1974. The market for goods and the market for ideas. American Economic Review, 64(2): pp. 384–391.

Delgado, Richard, and Jane Stefancic. 1992. Images of the outsider in American law and culture: can free expression remedy systemic social ills. Cornell Law Review, 77(6), pp. 1258–1297.

Goldman, Alvin I., and James C. Cox. 1996. Speech, truth, and the free market for ideas. Legal Theory, 2 (1), pp. 1–32.

Lombardi, Claudio. 2019. The illusion of a “marketplace of ideas” and the right to truth. American Affairs, Spring 2019, pp. 198–212.

Shih, David. 2017. Hate speech and the misnomer of “the marketplace of ideas.” NPR (May 3, 2017), available at https://www.npr.org/sections/codeswitch/2017/05/03/483264173/hate-speech-and-the-misnomer-of-the-marketplace-of-ideas. [permaCC]

Sparrow, Robert, and Robert Goodin. 2001. The competition of ideas: market or garden? Critical Review of International Social and Political Philosophy, 4(2), pp. 45–58.