Friday, November 30, 2012

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes

The CFTC has cheerfully complied with industry elites and blocked US citizens from participating in prediction exchanges (good commentary here). Part of the published justification for shutting down prediction markets is that they don't serve the public interest. This is a peculiar claim, but one very interesting for euvoluntaryists.

The benefits of prediction markets are unambiguous: their existence forces people to put up or shut up. With thick, ubiquitous prediction markets, cheap talk would dry up in a hurry. John Law-type flim-flam artists would find themselves out on their ear. But lest we forget, Law had the ear of Louis XV. Ditto for the Motion Picture lobby: Hollywood and DC enjoy a notoriously cozy relationship.

So the ban on Intrade is classic Olsonian public choice: concentrated benefits (to sleazy studio stuffed shirts) and diffuse costs (to folks who might have otherwise benefited from higher-quality forecasts i.e. everybody else). That's not how the CFTC sold it though. They made a euvoluntary claim: something about the "public interest". Even more interesting, the actual claim against Intrade was over commodities, as if off-exchange futures trades threaten to destabilize the market (I think?). I'm not entirely sure what logic underpins this argument.

The bit that interests me is the breakpoint at which elite collusion snaps. I wrote a post a short while ago about collusion in the three estates, and it occurs to me that the same mechanism that throttled the Church/State alliance might also strangle the bedfellowing of film executives and Congress. Intrade and sites like it present obvious efficiency gains to consumers, but squashing these services won't generate any theses nailed to the doors of your local AMC. The closest we see is the backlash against attempts to regulate the Internet and those are largely quite tepid. What would it take to defang Hollywood and dissolve their pairing with the Legislature? Could well-made video games possibly be our version of the Lutheran Church?

The rhetoric is also charmingly misleading. This case has a whole lot of cheap talk papering over a decision to shut down an institution that serves to reduce cheap talk. That's, what... maybe not ironic, but certainly obnoxious. Maybe even predictable. Hilarious, if you're of a particular bent. Which I am.

Ha ha ha.

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Do you have suggestions on where we could find more examples of this phenomenon?