Wednesday, January 8, 2014

Euvoluntary Balderdash?

Prices are information.

That's not just a cute, pithy little aphorism. It's a profound truth of economics that becomes more meaningful the longer you peer at it. In the case of blather, not only is talk cheap, but I submit to you that it's priced correctly.

Consider how easy it is to levy a private tax on chronic error. Loud public figures in the habit of predicting future events need only accept the occasional bet to cement their credibility. Or if predictions and forecasts can't be subjected to a bet for technical reasons, we the listening public might at least hold the b.s. artiste's feet to the coals for systemic inaccuracies.

But the SEC effectively banned Intrade in the US. Public intellectuals suffer blows to their reputation for personal indiscretions far more readily than for the cascades of hokum that roil past their lips. It might be easy to write off the failure of the public to hold purveyors of twaddle accountable for systematic error as a collective action problem, but it's tough to square that with the several heaps of scorn piled on folks who make factually correct, if unpopular, observations about the role of demographic variables in determining outcomes. Right, Larry?

Raising the price of fish stories means that fewer will be exchanged. Widespread resistance to price changes mean that folks (well, I should actually confine this to English-speaking folks: the linguistics are a tangent I'm not willing to tackle here) really do like a nice, robust market in bosh. At a glance, the market for bullshit is euvoluntary.

1 comment:

  1. A top derivatives regulator is expected next week to accept one electronic platform operator’s request to list several swaps for trading.


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