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Simon DeDeo @SimonDeDeo
, 38 tweets, 7 min read Read on Twitter
I would have been happy to let the @bloggingheads episode between @robinhanson and I stand. But since Robin's decided to jump back in as well, I'll make a few remarks.
What I expected was a back-and-forth on Robin's central claim: that we can, and should, use prediction markets to make political decisions.
What I encountered instead was a farrago. When presented with an example of how markets fail, Robin has two responses. First, that the markets he has in mind are different. This is fine, but he was never able to decide whether labor or bond markets were counted as speculative.
Second, that the markets actually didn't fail. Robin's example, as far as I can tell, is the gender wage gap. Robin doesn't actually commit himself to a position on this—it's quite a slippery motte-and-bailey sort of thing going.
Both the data, and personal observation, are sufficient for me to believe that the gender wage gap exists. Robin doesn't seem to believe this, or at least claims ignorance. That's fine, it would be a dull debate if we stopped there.
What I found unbelievable—sufficiently unbelievable that I became uncertain as to whether the discussion was being had in good faith—was his claim that he was uncertain whether such a gender wage gap existed in 1968.
Here are a few things women couldn't do before the revolutions of the 1960s: hold a credit card (if unmarried); have equal access to employment opportunities; have the right to be paid the same amount for (literally) the same job (e.g., TWA, "purser" vs "hostess".)
Robin's claim is that he really doesn't know about that. It's an open question, for him, whether choices that businesses made may corresponded to the actual value that the women in these positions provided their companies.
I get that these are hard questions. The gender wage gap is one of the most fraught questions in the modern era, and I'm happy to talk about the differing goals that people have in their lives. What was shocking to me was Robin's position.
To be doubly-clear: I did not expect Robin to take this position. In absolutely no way was this meant to be a gotcha question. I expected an interesting conversation about how one could modify his proposal to handle these obvious market failures.
There was one market failure that Robin was willing to consider: the possibility that speculators in his Futarchy would do exactly what we've seen them do in actually existing speculative markets.
i.e., amass centralized power, draw in nation-scale resources, and become too big to fail. The example was Long-Term Capital Management, which I began to hope would be very simple one, since Robin was willing to say this counted as one of his speculative markets.
Robin's suggestion was that the same people who were trading on these speculative markets would create the legislation needed to regulate them so they wouldn't be able to do this. His evidence, bizarrely enough, amounted to a quote from Karl Marx .
This came early in the discussion, so I figured that there was something I was missing, and after some back and forth, I asked if we could move on.
I walked away from this debate absolutely flabbergasted. The impression I had was of a man who had long forgotten what it was like to be disagreed with.
It's unclear what Robin means by this. One of the claims here seems to be that there's a transaction cost, Robin_TC. When Robin_TC is too high for "you and I" then the market does not have the properties necessary for Futarchy.
What Robin means by "you and I" is, presumably, "people like Simon and Robin", since he claims that bond markets are easy to profit from when the prices are wrong. I used to put a caveat of "at the risk of stating the obvious" here, but I leave that be...
Let's take the gloves off. A good market for Robin is one that he can enter. He's not a CEO hiring and firing people, and making money off those decisions, so the labor market is not speculative in his sense. He does have the money to cover transaction costs in bonds, so that is.
Robin's claim is then that the kinds of markets he can enter are a good basis for political decision-making. At which point, cycle back up for the nested structure of where we went, here:
This was another angle that Robin had going in our conversation. (To be clear, Robin's claim in the discussion was that the orgs would limit themselves from doing this—no "not being allowed" required, so this is a different one.)
It's classic motte-and-bailey. Motte: prediction markets can replace political decision-making. Bailey: prediction markets should not replace political decision-making to the extent to which they can't replace political decision-making. (But I can't tell you where that line is.)
In the actually-existing discussion, Robin's suggestion was that the Futarchy itself would decide this legislation.
One of the things that surprised me in the entire exchange: I had mentally aligned Robin with someone like @nntaleb (in a good way). Markets, when they work, have the lovely effect of cutting bullshit.
What struck me was Robin's inability to see the extent to which bullshit-preventing markets have been distorted, time and time again, by those without skin in the game.
LCTM did not have skin in the game. People hiring and firing women did not have (enough) skin in the game: lives would have been saved if they fired some bad male doctors, and hired female ones.
Let's summarize Robin so far: Banks will not be allowed to do certain kinds of risky trades on his prediction markets. But somehow, that decision will not be a political one, made by the Futarchy. Or perhaps it will, and Karl Marx was right?
And again, more material covered in our debate.
For Robin, prices can not be in error if the market prevents the error from being corrected.
Another motte-and-baliey: markets get things right (meaning, they reflect the truth, e.g., that pursers and hostesses provide the same value, let's say), except when they don't, and when they don't get it right, we redefine "right" to mean something else.
To be fair, Robin may be saying that the problem in 1968 was simply that if a particular contract was available—one that allowed one to short TWA conditional on employment practice...
Then this contract would have been bought. As I put it when he made this suggestion, it implies that the guys up in Greenwich were sitting around just waiting to exploit the failure.
Their transaction costs were just too high—it was an accident that all the employers didn’t see it, but the speculators would.
For Robin, that’s an axiomatic truth (always a bad idea in political theory). For reasons not to believe it, see the very existence of the TWA gap itself.
Groupthink, including the awful kinds like sexism, are basic features of the human mind. Large-scale markets like the kinds Robin suggests simply weaponize it.
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