In which I question the basis of everything

If you've read The Wisdom of Crowds, if you've read A New Kind of Science, if you run SETI @ home, or if you have ever had your mind expanded by any flavor of chaos theory, you, dear reader, are probably a sucker for the idea that new ways of looking at the word--and especially new ways of harnessing the awesome information-processing power that is all around us--is likely to yield spectacular predictive power. I know I am.

And you probably thought Intrade and it's ilk--which purport to predict all kinds of unrelated real-world results based on the mystic power of market forces--are a pretty nifty idea. I know I did.

But is there any evidence whatsoever that predictive markets actually predict future results better than any other kind of analysis? Every election cycle we hear about the predictive markets, but we never hear about the follow up. From the perspective of a media-watcher, this makes it the functional equivalent of some random town in some random state that has a 98 percent success rate of predicting the next president based on their local outcome. And, just like those stories, there is never any follow up.

So this year I've paid marginally (no market pun intended) more attention to the results of the predictive markets, and what have I seen is that the market has followed the trends rather than using the awesome aggregate intellect of their user base to anticipate any developments whatsoever. On Intrade, for example, this example sums it up for me:

Barack Obama’s chances of winning the Democratic nomination have risen sharply in the last four days, with Intrade on Monday giving him a 70 per cent probability of taking the prize against just 30 per cent for Hillary Clinton.

With the exception of a brief leap following his strong victory in the Iowa caucuses on 3 January, Mr Obama’s chances had been rated at substantially below 50 per cent all year.

If I weren't such a sucker, I could probably have predicted their prediction problem. You can follow the links from the wikiepd page for some more detailed and scientifically sound analysis of why predictive markets suck so very badly at what they are set up to do, but permit me oversimplify for rhetorical effect:

Predictive markets fail because, although they use the machinery of actual markets, they aren't actual markets in one crucial respect: There is nothing of actual value being bought or sold. It is simply a complex form of betting on outcomes (no wonder, given that Intrade was founded by Irish bookies). With the actual value of the underlying commodities and securities completely removed, the actual incentives for long-term, reasonable traders are likewise absent. What you are left with are day-traders and other nogoodniks whose activities, while more complex, are really no different than betting on a horse to show down at the track.

The same trouble is plaguing real markets, as well. We haven't managed to actually remove the underlying value of the commodities and companies being traded, but increasingly baroque financial packages have managed to obscure that value to such a degree that even very savvy financial institutions are being caught by surprise when they discover what is actually contained in many of their securities.

For markets to work well, at assigning value or predicting changes in value, there must be incentives for the long game, meaning that there must be real and transparent underlying value.

Not that I'm against gambling! But I do prefer straight up books to the hijinks at Intrade. I hear the odds on Obama are looking pretty good....

Perhaps it will "reincarnate" as an Olympic medal

From a few days ago:

ELK RIVER, Minn. - The high demand and soaring prices for scrap metal appeared to be the reason a 7-foot statue of Buddha, covered in copper-laden bronze, was stolen from an outdoor temple shrine at the Thai Buddhist Center of Minnesota, police said.

Police Chief Jeff Beahen said a 45-year-old Elk River woman was arrested Friday night, and a male family member was being looked at as another suspect in the theft.

The statue, valued at $10,000, was stolen Wednesday night, and a detective issued a statewide alert to police and scrap dealers Thursday with a photo of the stolen statue.

Early Friday afternoon, a recycling company in Monticello called the detective, saying they had taken in two pieces of scrap they believed to be from the statue.

Police recovered the right shoulder and right hip of the statue, each weighing about 60 pounds, and with the help of the recycler were able to identify the woman who had brought them in.

"There are another 10 pieces or so, and I hope the other recycling companies are as diligent in talking with us," Beahen said.

The statue was specially made in Thailand for the center.

"It's too bad," said temple member Jay Cramer. "The whole community is real sad. It's a sacred piece."

But Cramer said there was some relief in knowing that the statue was stolen for money and not because of bigotry.

Anyone even a little familiar with Buddhism, and especially Zen Buddhism, has probably heard the story about the firewood Buddha. There are several versions of this story, but they all climax with a sacred, revered wooden Buddha statue (or several) getting chopped up by a senior monk to be used as firewood in an extreme time of need, much to the chagrin of the other resident monks (another, similar story has the head abbot peeling the gold off of a sacred Buddha statue to give to a poor man). The moral of these stories, of course, is that Zen has nothing to do with statues, scriptures, scrolls, saints...or even Buddhas. The act embodies typical, paradoxical Zen "counter-knowledge," in this case committing a sacrilegious act which is, in fact, the essence of Buddhahood. If you meet the Buddha on the road, kill him, indeed (or, if you're the Taliban, blow him the hell up with yer anti-aircraft artillery).

The Elk River sangha's sadness at the loss of their Buddha is natural, true. And as a good Buddhist knows, sadness is a manifestation of suffering brought on by attachment. It's nice to hear Cramer take some comfort knowing the statue was stolen for money and not religious intolerance, but I am curious to know whether this organization has pressed or will press charges, what the economic situation of the statue-knappers truly is...and, whether or not the firewood Buddha story is being recounted this week in Elk River.

The beat goes on

Maybe internet radio won't die tomorrow after all:

SoundExchange, which has been playing hardball until now, made another interesting concession, according to Pandora founder Tim Westergren: "SoundExchange has committed to not putting webcasters out of business while negotiations are ongoing." |Stereophile|

This is the end

Congress's attempt today to broker a deal between webcasters and record labels will amount to nothing, according to a SoundExchange representative, because Wednesday's decision by a federal court of appeals made the new online radio royalty rates "etched in stone."

The representative used that expression twice before referring me to SoundExchange's May 1 press release about the Copyright Royalty Board's decision to raise royalty rates, base them on the number of songs each listener hears, and charge a minimum fee per channel that will kill services like Pandora this coming Sunday. |Wired Blogs|

DEVELOPING: USA not only nation for sale

Via Julian Sanchez, I see that Sealand is for sale.

If only I could afford it!

Back in ninth grade I got a D in Geography because I refused to change the topic of my semester report from Sealand to what my teacher referred to as a real country. She focused her argument around the claim that Sealand was utterly inconsequential, but had no adequate response to my objection from Andorra. The impasse was never resolved, except insofar as I got a zero on the assignment.