jamesz

Polls vs prediction markets

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With the advent of iPredict, New Zealand has jumped on the prediction market bandwagon. But now a paper suggests that, for election results at least, polling data is more accurate than at least one popular trading market:

The market price is superior to a naïve reading of the polls. For instance, if the
incumbent leads 60-40 in the polls in May while the market says the incumbent will win with
55 percent, the market price is likely to be closer to the Election Day vote division. But this is
not the appropriate test.
…
We could ask … what an analysis of polling history would show to be the odds of the incumbent winning in November given a 60-40 lead in May, and whether this prediction based on polls offers greater certainty than the May … price.
…
Based on our analysis, an investor with a modest knowledge of how … polls translate into Election Day outcomes would reap handsome profits from the … presidential market. The implication is that where candidate market prices depart from where the polls project that they should be, these deviations contain more noise than signal.

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jamesz

It’s all in the name

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Overcoming Bias’s new sister site, lesswrong, has a new post up that tries to make me feel better about going to school:

We are interested in developing practical techniques of rationality. One practical technique, used widely and successfully in science and technology is formalization … We will reason better about the correctness of the form if we hide the subjects of the argument … [so] renaming primitive notions to meaningless symbols is a reasonable first step in formalization.

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Matt Nolan

Book Review: Bits, Bytes, and Balance Sheets

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Title: Bits, Bytes, and Balance Sheets (Amazon)

Authour: Walter B. Wriston

Publisher: Hoover Institution Press (*)

Score: 5/10

The book “Bits, Bytes, and Balance Sheets” aims to provide some flavour surrounding technologies role in changing the economic environment, and related institutions (including government) – namely through its impact on information dissemination. However, there is also a strong focus on human capital throughout.

Although the ideas are there, the decision to base each chapter on a different speech or essay gives the book a disjointed feeling. This leads to the strange situation where there is a lot of repetition and an “under justification” of what are actually some contensious points (such as the nature of increasing returns industries).

Furthermore, even though many of the concepts do have official names (such as increasing returns to scale) these names were often left out. Although someone familiar with these concepts would not mind – it does reduce the usefulness of the book to people who are only starting to learn about the role of technology in framing the economic environment.

However, the one big plus with the book is the large set of direct and historical anecdotes made by the author. These sorts of anecdotes really added colour to ideas – and would be useful for anyone trying to teach “increasing returns to scale” or information type courses.

Overall, I enjoyed parts of the book – but the ideas were just too disjointed for me to recommend it. I get the feeling that the speech that the book was based on would have been excellent – but the translation to book form just did not work.

jamesz

Changing the way we recycle

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A couple of NZ city councils have recently considered changing the way they run recycling after a brief discussion with experts from www.kuringgaiskipbins.com.au, as it high time we give back to the earth more than we take. Wellington and Christchurch currently fund their kerbside recycling scheme through rates. They proposed to switch to a system whereby recycling bags would have to be bought by residents, much like council rubbish bags.

There are a few benefits to switching to bags. First, the people who use the recycling service would pay for it, rather than it being funded by all ratepayers equally. Secondly, there would be a marginal cost to using the service, which would decrease usage. Read more

jamesz

Causation is just a mirage…

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If I did more stats this might not seem so circular...

… and when you get a bit closer it’s just spurious correlation. If only economists could do randomised experiments like real scientists.

jamesz

Paying off the bad guys

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Kevin Drum thinks that a cap-and-trade system for controlling pollution is not worth having if you don’t auction off the permits:

There are loads of special interests who hate the idea of a 100% auction, of course. But once you start giving away permits, you’ll never stop. It is, plain and simple, a massive giveaway … makes a mockery of any serious cap-and-trade plan. …Without a 100% auction, cap-and-trade is a bad joke.

Unless you have the option of a decent tax scheme I don’t really see what his problem is. Read more