If You Can Bet on the Rain, Watch out for Rainmakers

A few days ago, the Chicago Mercantile Exchange began selling futures contracts on rain. As this Marketplace report points out, the Merc – best known for selling agricultural commodities and futures – “already sells futures for temperature, frost, snow – even hurricanes.”

As the Merc’s Tim Andriessen told Marketplace, “There’s really no science or art in terms of long-term forecasts so that uncertainty is actually what makes an opportunity for products like this.” Andriessen argues that “any business affected by weather – from farms to concert venues – could find rain futures beneficial. If that concert is rained out, the organization running the show could still make money.”

That makes sense, doesn’t it? Most of us buy insurance of one form or another. And such an offering seems impervious to human intervention. That’s a key component to setting up a fair betting market: the outcome can’t be influenced by any of the bettors.

But is this truly a betting market in which the outcome cannot be influenced by any of the bettors?

While the science is in dispute, there is good reason to believe that it is quite possible for humans to make rain. Here’s a bit about the history of rainmaking from the new illustrated SuperFreakonomics:

Project Cirrus, a joint venture between General Electric and the U.S. military, sought to research weather-modification technologies, including rain making. In this 1949 photo, Irving Langmuir (left) and Bernard Vonnegut look on as Vincent Schaefer tries to form ice crystals with his exhalations. Project Cirrus also tried to disrupt a hurricane by seeding it from an airplane with 180 pounds of crushed dry ice. The storm, which had been heading out into the Atlantic Ocean, veered westward and struck the Georgia coast, killing one person and injuring several more. As <em/>Time reported, a weatherman in Miami Project Cirrus, a joint venture between General Electric and the U.S. military, sought to research weather-modification technologies, including rain making. In this 1949 photo, Irving Langmuir (left) and Bernard Vonnegut look on as Vincent Schaefer tries to form ice crystals with his exhalations. Project Cirrus also tried to disrupt a hurricane by seeding it from an airplane with 180 pounds of crushed dry ice. The storm, which had been heading out into the Atlantic Ocean, veered westward and struck the Georgia coast, killing one person and injuring several more. As Time reported, a weatherman in Miami “hinted that last month’s disastrous hurricane might have been not an act of God, but just a low Yankee trick.” Ultimately, the U.S. Weather Bureau found that the hurricane had begun to head toward Georgia before the cloud seeding, and that Project Cirrus wasn’t at fault.

And, as we’ve noted a few times on this blog, there have been several recent attempts by governments (in Russia, China and Venezuela) to make rain. Some didn’t turn out as planned, producing massive snowfalls instead. But there have been claims of success, and likely will be many more attempts.

So if it’s possible to make rain, and if it’s also possible to bet on the rain, mightn’t we expect someone – be it an individual, firm or government – to try to cheat the system with the Merc’s new rain offering?

One person who thinks so is Tristan Brasseur-Kermadec. He is “fed up with all these fake business opportunities,” and so “on behalf of all those who have been (and still are) screwed by these irresponsible games,” he created a Facebook event to boycott the launch of the Merc’s rain market.

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  1. Brett says:

    It seems to me that it would be pretty expensive, and risky (to achieve success and to avoid legal repercussions) to pull this off. To make it worthwhile, the stakes would have to be pretty high, and given the difficulty in forecasting rain, I can’t imagine the regular players would let the stakes get that high…

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  2. Ian Kemmish says:

    Being contracts, these contracts will presumably include a formal definition of what constitutes rain. If it proves necessary, that definition can be amended in the future.

    One used to be able to bet on a “White Christmas” in the UK – being defined as snowfall recorded on the roof of Broadcasting House at any time on December 25th. Thanks to climate change, the definition used by the bookmakers now appears to be snowfall recorded anywhere in Greater London on that day.

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  3. Jake says:

    The Merc’s rules limit the number of contracts that can be owned. They also have rules regarding acts government, acts of god & other emergencies. At launch, they will be indexing rain at only 9 airports. With those rules, a big expensive raining making attempt would be even more risky.

    A more cost-effective way to cheat would be to find a way to tamper with the rain measurement results at one of the 9 weather stations.

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  4. Manuel Vasquez says:

    The guys selling futures make too much money selling those things. If I don’t pay $100 to buy a rain future and it disastrously arrives to flood my house and cost me $50,000, I demand that the future writer pay my $50,000 flooding costs upon payment by me of the $100 contract cost. Who cares if by that point its a pre-existing disaster?

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  5. Drill-Baby-Drill Drill Team says:

    If you can bet on the rain, I predict there will be an army of lawyers disputing the definition of rain.

    And Mafia Dons chartering cargo planes for random circular flight plans.

    And the sudden interests of Bookies in nucleation chemistry.

    And gamblers will try to discern Strato Cirro Cumulus from Strato Nimbus Congestus.

    And a giant Cumulus Cloud will form as certain as the Housing Bubble.

    Denial is not sustained from tiny acqueous droplets precipating from the sky. It is just a river in Egypt.

    It is easier to move to Portland, than to make rain happen.

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  6. Emmi says:

    “There’s really no science or art in terms of long-term forecasts”

    Not even the Farmer’s Almanac?

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  7. a typical working poor author in NYC says:

    “That makes sense, doesn’t it? Most of us buy insurance of one form or another.” This is false!!
    my friend works as author doesn’t buy any insurance at all but he likes give other a impression he has life and other form of insurance. In order words, to project a false image of success and wealth. HE lives in NYC, changes apartment every other years or so, don’t own a car, single,
    no kids, his saving never over $6.000, despite the fact that he published 2 or 3 books. There is common mispreception in American society that if one published a book, the author must be rich. In fact, vast majority of American authors are NOT rich,.
    Please be honest, don’t project false, misleading impression. You can’t buy condo, house, apartment, you don’t own a car, has have no family, because you can’t raise a family. IT is painfully obvious that you are poor, Please don’t overstate you published 3 or 4 books to mislead readers that you are rich, because you are not!!
    You are very poor. I am sure you has a lot credit card debts, right?!

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  8. Bufinder.com says:

    real economy is often replaced by virtual

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