Members of the public are being encouraged to take on the Bank of England by betting on the U.K.’s future inflation and unemployment rates.
Free-market think tank the Adam Smith Institute on Wednesday launched two betting markets in an attempt to use the “wisdom of crowds” to beat the Bank of England’s official forecasters. Punters can place bets on what the rate of both U.K. inflation and unemployment will be on June 1, 2015.
Sam Bowman, the research director of the Adam Smith Institute, believes the new markets will “out-predict” official Bank of England predictions. ”If these markets catch on, the government should consider outsourcing all of its forecasts to prediction markets instead of expert forecasters,” he said.
A Freakonomics Radio listener named Sudha Krishna writes with an e-mail titled “Praise and Concern.”
The praise is very nice — she finds the show “informative, entertaining, and lots of fun,” etc. — but it is the concern that most interests me. As she writes:
I confess I often find Freakonomics Radio depressing. While I am a believer in the power of “unintended consequences,” I find your story selection (and I am a consistent and attentive listener) depressing and discouraging. The stories tend to be focused on (and I am being a wee bit reductive) “good intentions leading to bad consequences (or at very least awry).” The consistent lesson of every episode — a nod to the supremacy of the market and the inexorable power of incentives (not sure about that lesson either). Rarely do you explore the opposite — bad intentions resulting in good consequences. Does such an example exist? One curious listener of Freakonomics Radio wants to know.
I could probably quarrel a little bit with Sudha — at least some of our shows are about some interesting solution to a problem, or at least an explanation for why such a problem exists. And I tend to think that Levitt and I are borderline extreme optimists, at least on many dimensions. But I get her point. The pattern she identifies is definitely a pattern.
So, in the interest of learning to think more broadly, I would love to identify some great ideas or stories about “bad intentions resulting in good consequences,” as Sudha puts it. Please leave your very best ideas (or even your mediocre ones) in the comments section below. Thanks to you and especially to Sudha.
The July issue of Qantas Magazine has an article on Akubra hats. The company has a problem: the price of a crucial input into its hats, rabbit skins, has risen by 125 percent in the past three years due to a virus that killed many Aussie rabbits. The rabbit population has been increasing again, but its previous decline caused a much longer-run decrease in the supply of rabbit shooters, who permanently left this occupation for other jobs in this low-unemployment economy.
These two factors—the short-run decrease in supply of rabbits and the long-run decrease in the supply of rabbit shooters—have caused a rise in Akubra’s costs and thus a decrease in supply in the related hat market. This is a nice example of a shock in one market causing a general equilibrium set of adjustments. Good for rabbits in the long run, not so good for bald guys who need hats to protect against the Australian sun!
Our latest Freakonomics Radio podcast is called “Soul Possession.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.) This kicks off a new season of original podcasts, marking the end of the hour-long “mashupdates” we’ve recently released.
This episode grew out of something that happened on this blog a while back. We had run a Q&A with Michael Shermer, the founding publisher of Skeptic magazine. In the comments section, a reader named Caleb B. wrote:
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Caleb B: What is it about the idea of a soul that even people who confess to not have one are hesitant to sell it? I have been trying, for the better part of ten years, to buy a soul. I’ve offered a dollar amount, between $10 and $50, for someone to sign a sheet of paper that says that I own their soul. Despite multiple debates with confessed atheists, no one has signed the contract. I have been able to buy several people’s Sense of Humor and one guy’s Dignity, but no souls. Additionally, will any Freakonomics reader take me up on this? I’m willing to spend $50 on souls.
I stumbled on this nifty business idea, Nanny in the Clouds, to create a market in the air for nannies. Think match.com, but for wanna-be-nannies and parents on airplanes.
A clear market failure: people on flights with kids want some help; other people on flights want to make some money taking care of kids. Social norms don’t really allow for instantaneous markets to appear (“hey, for $10 I’ll watch your kid for the next two hours so that you can take a nap” is unlikely to get many takers, I suspect). But prearranged, where the norm adheres to our expectations in the babysitter market, and we have a market helping make trades otherwise not made.
Here is how it works: Sign up on the website, put in the flight you’re going to take, and see if any parents (nannies) signed up and are looking for a nanny (parent who wants a nanny) on the same flight. Negotiate your rates directly, and pay Nanny in the Clouds $10 if the match is made. Read More »
Here’s something you don’t often hear an economist admit: We have very little idea where the economy will be next year.
Truth be told, our best guesses just aren’t very good. Government forecasts regularly go awry. Private-sector economists and cutting-edge macroeconomic models do even worse.
Our objective isn’t to beat up economists. Rather, we want to make the point that when we recognize our shortcomings, we’re forced to confront the enormous uncertainty that lies ahead. And appropriate humility about the economy changes how we think about policy. Read More »
A sign on the wall at an exhibit of René Magritte paintings noted, “Magritte repeatedly painted variants of his subjects, mostly to satisfy demand in the art market.” Even artists are selling their products, just as businesses do. When the demand for their product increases, it calls forth a supply. We also see this in popular literature, where a highly successful mystery writer winds up in a rut writing minor variations of an earlier hit. Sadly for us economists, this doesn’t seem as easy to do—the premium is on originality and novelty; if today’s demand called forth minor repetitions in what we supply, we soon wouldn’t get the stuff published very well!
Here’s my question: what is it about the idea of a soul that even people who confess to not have one are hesitant to sell it? I have been trying, for the better part of ten years, to buy a soul. I’ve offered a dollar amount, between $10 and $50, for someone to sign a sheet of paper that says that I own their soul. Despite multiple debates with confessed atheists, no one has signed the contract. I have been able to buy several people’s Sense of Humor and one guy’s Dignity, but no souls. Additionally, will any Freakonomics reader take me up on this? I’m willing to spend $50 on souls.
He has so far received at least one offer, from reader Jared Doom:
Caleb B., I will absolutely sell you my soul. To be fair, this won’t preclude me from selling it again to other suckers who (a) believe in souls and (b) believe they can be readily transferred on purchase. To be clear I’m offering because I don’t believe (a)
If nothing else, perhaps this blog has a future as a market for hard-to-purchase goods?