I read your post but didn’t understand it immediately. After thinking about it, I wrote what I feel the main points are in my own words. Maybe this makes it more clear to others too. Or maybe the OP will comment that I misunderstood something.
The “Harris market” can be seen as (is functionally equivalent to) a collection of markets. Each market has the following form:
Would Harris win, if {person} were her Vice Presidential nominee in 2024?
Each market resolves as follows:
Yes, if {person} is the nominee and Harris wins.
No, if {person} is the nominee and Harris loses.
N/A, if {person} not the nominee.
Each market is independent. I mean this in the sense that there is no manifold mechanic that ties them together, except that they are visually grouped under “the Harris market”.
There is a problem with this kind of market. When people see a high probability of a person in the market, they mistake it as meaning that the person is a likely choice or a good choice.
This is a mistake because it does not follow from the market’s incentives. Imagine someone that will obviously not be nominee, like “Batman”. You know that Batman will not be nominee, so you know that this market will resolve to N/A. This makes bets on Batman meaningless. You can bet Yes or No, it doesn’t matter. The market will resolve to N/A and you get your money back. Some people do this because they find it fun to see that Batman has a high Yes probability.
Batman can’t be nominee because he doesn’t exist, but you have the same problem for obviously terrible candidates. Imagine the person most hated by all potential Harris voters, “the Joker”. (Assume Joker was a real person.) The true probability of Harris winning with Joker is tiny. Yet, in the market, there is little incentive to correctly predict this. Everyone knows Joker is a terrible choice, so Harris is not going to choose him as nominee, so the market will resolve N/A.
The author of the Substack you quote makes this mistake. They did not consider what the market incentivizes.
They also made a separate mistake that applies to all prediction markets, not just misleading conditional markets. They did not take into account how much money it takes to intentionally influence the market. It is easy (cheap) for people to push small markets (markets with little money invested) in their desired direction.
I read your post but didn’t understand it immediately. After thinking about it, I wrote what I feel the main points are in my own words. Maybe this makes it more clear to others too. Or maybe the OP will comment that I misunderstood something.
The “Harris market” can be seen as (is functionally equivalent to) a collection of markets. Each market has the following form:
Each market resolves as follows:
Yes, if {person} is the nominee and Harris wins.
No, if {person} is the nominee and Harris loses.
N/A, if {person} not the nominee.
Each market is independent. I mean this in the sense that there is no manifold mechanic that ties them together, except that they are visually grouped under “the Harris market”.
There is a problem with this kind of market. When people see a high probability of a person in the market, they mistake it as meaning that the person is a likely choice or a good choice.
This is a mistake because it does not follow from the market’s incentives. Imagine someone that will obviously not be nominee, like “Batman”. You know that Batman will not be nominee, so you know that this market will resolve to N/A. This makes bets on Batman meaningless. You can bet Yes or No, it doesn’t matter. The market will resolve to N/A and you get your money back. Some people do this because they find it fun to see that Batman has a high Yes probability.
Batman can’t be nominee because he doesn’t exist, but you have the same problem for obviously terrible candidates. Imagine the person most hated by all potential Harris voters, “the Joker”. (Assume Joker was a real person.) The true probability of Harris winning with Joker is tiny. Yet, in the market, there is little incentive to correctly predict this. Everyone knows Joker is a terrible choice, so Harris is not going to choose him as nominee, so the market will resolve N/A.
The author of the Substack you quote makes this mistake. They did not consider what the market incentivizes.
They also made a separate mistake that applies to all prediction markets, not just misleading conditional markets. They did not take into account how much money it takes to intentionally influence the market. It is easy (cheap) for people to push small markets (markets with little money invested) in their desired direction.