At 12:21 2003-07-29 -0700, Tim May wrote:
The problem is not with the idea of using markets and bets and Bayesian logic to help do "price discovery" on things like when the Athlon-64 will actually reach consumers, or when the new King of Jordan will be whacked, and so on. The problem is, rather, with _government_ establishing a monopoly on such things while putting suckers like Jim Bell in jail basically for espousing such ideas.
And, as I noted, there are significant problems with government employees in a betting pool (gee, aren't even office baseball pools technically illegal? Haven't they prosecuted some people for this? Yep, they have) where they also have control over the outcome. Jim Bell used this as a payoff mechanism for assassinations ("Alice bets $1000 that Paul Wolfowitz will be murdered with his family on August 10, 2003")...the same logic applies to the government's dead pool.
The ideal securities market is one which does a good job of allocating capital in the economy. This function is enabled by "market efficiency", the situation where the market price of each security accurately reflects the risk and return in its future. The primary function of regulation and policy is to foster market efficiency, hence we must evaluate the impact of insider trading upon market efficiency. Insider trading is often equated with market manipulation, yet the two phenomena are completely different. Manipulation is intrinsically about making market prices move away from their fair values; manipulators reduce market efficiency. Insider trading brings prices closer to their fair values; insiders enhance market efficiency. In traditional markets, insider trading appears unfair, especially to speculators outside a company who face difficult competition in the form of inside traders. Individual speculators and fund managers alike face inferior returns when markets are more efficient owing to the actions of inside traders. This does not, in itself, imply that insider trading is harmful. Insider trading clearly hurts individual and institutional speculators, but the interests of the economy and the interests of these professional traders are not congruent. Indeed, inside traders competing with professional traders is not unlike foreign goods competing on the domestic market -- the economy at large benefits even though one class of economic agents suffers. steve "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship." --Alexander Fraser Tyler