environmental futures emile servan-schreiber, ph.d. newsfutures.com
TRANSCRIPT
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Environmental Futures
Emile Servan-Schreiber, Ph.D.
NewsFutures.com
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Consensus Machines
Markets aggregate
Dispersed informationVarious interpretations
Conflicting beliefs
Consensus(trading price)
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Futures markets aggregate
Dispersed informationVarious interpretations
Conflicting beliefs
Consensus Prediction(trading price)
Forecasting Tool
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What is a Prediction Market?
Contract is worth $100 if it happens, or nothing if it doesn’t.trading price event probability
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Market Price = Event Probability
Source: SCIENCE, Feb 1, 2001
Trading prices really do correspond to observed event frequencies
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More Accurate Than Polls
Source: Iowa Electronic Markets
Consensus of expert stakeholders vs “representative” population sample
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Consensus of expert stakeholders vs “representative” population sample
Source: Iowa Electronic Markets
More Accurate Than Polls
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Why are MarketsMore Accurate than Polls?
• Polls average over individual opinions and do not engage the intellect.
• Markets engage people into a conversation with one another and forces them to come to a consensus (aka the trading price).
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Prediction Markets Help Most When:
• Information/expertise is distributed among many, hard to gather, or difficult to verbalize (implicit knowledge).
• New information comes in continuously, requiring frequent updates of forecasts.
• Information is subject to various interpretations.
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Increase or decrease this year?
• World’s Ecological Footprint• Insurance industry payments due to natural disasters• Amazon forest fires• Environmentally induced migration• Size of the Ozone Hole• Global temperature• Etc.
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Will happen this year?
• Kyoto becomes effective• China becomes a net importer of food• Man-made famine• Oil spill• Etc.
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Applications
• Environmental Security Dashboard:• Continuous, real-time monitoring of consensus
estimates about expected environmental outcomes.
• Decision Support:• Decision markets can evaluate costs/benefits of
intervention scenarios: What if Bush is re-elected? What if the U.S. ratifies Kyoto?
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General Public Markets
• Deepen awareness of the problems, solutions, and progress made (or unmade).
• People become stakeholders in a personal sense.
• Feel the public pulse in real-time;
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Experts-Only Markets
• Cut through the fog of scientific debate with clear, quantified consensus signals.
• Rapidly, collectively estimate various intervention (or lack thereof) scenarii.
• Help indentify those who tend to predict correctly, sideline those who tend to be wrong.
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Insiders Markets
• Hedge against various environmental outcomes.
• Generate valuable insiders signals.