Arnold Kling  

Climate Prediction Markets

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The Reality of Massachusetts H... Promising Abstract, Disappoint...

Mark Bahner writes,


The U.S. government should set up a prize fund totaling $400 million, payable in 2031. The prize fund would be open to any U.S. university with accredited science or engineering programs. The fund would be awarded as $200 million for first place, $100 million for second, $50 million for third, $25 million for fourth, $12 million for fifth, $6 million for sixth, $3 million for seventh…and $1 million until we run out of money.

Prizes would be awarded for most closely predicting the following parameters:

1) globally averaged surface temperature anomaly for 2029-2031, relative to 1990;
2) globally averaged lower tropospheric temperature anomaly for 2029-2031, relative to 1990;
3) Atlantic hurricane basin sea surface temperature anomaly for 2029-2031, relative to 1990;
4) average insured U.S. hurricane losses for 2029-2031

...


I see lots of problems with this approach. But I do think that the problem of coaxing climate science out of the cave of religion is worth thinking about. One idea would be a methodological audit conducted by statisticians, economists, and others who are outside the climate science field. Another idea would be a prediction market.

On the subject of prizes, the New York Times has an article on the use of prizes as an incentive for innovation, featuring quotes from Robin Hanson of overcoming bias. Thanks to Greg Mankiw for the pointer.


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COMMENTS (6 to date)
Ronnie Horesh writes:

Here's another idea: what about setting climate goals and giving prizes for achieving them? Reward people, in other words, for doing the right thing, rather than just guessing right.
Well, that is the essence of my idea for Climate Stability Bonds. We define a target outcome (a combination of climate indicators and climate-induced indicators). Then we contract out the achievement of the climate stability goal to the private sector via the tradable bonds. Let the market decide how the climate stability goal shall be achieved. Diverse, adaptive solutions will follow.

DF writes:

"I see many problems with this approach" - not least of which would seem to be that there would be no cost barriers to prevent people from flooding the contest with submissions based on wild guesses.

Matt writes:

It's a worthless endeavor. I could pay you $1,000 to tell me the World Series Champion in 2031. Except I have no idea if the information is any good until 2031. How does that help us today?

Now, if I was placing a bet today on the 2031 World Series (like if we adopt climate change measures today) then what I really need is to find out how sure you are of your pick. So what I want is a punishment.

Everyone who enters must pledge a certain amount of money, based on their net worth. For instance, an individual maybe $50,000, a large research university $100 million. They can submit a model or bet on someone else's. This money will be put into index funds and placed in escrow. If they are less than certain, they can pledge a lesser amount. So a universtiy that has only 10% confidence in their prediction puts up $10 million .

Make people put their money where there mouth is and see what happens.

Jim writes:

"I do think that the problem of coaxing climate science out of the cave of religion is worth thinking about."

Your complaint about climate science seems to be that it must be dodgy because you don't understand it. But you still think some sort of techno-fix will come along to save us from having to take responsibility for our actions. Sorry, but based on your example I think economists need to be kept as far away from real scientists as possible.

Dezakin writes:

The problem is many climate scientists dont understand economics and many economists dont understand climate science. Many climate scientists argue draconion carbon limits that are uneconomic and dont consider the cost benifit analysis of undertaking those limits, while many economists assume that since the climate scientists are making such extreme demands off of predictions that are rather uncertain, that nothing should be done at all.

Again, you can have it both ways if you're willing. Ban new coal and fasttrack nuclear licensing and your costs are free. We'll need the coal for turning into fuel someday anyways.

Brad Hutchings writes:

The cost is credibility in 2031. I'd modify the idea to have $1.4 billion in funding. Allocate prize money the same, but spend $1 billion over 24 years making sure everyone knows who bet what and keeping score as we go along. Otherwise, there is no cost to those who would keep with their religious convictions at the expense of truth.

One place you can see where "no cost" plays out is cheerleader stock analysts. My favorite pair are Shaw Wu and Gene Munster who pump up AAPL (Apple, Inc.) like it's an inflatable raft. No scorecard for these guys, so they can issue 5 reports a week with the rosiest of predictions that are completely out of line overestimating a generally good record of price growth and nobody seems to notice. This climate contest could be the same, only in reverse.

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