Bryan Caplan  

The Silence of the Bets

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Last week's post on "Bets, Portfolios, and Belief Revelation" sparked a long list of responses: Tyler (here, here, plus a ton on Twitter), Alex, Robin, Eli Dourado, and more.  Adam Gurri kindly aggregates here.  The quick version of my view: Alex shows that betting is extremely probative from an orthodox neoclassical perspective, and I show that making neoclassical assumptions more psychologically realistic makes the case for betting even stronger. 

There are only two Cowenian points I feel a strong need to rebut.

1. Tyler accuses Alex and Robin of falling prey to his "fallacy of mood affiliation":
[R]ead Robin's framing or Alex's repeated use of the mood-affiliated word "bullsh*t" to describe both scientific communication and reporting...
But does the charge apply?  Let's return to Tyler's original explanation of the fallacy:
[P]eople are first choosing a mood or attitude, and then finding the disparate views which match to that mood and, to themselves, justifying those views by the mood.  I call this the "fallacy of mood affiliation," and it is one of the most underreported fallacies in human reasoning.
Frankly, I don't see the slightest connection between mood affiliation so defined and what Robin or Alex say.  They're not "finding disparate views" to match a mood.  They're defending ONE simple proposition: bets are a very good way to discovering what people really think and figure out who's right. 

At risk of sounding exasperated: What term may we use to describe "frivolous, evasive, and irresponsible intellectual output" without being accused of Tyler's favorite fallacy?  Does Tyler seriously deny that such output surrounds us? 

2. Tyler interprets the pro-betting position "as a preference for witnessing comeuppance for its own sake."  I very sincerely disavow this view in my Bettor's Oath:
When I win a bet, I will not shame my opponent, for a betting loser has far more honor than the mass of men who live by loose and idle talk.
A better description of the underlying motive of the pro-betting position is: To draw a bright line between (a) serious thinkers who measure their words, state their views clearly, and humble themselves before the facts, and (b) frivolous thinkers who exaggerate, state their views vaguely, and feign constant vindication by events. 

Why is the line between serious and frivolous thinkers so important to brightly draw?  Because frivolous thinkers vastly outnumber serious thinkers, to the point that serious thinkers are difficult to detect.  The world of ideas has long been a dreadful cacophony, and the Internet has aggravated this curse a thousand-fold.  The Betting Norm greatly mitigates this problem by spurring frivolous voices to silence themselves.  This in turn allows serious thinkers to hear each other, learn from each other, make intellectual progress, and credibly publicize their progress. 



COMMENTS (11 to date)
Jeff writes:

I assume Tyler recognizes that financial speculation has real utility for the economy at large, even while much of it isn't too terribly different from a betting market. Why should this be different? I think the advantages are clear, really Maybe Tyler, as a prolific blogger, thinks that his less rigorous writing will be hampered if his every post is filled with commenters pressuring him to wager on this or that assertion.

I am also confused by his denigration of comeuppance. Why is it bad to want to see people like, say, Paul Ehrlich have to admit they were wrong and pay the piper? The basic impulse here is actually a good one, I would think: we want to see people get what they deserve. Tyler seems to think the opposite. But even so, isn't the idea of markets to channel base impulses toward productive ends? Instead of people simply hurling invective at one another when they have some disagreement, wouldn't that effort be clearly better utilized crafting a wager whereby they can determine who is right?

What I'd really like to see is economists making significantly large public bets about predictions of macroeconomic variables such as output growth, unemployment, and inflation, as well as when the next recession will happen and how long it will last.

Jayoh writes:

I made a "Bettors Oath Takers" Facebook group for anyone interested. Mostly econ and politics. I added you without your consent, Bryan. Take that.

Thanks,
Jayoh

BLM4L writes:

For betting on beliefs to be effective, the concept of "laying odds" must be introduced, a concept familiar to many poker players or other gamblers.

Suppose on September 1, 2012, I believed that Romney would win the 2012 election. If you offered me an even money bet on that belief, I would be getting a bad deal, because I could get better than even money from InTrade or other gambling sites (minus fees).

So, to test unorthodox or unpopular beliefs via betting where there is a functioning market for betting on such beliefs (such as foreign exchange rates, interest rates on the 10 yr treasury, etc.), to decline an even money bet is not inconsistent with that belief.

Carl writes:

Bryan, when you suggest that people put their money where their mouth is you are doing "mood affiliation". Duh!

YetAnotherTom writes:

Tyler values the ambiguity of non-bets because he can communicate different things to different people and hide his motives until after the fact. Whereas Alex is much more transparent and has nothing to lose from a betting culture. I've never really thought of Tyler as a man of loose and idle talk, though.

Rich Berger writes:

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Daublin writes:

I'm reminded of the reluctance of heavyweight boxers to get into actual high-profile boxing matches. Once you are already famous, you have little to gain and a lot to lose by continuing to compete.

I laud your attempts to change the culture around this, though. There are lots of things that famous people would rather not do, but that the general public expects them to do anyway.

SaveyourSelf writes:

"...a betting loser has far more honor than the mass of men who live by loose and idle talk."

You might also call this the "Suckers' Oath," but I take your meaning.

MingoV writes:
The Betting Norm... allows serious thinkers to hear each other, learn from each other, make intellectual progress, and credibly publicize their progress.
It is easy for experts on a topic to distinguish between professionals who are knowledgeable and correct and self-claimed experts who are ignorant and incorrect. No bets are needed to accomplish this.

Internet link data can help non-experts identify the best experts. For example, if Bryan Caplan on this site lists four experts in behavioral economics, and other economists do the same, then the experts who are most often listed are likely to be the ones to heed. This process is similar to citation tracking in journals. An author whose articles on a topic are cited frequently is most likely an expert on that topic.

Silas Barta writes:

BL4ML: Ehrlich could likewise have arbitraged his own bet with the metal futures markets. That he didn't was an even bigger flaw in his position.

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