Re: How You Do Not Tell the Truth

From: Robin Hanson (
Date: Wed May 02 2001 - 14:03:08 MDT

Hal Finney wrote:
>Regarding Robin's paper,
>What does the existence of markets and market prices say about the
>existence of disagreement? Why don't people pour all of their resources
>into markets where they disagree that the current market-clearing price
>is correct? ...
>Can this be explained because people aren't as confident in their beliefs
>as they like to think that they are? They're "sure" that the stock is
>underpriced or overpriced, but when it comes time to put their money down,
>suddenly they are not so sure.
>If so, then perhaps the existence of an IF market would make people more
>aware of their true (lack of) certainty about their beliefs.

I think this is right. People indulge in irrational disagreement more
when the personal penalties are less. When money is at stake, they self-
deceive less. This is part of what I had in mind years ago when I said
that idea futures gave people an incentive to be "careful and honest" in
what they say. Honest not only with others, but also with themselves.

Robin Hanson
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326 FAX: 703-993-2323

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