« The best caption I read this morning | Main | John McCain on the economy »
Prediction markets as bribery?
Harald, a loyal MR reader, writes to me:
What would happen if some famous rich person walked into a presidential prediction market and said: "Hello, I'm selling shorts for candidate A, to the value of a hundred million dollars if he should win. I'm not doing this because I don't believe candidate A will win, indeed, I want her to win. I hope everyone who can help candidate A win, by campaigning, talking to friends, or even just voting, will buy a short from me (I'm practically giving them away!) and go out and do it with a healthy economic self-interest in their hearts!"
Regulators aside, could such a scheme work? It is best done as a contingent claims market, rather than in the InTrade format. You buy insurance for a penny, and you get a payout of a thousand dollars if candidate X wins. Claim holders may then support and talk up candidate X. Of course people who won't change their votes for a thousand dollars also will try to buy up the contingent claims. So the sponsor might restrict purchases to people who live in swing states or who can prove independent voting affiliation or an absence of previous campaign donations [TC: I've edited this section a bit for clarity].
How about giving away assets that pay off if some important social problem is solved? How much would it cost to mobilize a strong enough army of voters to oppose farm subsidies?
Posted by Tyler Cowen on January 25, 2008 at 04:09 PM in Political Science | Permalink
Comments
If you sell 1000 shorts really cheaply, what's to stop one person from buying all 1000? There's no way to enforce a limit of "one per customer", and thus no way to incentivize a thousand people to vote for your candidate.
A secondary issue is that prediction markets are just too thinly traded at the moment. Only a vanishingly tiny fraction of the population has even heard of them.
Posted by: at Jan 25, 2008 4:47:24 PM
Why don't libertarians bribe the public?
Ron Paul should say, "If elected, I will privatize the post office by IPO. Every American citizen will get 1 share which they can choose to keep or sell at the IPO date. The sale will take place 1 year into my Presidency, and other non-essential government offices will follow at staggered dates."
Now the post office must be worth billions, if not in revenue then just from the property they own in metropolitan areas. Each American would get hundreds, possibly thousands of dollars from that IPO alone. Would that be a reasonable bribe?
Posted by: th at Jan 25, 2008 5:16:13 PM
The same can be done by abolishing departments and sending the money back as tax "rebates".
Posted by: 8 at Jan 25, 2008 5:53:57 PM
There's also the free-riding problem for the buyers of the very cheap short contracts. As a recipient of one of these almost free contracts, I would just let everyone else do the work of trying to get the candidate elected.
Posted by: r at Jan 25, 2008 6:09:10 PM
On the subject of price, in Thailand the cash price of a vote is 500 baht, around 12usd. US GDP per capita is only a few multiple of Thai. So $1000 sounds unnecessarily high.
Remember you don't need to bribe the average voter, only the poorest ones. Of course it might be that those ones don't understand prediction markets.
Posted by: Cormac at Jan 25, 2008 7:02:16 PM
You could generate greater turnout with such a system. People who normally don't care might get angry or some may get greedy. The price for the marginal voter, the voter who can sway the election, could go very high but the harder problem is deciding which voter (or group of voters) you need to pay.
Posted by: DanC at Jan 25, 2008 7:15:05 PM
I don't see a problem here, nor any need for any regulators, because if you buy x amount of futures for candidate X, someone else can buy y amount for candiate Y -- in the end, the transactions on both sides will cancel out and an equilibrium will be reached
Posted by: enrique at Jan 25, 2008 10:15:08 PM
The answer is simple. The rich person will push the market until rational investors simply take the opposite position. But that doesn't mean those investors will do much to try to swing the election. After all, that would take REAL money.
The result would just be a bad bet by a rich person. Nothing more.
Posted by: infopractical at Jan 25, 2008 10:39:16 PM
This post was incomprehensible. And I have a PhD in economics.
Posted by: anonymous at Jan 26, 2008 3:34:55 AM
Lab experiments could do a decent job of exploring this situation.
Posted by: Robin Hanson at Jan 26, 2008 12:16:27 PM
It wouldn't work because one's individual vote has such a small impact. Let's say you will pay me $10,000 if your candidate wins, and my vote has a 1 in $10,000,000 chance of deciding the election. My voting for your candidate gives me an expected yield of a tenth of a cent.
Maybe with a sufficiently large bribe you can get yourself elected dog catcher.
Posted by: George Weinberg at Jan 26, 2008 1:51:53 PM
Lots of interesting views here.
The first poster assumes that for this to work, a lot of people have to buy in. But that presupposes that elections are in fact fairly decided by the people, as opposed to respected visible persons (like Chuck Norris!), party elites, wealthy donors, media moguls etc.
Enrique is of course correct that another rich man might come along and do it for the other side, thus canceling out any effect - but who says the sides have equally much money behind them?
Remember, the seller is selling them cheaply, but not giving them away. If another wealthy group or person attempts to block the move by buying up all of them, then two things can happen: Candidate A wins anyway, or candidate A loses. In the first case, the seller is just as well off as if only efficient campaigners and lobbyist bought them, so why should he complain? In the other case, he didn't get the outcome he wanted, but instead of paying out a hundred million dollars, he made a direct profit.
On second thought, I would say it's important that the seller sells the shares at the market price, not below.
One advantage of the market approach over the insurance approach is that people don't have to stay in until the end. An influential editorialist might for instance buy some, write a favorable article about the candidate, and then cash out when the candidate's chances get better as a result of it.
The free rider problem is real, but I would have thought the market could take care of it reasonably well.
Posted by: Harald K at Jan 27, 2008 8:11:02 AM
I suppose the idea of bribery to get one’s desire to vote for a candidate would initially sound quite difficult and unethical. In such a case, the amount of money may not be the subject in question. When initiative is one’s aim, the cause may need a little boost of “confidence.” The goal is to get one’s ideas across and aggregate important points to display a probable cause and throw in a little “initiative.” To simply suggest any amount of money into such a program without detail is suicide.
Therefore, one must display a cause with extensive research and supply a donor that shares the same amount of interest. The public is then shown a dedication through donation and hard facts. The idea is to display any large amount not as any amount, but as a resource. This resource may provide land, labor, capital, and entrepreneurship. As an example, one must demonstrate a structured influence on what is a present problem. With proper supplies and more research, any product used to help improve technology could provide more jobs. A large donation can easily accomplish it.
With such a positive outcome, the public would look at the proposed amount and maybe even add to it. Along with proposed investments, the public will see the goal and know how to obtain it. A large amount of money may very well significantly increase the individual’s support from the public If properly displayed. The dedication of an individual with such economic stance provides the confidence that should be put into a particular campaign. The rhetoric could provide a subtle, but hefty push into public popularity.
Posted by: Allison at Jan 28, 2008 10:51:09 PM
提供钢管无缝钢管数据恢复心理咨询心理辅导与心理治疗bjxlzx.cn等服务
Posted by: baom at Feb 9, 2008 12:12:16 AM
Very nice article! Thanks for this!
Posted by: 二宮沙樹 at Jul 28, 2008 7:28:26 AM
