Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Covid Prediction Markets at Polymarket, published by Zvi on December 2, 2021 on LessWrong.
We now have some useful prediction markets up on Covid issues, so it’s worth looking at what they say and thinking about what other markets we could generate. I encourage you to suggest additional markets in the comments, with as much detail as possible.
As I wrote a while ago, if you want prediction markets to be successful, you need five elements:
Well Defined. The resolution mechanisms must be clear and transparent.
Quick Resolution. The longer it takes, the less people will be interested.
Probable Resolution. There has to be a definitive outcome most of the time.
Limited Hidden Information. If others know what I don’t, I’m the sucker.
Sources of Disagreement and Interest. Suckers at the table.
To these, of course, we can add an implied sixth, which is
Real Money. Money talks, bullshit walks. Are we doing this or not?
Thus, now that we have Polymarket posting real Covid-19 markets, we have the potential to learn things that matter, with a level of resolution we can use, and I’m glad I’ve been able to help them figure out what markets to offer.
We need real money prediction markets if we want to rely on their information. I’m glad Metaculus exists and puts up some markets, and it’s good for getting some idea at all, but it is not remotely the same thing. Their main advantage is that, exactly because they don’t use real money, they can violate the five pillars and those who are inclined to participate at all will still participate because there is no cost of capital, need to invest tons of attention or worry about being the sucker when it’s for internet points.
Whereas at Polymarket, a prime motivation of liquidity providers is to use the markets to generate information, providing motivation in turn for others to come participate.
There are three new markets up, let’s check them out.
Will Omicron be >1% of all USA cases by the end of the year?
Here’s what it would look like betting $1000 or $10,000 on this respectively.
It was my suggestion to use a relatively low threshold like 1% of cases, in order to allow the market to resolve faster. There is an interesting and important question of whether Omicron would then fully displace Delta, but if Omicron goes from 0% to 1% in a month, going from 1% to 50% is a lot less exponential growth than that and should happen that much faster. The game is very much over at that point.
If the chance of 1% happening in time gets very low or very high, or there’s sufficient volume, other markets with other percentages and/or longer time horizons (or other locations) can be created to continue asking the questions that matter and improving our estimates. For now, it seems better to focus on only one market of this type, to ensure better liquidity.
It’s possible that some people are trading thinking that 1% isn’t that much, as opposed to it being the majority of the way to 50%, which is one of many possible sources of good trading.
For those in other countries like the UK, this is still mostly the question you care about, since the growth rates in both places will be highly correlated.
Currently the market is putting this result at about 67% to happen within the month, and you can bet four figures without too much slippage in price, and five figures if you’re confident enough to buy up to 77% to do so, which could easily be a good buy especially if you’re reacting quickly to new information. If you think that the market is off by a lot, I’d encourage you to come in and participate.
You can also choose to provide liquidity to the market to encourage other participants. If there’s back and forth trading you make a profit, but you’ll be on the wrong end of any permanent market moves, including the final move to 100% or 0%, unless you withdraw your f...