Date: 12/09/17
|Lindsay Fortado, Financial Times
One of Europe’s largest hedge funds is looking to move into the gambling industry in the UK, as it sets up a new venue where players can bet on the effects of climate change. The project is hoping to tempt climate scientists to put their money where their models are.
The new “climate prediction market” is the brainchild of Winton Capital, founded by David Harding, and is aimed at finding a market consensus on the levels of carbon dioxide in the atmosphere and global temperature rises in the future.
The not-for-profit project, which is being funded out of Winton’s philanthropic budget, is hoping to tempt climate scientists to put their money where their models are, and to provide a clear benchmark of the academic consensus at a time of intense interest in man-made climate change.
News of the project comes as the UN General Assembly meeting in New York focuses on the theme of a sustainable planet. Climate change also continues to dominate the political agenda around the world, after President Donald Trump declared he will withdraw the US from the Paris climate accord and roll back regulations on the production of coal.
“With a prediction market, getting the information is the primary objective,” said Mark Roulston, a scientist at Winton who is overseeing the project. “There’s not necessarily a consensus on all the implications of climate change. The idea is to have a benchmark which could track any emerging consensus.”
Under the plan, scientists and experts from around the world will be able to trade contracts based on the atmospheric concentration of carbon dioxide and how far temperatures increase, going decades into the future. Winton will act as a market maker and subsidise trading, rather than taking a cut or skewing the odds in its favour.
Winton’s market, which will be based in the UK, will be one of only a few prediction markets and is believed to be the first dedicated to climate issues. Such markets are mostly barred in the US because of more restrictive gambling laws; one exception is at the University of Iowa, which has developed a political futures market run for research and teaching.
If the Winton market is successful, Mr Roulston envisions it being a source to show how experts believe world events — such as the US withdrawing from the climate accord — could impact climate change.
Robin Hanson, a professor of economics at George Mason University who helped pioneer the use of prediction markets, said there is little incentive for anyone to try to manipulate the market, because that will only make the potential profits bigger for those who predict CO2 concentration and temperature correctly.
HT | Roger Knights.
Everyone is missing the point. There are only two possible outcomes. Both huge wins for the skeptics.
1. Climate scientists will prove unwilling to gamble with their own money thus proving their theories are guesswork.
2. Climate scientists put up their predictions and demonstrate there is no consensus.
I fully expect some form of herd pronouncement that as persons of science they are above such activities.
climate models
can’t make
predictions, only projections
Which is just one of innumerable reasons why they are not science, but politics and rent-seeking.
sixto – why don’t you explain
how a climate model would make
an actual prediction. i’ll wait….
No need to wait.
The whole point of scientific models is to make predictions. The heliocentric model of the solar system makes predictions, which were indeed found true, such as the phases of Venus.
A computer model of future climate, if it is to serve as a basis for public policy affecting billions of people direly, must show skill at forecasting at least one or two decades ahead, if its projections for AD 2100 are to be credited. But the models have failed miserably.
I am afraid of another option 3. There won’t be real money put up. Just used as a publicity scam to say “look the experts bet with their own money that the temperature is going up 4 degrees”, but in the fine print, no one will lose money.
Finally!
Might not be liquid enough to work very well, but still a great step in the right direction. If the models are ever actually right, climate science could eventually be self-funding.
The “temperature” will depend on who measures it.
you mean it depends on the model
used to calculate it.
that’s true. note, for example, how
low uah’s trends are cp rss’s.
I love this idea, put up or shut up. The problem is they will do neither, they can’t put up because they would loose their butts( bad models) and they won’t shut up or they would loose their grants.
I wonder how it will work? The stock market is a reflection of the value that the traders themselves place on a particular stock. Is this how it will work? I presume the contracts will have a due date. If the contract misses the target, how will the pay-off be measured? Proportionally or all-in? Adjusted by the date of the buy/sell date?
Sounds complicated.
More details on this should be provided; perhaps the GWPF will do some digging. I like the idea of proportionate payments (less of a loss if a bettor just missed being right). But it would complicte things. Without that feature, it’s not too complicated—Intrade’s arrangement was popular & worked for years.