WIRED, Sept. 1995, Idees Fortes section, p.125
This version corrects some of the WIRED editors' "corrections".
A section was quoted in the 30Aug95 WSJ.

Idea Futures

How making wagers on the future can make it happen faster

by Robin Hanson

When a science question - about, for instance, the greenhouse effect, the "Star Wars" missile-defense system, or pesticide toxicity - becomes relevant to public policy, few of us are confident that the opinions expressed in popular media or in congressional testimony reflect the best available information. Instead, we fear bias - either from corporate interests, politically correct doomsayers, or just resistance to new ideas. [1]

So consider a radical, market-based alternative for reaching scientific consensus. Imagine a betting pool on disputed science questions, where the current odds are treated as the current intellectual consensus. For example, people might bet on whether cold fusion will be used to produce power by the year 2020. Right now the odds would be fairly low - say 20-to-1 against. But as the results of new research became known, and if more people became convinced that cold fusion worked, the odds would rise. And if cold fusion became a reality by 2020, those early supporters would make a bundle.

Such betting markets would become "idea futures" markets - like corn futures markets, except you'd bet on the future settlement of a scientific controversy instead of the future price of corn. The system could increase the public's interest and role in science, and betting odds could serve as a scientific barometer to guide mass media and public policy.

Here's an example of how it might work: Ann, a graduate student in biology, proposes a new theory about how AIDS destroys the immune system. If true, her theory has important implications. But relevant academic insiders insist the theory is wrong and refuse to discuss the issue further.

Today, Ann could keep working on her own, or she could call a news conference. But using the idea futures market, Ann would have a new option. First, she would pay a reputable judging organization to eventually [2] declare a verdict on the correctness of her theory. Then Ann would pay someone else to create a market where anyone could bet on this verdict.

If policy makers take the current market odds seriously, Ann need only post offers to bet in favor of her theory at odds of, say, 1-to-3. Now, if the academic insiders want their views reflected in policy, they would have to bet against the theory in order to drive down the odds (to say [3], a 5 percent chance that Ann is correct). Naysayers could no longer suppress Ann with silence or ridicule.

True, if the academic insiders had more money to spend, they might win this fight, at least for now. But with more money at stake, speculators might well take a keen interest in Ann's theory. Science patrons and policy makers might decide the question interests them enough to subsidize betting markets on Ann's theory, promoting research without taking sides. Research labs could compete to win the prizes these subsidies create, investing their own money in the hope of later rewards. Finally, as research moved the weight of evidence - and the market odds - in Ann's favor, she and the speculators who supported her could sell their bets at a healthy profit.

The concept of idea futures might sound at odds with the world of science, but it has its precedents. Four centuries ago, for Instance, in a "scientific revolutlon," European "outsiders" formed scientific societies where their theories could be judged by how well they agreed with observations, not by how well they agreed with the authorities of the day. Researchers demonstrated their discoveries at society meetings, and patrons sponsored competitions to reward the best solution to a specific problem. [4]

Today, a trial idea futures market [5] exists on the Web (http://if.arc.ab.ca/lF.shtml), where 1,000 people are testing the possibilities of another path on the scientific quest.

Robin Hanson (hanson@hss.caltech.edu) is a doctoral student a the California Institute of Technology.

Corrections to published WIRED version

1. In WIRED, this sentence read:" Instead, we fear bias - from corporate interests and politically correct doomsayers - or we're just resistant to new ideas."

2. In WIRED, "eventually declare a verdict on the" was replaced by "decide the potential".

3. In WIRED, "to say" was replaced by "say".

4. This whole paragraph is a drastic reduction from many paragraphs in previous versions. I admit it doesn't make much sense here as it is.

5. Previous longer drafts included this important clause: "developed at the Alberta Research Council by Sean Morgan and Mark James".