Re: poly: Idea Futures, some questions

The generic situation is this: Someone has offered a reward for
an idea, and competing teams can form to attempt to gain this reward.
The reward is given to the first team to submit a valid entry.
This model covers ad agencies, patent applicats, idea
futures speculators, and probably much more.

Each team should be concerned that, just before they complete their
entry, one if their members will secretly sell their results to
another team. Many approaches are available to deal with this
potential problems:
1) Teams can monitor their members more carefully.
2) Large costs can be imposed on entrants, inducing few entrants.
   Investigation of theft can then focus on a few suspects.
3) These costs can be early and sunk. Then a theiving team would
   have to plan and count on stealing an idea at the last minute.
4) Entries could be required to include a history of their efforts.
   Theives would then have to make up a plausible history.
5) Entries could be required to included detailed "reasoning".
   Theiving entrants may have trouble generating different reasons.
   
I think that Nick B. sees patents as including something like 4&5.
But I think that any features of patents that seem like this are
incidental. Patents require some detail in their applications in
order to police patent violations, not to deter patent idea theft.
I don't believe much patent theft is deterred due to the need for
patent application detail, so I'm not very worried about similar
theft with idea futures.

>> But it turned out to be crucial, one could consider requiring
>> idea futures market participants to similarly have detailed documentation
>> of their reasoning for making the trades they do.
>
>That doesn't sounds *extremely* implausible. Pick any stock, and I'm
>sure I could easily cook up a justification for buying it. Would the
>law require that your justification was *valid* -- if you can't
>*prove* to the authorities that IBM is likely to rise next year,
>you'll go to jail if you invest in them?

It's only extremely implausible if you think idea futures must work
like the NYSE. It is true that such rules would discourage the
system from aggregating much of the intuitive, hard to document,
sources of information that now inform IBM's price. But if you
thought that idea theft was an overwhelming crucial problem, you
might be willing to accept that. (I don't see idea theft as such
a problem.)

Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-2627
Received on Mon Jun 29 18:24:10 1998