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<h3><span id="lblStoryTitle"><font size="1">http://www.mises.org/fullstory.aspx?control=1575</font></span></h3>
<h3><span><font size="5">Can Markets Predict Elections?</font></span></h3>
<span id="lblStoryText">
<font face="Verdana, Helvetica" size="4">by B.K. Marcus</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2">[Posted August
4, 2004]</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><img alt src="http://www.mises.org/images3/voting.gif" align="right" border="0" NOSEND="1" width="240" height="189">Can
markets predict the next presidential election? On one sports gambling website
people are literally betting they can. Other websites are running virtual"prediction
markets" in an attempt to harness the information that eludes pollsters.
They solicit participation from the general public in much the same way real
markets do in the real world. And yet there are important differences between
the gambling markets and the virtual markets. It comes down to whether traders
are using real resources or just playing games.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The two approaches
represent the difference between Mises's theory of calculation and Hayek's
theory of knowledge. I hope to demonstrate that those services in which people
use property and not just knowledge will be better predictors.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><strong>Prediction
markets</strong></font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The topic of prediction
markets made headlines last year because of a public relations disaster called
the</font> <font face="Verdana, Helvetica" color="#3333cc">Policy
Analysis Market</font>.<font face="Verdana, Helvetica"> PAM was
a multi-million-dollar Pentagon research program that would have involved
investors risking small amounts of money (around $100) on contingent contracts
related to the social, economic, and political future of Middle Eastern
countries. But when certain US Senators learned of the program, they labeled it
a terrorism futures market, and publicly denounced the idea. They claimed
the project proposed"that we trade in death," and expressed outrage
that the Pentagon was developing"a federal betting parlor on atrocities".</font><a id="_ftnref1" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn1" name="_ftnref1"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[1]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">As the political hysteria
died down, some journalists started to discuss the actual merits and risks of
using market mechanisms to predict geo-political events. Criticisms run from
general skepticism about mixing government programs with market structures to
specific concerns about how the incentives of would-be terrorists might be
affected. The advocates cite econometric studies and point to recent success
stories among less politically charged experiments. Whether or not terrorism in
particular can be successfully forecast through such markets, there is
compelling evidence that decentralized systems of market-like bidding can
generate more accurate predictions than traditional forecasting techniques such
as surveys or focus groups.</font><a id="_ftnref2" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn2" name="_ftnref2"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[2]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Twenty years ago
economist Richard Roll demonstrated that the price of orange juice futures
predicted temperature change better than the National Weather Service.</font><a id="_ftnref3" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn3" name="_ftnref3"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[3]</font></span></a>
<font face="Verdana, Helvetica">But it's easier to believe that natural,
impersonal forces, such as the weather, can be accurately forecast than it is to
believe in predictive systems more generally. What about future human
events, such as entertainment or politics? These too have been the subjects of
contingent contracts sold in futures markets. The success stories include the</font>
<font face="Verdana, Helvetica" color="#3333cc">Hollywood
Stock Exchange</font><font face="Verdana, Helvetica">, which accurately
predicted 35 of the 40 Oscar nominees in the top eight categories,</font><a id="_ftnref4" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn4" name="_ftnref4"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[4]</font></span></a>
<font face="Verdana, Helvetica">and went on to pick all six of the top winners
at the Academy Awards.</font><a id="_ftnref5" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn5" name="_ftnref5"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[5]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The</font> <font face="Verdana, Helvetica" color="#3333cc">Iowa
Electronics Market</font> <font face="Verdana, Helvetica">(IEM) -- which
trades stocks for the candidates in upcoming public elections -- is another
famous winner. Over the course of 14 elections, the Iowa exchange's prices were
on average a half a percentage point closer to the final results than were the
final polls before voting. In addition, the market generates better
predictions sooner than the polls do. According to Joyce Berg, a
University of Iowa professor who helped organize the IEM's political exchange,
markets"tend to predict events really well when no one person knows the
answer -- when information is distributed among many people with different
knowledge bases."</font><a id="_ftnref6" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn6" name="_ftnref6"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[6]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">This is Hayek's knowledge
thesis in action. (Here are the latest
prices.)</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><strong>The
Hayekian Thesis</strong></font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<p class="MsoBodyText"><font face="Verdana, Helvetica">"The capitalist
economy is, for Hayek, a valuable means of disseminating knowledge from one
individual to another through the pricing 'signals' of the free market."
-- Murray N. Rothbard</font><a id="_ftnref7" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn7" name="_ftnref7"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[7]</font></span></a>
[/i]
<p class="MsoBodyText"><font face="Verdana, Helvetica">In his 1945 article,
"</font><font face="Verdana, Helvetica" color="#3333cc">The
Use of Knowledge in Society</font><font face="Verdana, Helvetica">,"
Hayek attacks the would-be experts and central planners of socialism for failing
to see that the knowledge necessary for a rational allocation of resources
"never exists in concentrated or integrated form," that"the 'data'
from which the economic calculus starts are never for the whole society 'given'
to a single mind."</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Hayek goes on to
speculate that the 20th Century's widespread faith in socialist central planning
was the result, in part, of the many significant advances in the natural
sciences, and a general trend toward an age of experts and engineers. But
according to Hayek and the Austrian School tradition that produced him, it is a
mistake to apply to economics the methods of physics:"This misconception
... is due to an erroneous transfer to social phenomena of the habits of thought
we have developed in dealing with the phenomena of nature."</font><a id="_ftnref8" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn8" name="_ftnref8"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[8]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">After the collapse of
many would-be socialist economies in the East and more limited experiments in
social engineering in the West, there is a new faith, however hesitant, in the
power of markets and prices, and a general distrust of both centralization in
particular and of expert elites in general. The social and political worlds are
better understood to be extremely complex and ever changing, making them a poor
fit for single minds and central plans.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Hayek seems to have been
right: knowledge that is implicit, dispersed, and inaccessible by traditional,
conscious methods can be organized through markets to create more rational
calculation than can elite experts.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">James Surowiecki,
business columnist for The New Yorker magazine and author of The
Wisdom of Crowds, has studied the developing technologies for accessing
collective knowledge and is an advocate of prediction markets. But he suggests a
certain irony: businesses, based in a culture of hierarchy and status-based
leadership, might be slow to embrace the power of the more decentralized, more
"democratic" mechanisms of the market!</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">I would like to suggest,
however, that even if Surowiecki is correct about a certain reluctance from the
traditional private sector, prediction markets will not achieve their full
potential until they incorporate the power of profit-seeking self-interest,
which can only be found in the private world of risk and reward.
Government-developed"planned markets" such as the Pentagon's PAM,
"virtual markets" such as the Hollywood Stock Exchange, and low-risk hampered
markets such as the IEM (which only allows $500 trading accounts) will not
be able to operate as efficiently or accurately as would true capitalist markets,
which allow for real profit and real loss. </font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><strong>The
Misesian Thesis</strong></font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<p class="MsoBodyText"><font face="Verdana, Helvetica">"For Mises, in
short, the key to the capitalist market economy and its successful functioning
is the entrepreneurial forecasting and decisionmaking of private owners and
investors." -- Murray N. Rothbard</font>
[/i]
<p class="MsoBodyText"><font face="Verdana, Helvetica">A quarter-century before
Hayek published"The Use of Knowledge in Society," his mentor, Ludwig
von Mises, shook the world of socialist economists and their fellow travelers
with a monograph entitled,"Economic Calculation in the Socialist
Commonwealth."</font><a id="_ftnref9" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn9" name="_ftnref9"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[9]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Mises's thesis was that
economic calculation -- the ability to allocate resources most efficiently
toward the end products that are most needed or wanted -- depends entirely on a
price system, which reflects the balance of supply and demand.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The Misesian argument was
devastating. Prior to his paper, the universally acknowledged challenge to
socialism was the incentive problem, namely, Where is the incentive to work
harder, to increase efficiency, to innovate -- or even to work at all -- when
there is no pay-off for such behavior? Or, as it was often summarized, Under
socialism, who will take out the garbage?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The socialist reply was
that collectivist society would create collectivist psychology, a new Socialist
Man who works for collective interest rather than old-fashioned self-interest.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Mises granted the
socialists their absurd Socialist Man. For the sake of argument, he said, let's
assume that everyone is well-intentioned, altruistic, and aligned in their
collective goals. Even so, said Mises, without a free price system,
scarce resources can never be allocated efficiently.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The calculation debate
went on for years. In the end, many socialists were persuaded of the need for
markets and for prices, but failed to see why markets and prices had to be based
in private property, especially in the private ownership of capital goods -- the
famous means of production in Marx's language. Private ownership of
capital goods is, after all, the formal definition of capitalism, and it was
exactly such private ownership that socialism sought to abolish.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">For the socialists, it
was impossible to believe that central planning was less rational than the chaos
of competing selfish interests. Their response to Mises -- other than denial --
came from Oskar Lange, who eventually became chief economic planner of Poland's
Politburo. Lange said,"socialists have certainly good reason to be
grateful" to Mises for forcing them to"recognize the importance of an
adequate system of economic accounting to guide the allocation of resources in a
socialist economy." He even suggested that a"statue of Professor
Mises ought to occupy an honorable place in the great hall of the... Central
Planning Board of a socialist state" in"recognition of the great
service rendered by him" to the theory and practice of socialism.</font><a id="_ftnref10" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn10" name="_ftnref10"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[10]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Lange's"Misesian"
revision to traditional Marxism came to be known as Market Socialism, wherein
socialist planners could order managers to make up prices based on the
costs of production. Given this starting point for prices, different bureaus in
the central planning agency could behave as if they were bidding against
each other for capital resources. Trial and error, it was claimed, could bring
supply and demand together in rational socialist prices.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The later and more
influential response was a claim from mathematical economists that given
sufficient knowledge of economic conditions, there existed various
mathematical equations that could solve the problem of efficient allocation.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">It was in response to
these mathematical socialists, that Hayek wrote his"Use of Knowledge"
essay, emphasizing that their given-sufficient-knowledge condition was so
impractical as to yield the entire socialist mission nearly impossible.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Unfortunately, Hayek's
knowledge thesis came to overshadow Mises's original point that property-based
prices are indispensable to rational calculation. For years, economists talked
as if there were a single, homogenous Mises-Hayek thesis from the Austrian
School -- as if Hayek had incorporated and expanded on Mises's original argument.
Toward the end of the Twentieth Century, however, Misesians began to"de-homogenize"
the thesis. They insisted Mises's original claim -- that there is no true
cost-benefit analysis without actual human beings bearing the costs and reaping
the benefits -- is distinct from, and stronger than the later Hayekian
emphasis on knowledge coordination.</font><a id="_ftnref11" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn11" name="_ftnref11"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[11]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">By the fall of the Berlin
Wall and the collapse of Soviet communism in 1989-90, Western economists were
forced to acknowledge what East-Block economists had already learned the hard
way: Mises was right!</font><a id="_ftnref12" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn12" name="_ftnref12"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[12]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">But is this concession
stronger than the claim that Hayek was right?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Prediction markets offer
us an opportunity to compare -- on Hayek's territory, so to speak -- the
strength of Mises's original emphasis.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The Hollywood Stock
Exchange, for instance, where both stocks and dollars are only virtual, can be
seen as exactly the sort of"play market" that Mises dismissed the
Market Socialists for proposing:"They want people to play market as
children play war, railroad, or school. They do not comprehend how such childish
play differs from the real thing it tries to imitate."</font><a id="_ftnref13" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn13" name="_ftnref13"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[13]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">But as we've already seen,
the Hollywood Stock Exchange, however"unreal" it is as a market, is
nevertheless a prediction system superior to even rigorous implementations of
more traditional methods. Aren't we guilty of the perfection fallacy --
contrasting the very best available reality with some hypothetically perfect
alternative -- if we say that a virtual Hayekian market is inferior to an
all-together non-existent Misesian competitor?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><strong>Profit,
Research & Arbitrage</strong></font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<p class="MsoBodyText"><font face="Verdana, Helvetica">"It is at least
conceivable that one can order a manager to play market and act as if he were
enjoying the profits and suffering losses; but it is clearly ludicrous to ask
investors and capital speculators to act as if their fortunes were at
stake." -- Murray N. Rothbard</font>
[/i]
<p class="MsoBodyText"><font face="Verdana, Helvetica">The Misesian competitor
is not, of course, all-together non-existent, since actual, property-based,
profit-driven commodity futures markets operate so efficiently that, as noted
above, they beat the predictive ability of the National Weather Service.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Another empirical
comparison could be conducted between the accuracy of the odds generated in
traditional horse race gambling to any of the virtual Hayekian systems. The fact
that a horse running at 2-to-1 odds will tend to win a third of the time tells
us a lot about the ability of the gambling market to generate rational
predictions. How accurate would those odds be in a system where gamblers
couldn't collect their winnings?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Without conducting an
empirical study on sports gambling, a couple of simpler theoretical
demonstrations are available. The first is the cost of research and the need for
profits to justify such costs; the second is the absence from virtual markets of
the purely profit-based phenomenon of arbitrage.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The research point is so
straight-forward that it can be addressed in two simple questions:</font>
<p class="MsoBodyText"><font face="Verdana">1. Is it possible that research
undertaken by market players might improve the accuracy of their bids?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">2. Will such research
take place in a"market" that won't pay for it?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The arbitrage issue
requires a bit more explanation. The first time I looked at</font> <font face="Verdana, Helvetica" color="#3333cc">TradeSports.com</font>
<font face="Verdana, Helvetica">-- an Irish sports gambling site that operates
through an international exchange of contingent contracts -- they were putting
the chances of President Bush's re-election at 60% (i.e., a $100 BUSH WINS
contract was priced at $60). The clients of TradeSports.com spend real money on
real contracts, taking real risks in pursuit of real reward. The virtual
prediction market site,</font> <font face="Verdana, Helvetica" color="#3333cc">NewsFutures.com</font>
<font face="Verdana, Helvetica">also offers contingent contracts on President
Bush's re-election chances, but both purchases and pay-offs are done with play
money. Their"market" gave Bush only a 49% chance of re-election. This
was in the spring of 2004. One obvious empirical test would be to compare how
close the different sites come to predicting the actual election results -- will
the local knowledge of the local American website outperform the profit-driven
predictions of the international gamblers?</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">As I write this, in the
summer of 2004, I can't yet know. What I do know is that an 11-point discrepancy
in contract prices couldn't last if both markets were based on the risk of real
money. If both markets really paid a hundred dollars for their $100 contracts --
and if they were both active enough to allow a large number of such contracts to
be traded -- then arbitrageurs could guarantee a certain return in November. By
buying the cheaper contract in each market -- the $40 BUSH LOSES in one market
and the $49 BUSH WINS contract in the other -- they could guarantee a $100
pay-off for an $89 expenditure (ignoring transaction costs). Note that the
arbitrageur doesn't need to have any opinion of Bush's re-election chances: he
is, after all, betting both ways. All that is necessary for the arbitrage
profit opportunity is a disagreement between the two markets: a discrepancy in
their prices. </font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The very activity of
arbitrage would, of course, drive the two markets toward a common price: by
raising the demand for the cheaper contracts, arbitrage would drive up the price
of each, until the discrepancy is eliminated. As long as the discrepancy remains,
the arbitrage opportunity will remain.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Fine, you might say, but
all that shows is that arbitrage will force the markets to reflect each other's
predictions. It won't necessarily produce a better prediction in the
process.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">This objection assumes,
however, that the original discrepancy was arbitrary, and that closing the gap
between the two prices will only produce a new-but-still-arbitrary consensus
price. If that were true, a simple averaging of the two prices could eliminate
the discrepancy. But arbitrage isn't likely to produce a price that merely
splits the difference.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">Let's say that Market 1
sells $100 Event X contracts for $40 (and therefore sells Not-X contracts for
$60). Market 2 has those prices reversed: it gives Event X a 60% likelihood. The
arbitrageur will buy Market-1 X contracts for $40 each, paired with Market-2
Not-X contracts for $40 each, guaranteeing a $100 payoff for each $80 contract
pair. As more arbitrage takes place, the gap between the Market-1 and Market-2
prices will disappear, but arbitrage would only result in an average price of
$50 if the two markets were equally informed, equally confident, and equally
liquid. What is far more likely to be the case is that one market will have
"stickier" prices than the other. The price of an Event X contract in
Market 1 might well rise above $40 as a result of arbitrage between the two
markets, but it might move slowly and by smaller increments than the falling
price of Event X contracts in Market 2. If the post-arbitrage price turns out to
be $45 instead of an even split of 50/50, then the 45% odds given to Event X are
likely to reflect a greater informedness, greater expertise, or greater
confidence in the original Market-1 prediction against the chances of Event X
coming to pass.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The arbitrageurs need
know nothing about Event X. They don't need to have any opinion on the
likelihood of any future event related to Event X. All they need are investment
funds, a grasp of mathematics, and a self-interested pursuit of profit. But the
result of their activity is a consensus price that better reflects the beliefs
of the more confident and informed market players. The blind pursuit of profit
squeezes the untapped potential from the prediction markets.</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica" size="2"><strong>Conclusion</strong></font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">According to the <font face="Verdana, Helvetica" color="#3333cc">Concise
Encyclopedia of Economics</font>,"modern economists agree that
Mises' argument, combined with Hayek's elaboration of it, is correct."</font><a id="_ftnref14" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn14" name="_ftnref14"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[14]</font></span></a>
<p class="MsoBodyText"><font face="Verdana, Helvetica">The prediction market
advocates would certainly agree with Hayek's elaboration, but they have lost
track of the original argument that Hayek was trying to elaborate. The more
limits that are placed on the profit potential of prediction markets, the more
limits are being put on their predictive power. The magic of market mechanisms
goes well beyond the creation of consensus from a decentralized distribution of
local, implicit, sometimes unconscious knowledge -- the power of the market lies
in its ability to harness the power of self-interest. By focusing on the
question of knowledge, Hayekians lose track of the critical role of the
arbitrageur, who contributes exactly as Adam Smith would have described:</font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<p class="MsoBodyText"><font face="Verdana, Helvetica">... he intends only his
own gain, and he is in this, as in many other cases, led by an invisible hand
to promote an end which was no part of his intention... By pursuing his own
interest he frequently promotes that of the society more effectually than when
he really intends to promote it.</font><a id="_ftnref15" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftn15" name="_ftnref15"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[15]</font></span></a>
[/i]
<p class="MsoBodyText"><font face="Verdana, Helvetica">What the advocates of
prediction markets need to rediscover is the importance of Mises's original
insight -- or perhaps just Adam Smith's.</font>
<div class="MsoBodyText">
<p class="MsoBodyText">---------
<p class="MsoBodyText"><font face="Verdana, Helvetica">B.K. Marcus is a
freelance writer in Charlottesville, Virginia. His website is</font> <font face="Verdana, Helvetica" color="#333399">www.bkmarcus.com</font><font face="Verdana, Helvetica">.
goldbug@bkMarcus.com. Comment on the blog.</font>
<p class="MsoBodyText">
<hr align="left" width="33%" SIZE="1">
</div>
<div class="MsoBodyText">
<div class="MsoBodyText" id="ftn1">
<p class="MsoBodyText"><a id="_ftn1" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref1" name="_ftn1"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[1]</font></span></a><font face="Verdana, Helvetica">
"Amid
furor, Pentagon kills terrorism futures market." CNN.com/Inside
Politics. Wednesday, July 30, 2003 Posted: 1:37 PM EDT (1737 GMT)</font>
</div>
<div class="MsoBodyText" id="ftn2">
<p class="MsoBodyText"><a id="_ftn2" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref2" name="_ftn2"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[2]</font></span></a><font face="Verdana, Helvetica">
Philip Hodgson,"Is
Consumer Research Losing Its Focus?" June 1, 2004.</font>
</div>
<div class="MsoBodyText" id="ftn3">
<p class="MsoBodyText"><a id="_ftn3" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref3" name="_ftn3"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[3]</font></span></a><font face="Verdana, Helvetica">
R. Roll,"Orange juice and weather," American Economic Review,
74, 1984, 861-880.</font>
</div>
<div class="MsoBodyText" id="ftn4">
<p class="MsoBodyText"><a id="_ftn4" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref4" name="_ftn4"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[4]</font></span></a><font face="Verdana, Helvetica">
James Surowiecki,"Decisions,
Decisions." The New Yorker. March, 2003.</font>
</div>
<div class="MsoBodyText" id="ftn5">
<p class="MsoBodyText"><a id="_ftn5" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref5" name="_ftn5"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[5]</font></span></a><font face="Verdana, Helvetica">
Justin Lahart,"Trading
the Oscars." CNN/Money. March 11, 2003: 11:12 AM EST.</font>
</div>
<div class="MsoBodyText" id="ftn6">
<p class="MsoBodyText"><a id="_ftn6" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref6" name="_ftn6"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[6]</font></span></a>
<font face="Verdana, Helvetica"> Noah Shachtman,"The
Case for Terrorism Futures." Wired News. 02:00 AM Jul. 30,
2003 PT.</font>
</div>
<div class="MsoBodyText" id="ftn7">
<p class="MsoBodyText"><a id="_ftn7" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref7" name="_ftn7"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[7]</font></span></a><font face="Verdana, Helvetica">
Murray N. Rothbard,"The
End of Socialism and the Calculation Debate Revisited," Review
of Austrian Economics, 1991, 5(2), pp. 51-76.</font>
</div>
<div class="MsoBodyText" id="ftn8">
<p class="MsoBodyText"><a id="_ftn8" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref8" name="_ftn8"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[8]</font></span></a><font face="Verdana, Helvetica">
F.A. Hayek,"The Use of Knowledge in Society,"</font>
<p class="MsoBodyText"><font face="Verdana, Helvetica">American Economic
Review, XXXV, No. 4; September, 1945, pp. 519-30.</font>
</div>
<div class="MsoBodyText" id="ftn9">
<p class="MsoBodyText"><a id="_ftn9" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref9" name="_ftn9"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[9]</font></span></a><font face="Verdana, Helvetica">
"Die Wirtschaftsrechnung im
sozialistischen Gemeinwesen." Archiv für Sozialwissenschaften,
vol. 47 (1920). <></font>
</div>
<div class="MsoBodyText" id="ftn10">
<p class="MsoBodyText"><a id="_ftn10" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref10" name="_ftn10"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[10]</font></span></a><font face="Verdana, Helvetica">
Oskar Lange,"On the Economic Theory of Socialism," Review of
Economic Studies 4:123-142. 1936.</font>
</div>
<div class="MsoBodyText" id="ftn11">
<p class="MsoBodyText"><a id="_ftn11" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref11" name="_ftn11"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[11]</font></span></a><font face="Verdana, Helvetica">
See the writings in particular of Joseph Salerno and Hans-Hermann Hoppe in The
Review of Austrian Economics. See also Salerno's postscript to the 1990
edition of Economic
Calculation in the Socialist Commonwealth issued by the Mises Institute:</font>
</div>
<div class="MsoBodyText" id="ftn12">
<p class="MsoBodyText"><a id="_ftn12" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref12" name="_ftn12"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[12]</font></span></a><font face="Verdana, Helvetica">
Robert Heilbroner,"Reflections After Communism," The New
Yorker, September 10, 1990, and"The Triumph of Capitalism," The
New Yorker, January 23, 1989.</font>
</div>
<div class="MsoBodyText" id="ftn13">
<p class="MsoBodyText"><a id="_ftn13" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref13" name="_ftn13"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[13]</font></span></a><font face="Verdana, Helvetica">
Ludwig von Mises, Human Action. 1949. Chapter
26, section 5:"Quasi-markets."</font>
</div>
<div class="MsoBodyText" id="ftn14">
<p class="MsoBodyText"><a id="_ftn14" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref14" name="_ftn14"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[14]</font></span></a><font face="Verdana, Helvetica">
"Biography
of Ludwig Edler von Mises (1881-1973)," The Concise Encyclopedia
of Economics.</font>
</div>
<div class="MsoBodyText" id="ftn15">
<p class="MsoBodyText"><a id="_ftn15" title href="http://www.mises.org/fullstory.aspx?control=1575#_ftnref15" name="_ftn15"><span class="MsoFootnoteReference"><font face="Verdana, Helvetica" color="#333399">[15]</font></span></a><font face="Verdana, Helvetica">
Adam Smith, An
Inquiry into the Nature and Causes of the Wealth of Nations.
1776.
</font>
</div>
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