196Joined Sep 2021


This is also a good reminder that over time "arbitrage" often tends towards "work". At first arbitrages are wide and easy. As more people get involved, the width of the arbitrage gets compressed, and effectively becomes fairly priced.

To take your example - there is some fair price for your labour + storage space + risk of not being able to offload the product. I don't know how close you are to that breakeven, but generally these sorts of arbitrages tend to end up being 'fairly' priced once you account for these hidden costs.

In other situations, say HFT, the arbitrage is very clean, but there are large costs (exchange connectivity, hardware, software, employees) and a continuous arm race to keep up with the competition. Looks quite a bit like work to me.

Arguably the ultimate arbitrage is  wage labour. Turn up regularly, provide some service and you get paid. Money for 'nothing'.

I didn't get the impression from this transcript that Rory Stewart has just heard of cash transfers - is there any part which implied that? It felt to me more like bringing-the-listener-with-him kind of speak to convey a weird but exciting idea.

Reading the transcript cold, maybe it doesn't give that impression. If you're willing to listen to the episodes (there's two of them and the topic comes up a few times intersperced throughout) I'd be interested if your view changes with his joke. (He certainly gives off a tone of surprise). I also think this:

 I've never seen anything like it in 30 years working in international development

Pretty strongly gives the impression that he hadn't seen it before. 

I would argue his point that 'giving people cash is probably the most effective single intervention that you can do for a very poor family'  is pretty accurate and I think it implies he understands it maybe isn't as effective as larger scale interventions (larger than 'a single intervention for one family').

Again, I think it's worth listening to the full context, the impression the listener is given is very much that this is a pancea and better than "charities who are going in doing  [..] health programs".

I'm very happy to be wrong on this so I am very keen to grab onto anything saying the opposite, I just can't shake the first impression I got from listening.

I feel like I'm going to upvote both? There seem to be some significant (specific) errors, but the message is broadly correct.

To be clear - I think that this is on net a good thing. This podcast will probably introduce both GiveDirectly and EA ideas to a wider audience. Having written up this transcript, I am also less disappointed about how this came across than I was when I first heard this at 2x-speed. That said, I still find two things fairly depressing:

  1. Someone who has worked in international development for 30 years and headed DfID(!) is only just now finding out about cash transfers, and thinks it's the most effective intervention you can do. (Although perhaps with his caveat about "for a single poor family" makes it true?
  2. That the head of DfID thinks that it would have been better off spending the money on cash transfers. I had gotten the impression (mostly from posts on the EA Forum) that DfID was fairly well regarded in the space of effective giving so would have at least been aware of cash transfers. 

This mostly made me think (slightly) less of Rory Stewart rather than DfID because my prior for a minister not being across their breif is higher than my prior of DfID not being aware of cash transfers, although I'd be curious to know what others think. 

Capital market investors would be attracted to these financial products because they are not correlated with developed world asset prices. As mentioned before, these investments can also hedge against climate risks and GCRs.

Lots of products aren't correlated to financial markets. (Betting on sports for example). That doesn't mean investors want to put money in. 

Another point is that if they hedge against climate risk, and you think climate risk will materially affect the world, then you should expect these products to be correlated to the market. (But at least then they might have some excess return).

Capital market investors would be attracted to these finance products due to high returns and a lack of correlation with developed world asset prices. As mentioned before, these investments can also hedge against climate risks and GCRs.


Why should we expect high returns? ILS / "Cat Bonds" don't seem to have especially high returns, and I'm not sure what the economic justification for them having high returns would be?

My general take on this space is:

  1. There is (generally) a disconnect between decision makers and forecasting platforms
  2. Spot forecasts are not especially useful on their own
  3. There are some good examples of decision makers at least looking at markets

Re 1: the disconnect between decision makers and forecasting platforms. I think the problem comes in two directions.

  • Decision makers don't value the forecasts as much as they would cost to create (even if the value they would provide would be huge)
  • The incentives to make the forecasts are usually orthogonal to the people using them. (Prediction markets seem to most naturally arise from investing and gambling) which isn't necessarily a strong enough incentive in and of itself. My understanding of the gambling industry is that most people are interested in short-term, volatile markets. (The boom in in-play sport vs pre-match odds; or Polymarket's  success in markets which are generally <1 month). Investing is a little different (and as I'll say latter) I think people do take those forecasts fairly seriously.

Re 2: someone saying "X has a y% chance of happening" is not (usually) especially valuable to a decision maker. (Especially since the market is already accounting for what it expects the decision maker to do). Models (even fairly poor ones) often have more use to a decision maker, since they can see how their decision might affect the outcome.  [Yes, there are ideas like counterfactual markets, but none of those ideas can really capture the full space of possibilities and will also just fragment liquidity]. The best you can really do is extract a model statistically (when indicator goes up, forecast goes down, so indicator might be saying something about event).

Re 3: It would take a while for me to summarise the evidence here, but I think there's a pretty strong case that central banks (eg the Federal Reserve in the US) are increasingly looking at market indicators when setting monetary policy.  I think CEOs and other decision makers in business look at market prices as indicators when deciding direction of their companes. (Although it's hard to fully describe this as a prediction market as much as "looking at the competition" I think with some time I could articulate what I mean)

You might be interested in both: "Most Likes" and "h-Index" metrics on MetaculusExtras which does have a visible upvote score. (Although I agree it would be nice to have it on Metaculus proper)

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