So I’ve invested a lot of fake money in Bush not becoming president in 2004 in the Foresight Exchange. I guess we will see how that goes.
I’ve been tempted to put actual money on Kerry getting more votes that Bush in the IEM. These markets can be used to make money if you know something that other people don’t. Although I think Kerry will get more votes that Bush, I think it is likely that other people know something that I don’t.
But there is another thing that these markets can be used for. They can be used to reduce risk. Say I want to donate $100 to the ACLU if Bush wins the election. I can invest something like $50 in Bush-wins. So if Bush wins, I can take my winnings and donate them to the ACLU. If Bush loses, I donate nothing. The net result is that I’ve changed my risk of paying $100, to paying a certain $50.
hukuma noted that under this reasoning it would be wise for the ACLU to invest some of it’s money in the Bush-wins market.