A Prize Would Speed Up Search for Malaysia Flight 370

Three months ago, a Malaysian Airlines plane carrying more than 200 passengers and flying between Kuala Lumpur and Beijing lost contact with flight controllers and failed to arrive at destination. Since then, there has been a multi-country search on both sides of the destinations with no success. As it stands now, the plane is missing and there is no clue about what happened to the aircraft and its passengers.

Understandably, the relatives of the missing passengers together with individuals do not believe official claims that this plane is missing and that nobody has found it. This state of affairs presents a fertile ground for all manner of conspiracy theories about what happened to the plane, its cargo and final resting place. All this is not helped by another statement such as that covered in this NYT piece stating that the search area has been changed once again. In short, the level of confidence in official statements and whether a proper search is being made in good faith is low.

I am not too familiar with flight science and therefore unable to find reason to distrust official statements from the airlines and the malaysian government. It is clear to me that many more people in that government are just as clueless but issue statements with more confidence than is warranted.

To my mind, the insurers of this airline together with the government would be best served to crowd source the finding of the aircraft. The incentive for them would be to display their own good faith and support that with a monetary incentive to ask teams of engineers and meteorologists who understand flight science to either find or suggest the final point of the fuselage. With these parameters broadly drawn, I am sure that a prize of up US$ 10 million would be placed out there to be claimed by the first team that provides the most useful answer or identifies the location of the flight.

This approach would serve the Malaysian Airlines and the government well because it would buttress their claim that there is no conspiracy to cover up the accident and provide relief to waiting families. The sum suggested here is affordable for both the airline, its insurers and the government of Malaysia. With that prize established, the governments that are assisting in the search could continue to conduct searches based on the best information at their disposal.

What Happened to Intrade on Obamacare?

The idea behind the design of information markets such as Intrade and a few others is that they aggregate information from a diverse crowd of people and thereby, attain accuracy by errors on either side of a question canceling out. David Leonhardt therefore writes about the most important policy decision of the last few weeks where Intrade in particular was wrong by a large margin. As the article states, the US Supreme Court made a majority decision that affirmed the constitutional fitness of the health care mandate.

Being one of the largest decisions this year and one on which the incumbent president had lots of skin in the game, it is essential to consider the fact that Intrade in particular was so far off. David Leonhardt mentions that information markets are not perfect and may have been affected in this instance by the thinness of the market and may have reflected a very narrow set of views to the exclusion of the alternative views. It appears that on the part of the Obamacare, the participants reflected too much of those who information suggested that the mandate would be declared unconstitutional.

And yet in spite of the confirmed error in this instance, I think that the chatter about this miss is still uninformed. To my mind, confidence in information markets is based on the fact that the collection of view that generates its information is bound to be more accurate that individuals who hold court as "the experts". Thus information markets are bound to have a better predictive record than these experts but that is not to state that they are infallible. So the total failure in calling out the outcome of the case is still embarrassing to me, but I think that few experts had it as clearly too.  Intrade only appears to have made it look like it was not even close because with a 65%-70% threshold, Intrade in particular performs very well.

The lesson of this event is that the experts claiming that information markets are imperfect are not saying anything new. On the other hand, the cheerleaders of information markets must always state clearly that they tend to be far more accurate than experts and that usually is good enough but does not mean they are infallible. 

Who Delivers the Coming Concession Speech?

Its late in the day to pretend to be making predictions but Intrade defines it for me. I think that in spite of my reservations in respect to information markets, this chart is right and 44 will be Barack Obama. Congratulations to a competent campaigner who fully deserves his victory.