03 August 2007

When is number 756?

You can put money at newsfutures.com on Barry Bonds hitting 21 or more home runs this season. (He came into the season with 734, and 734 + 21 = 755, so you're betting on him at least tying Hank Aaron's career record. He's currently at 20 for the season, 754 for the career.)

Not surprisingly, the contract (which pays $100 if he does, and nothing if he doesn't) currently trades for $98.

But I found the following interesting: the page claims "The likelihood of this prediction is computed in real time by a prediction market." Note the word computed. Is what a prediction market does really "computation"? ("Right now" is the middle of the fifth of tonight's Giants-Padres game.) I suppose you could make an argument that it is, but when I hear "computation" I expect to see something like Clay Davenport's prediction -- on May 11, he predicted that Bonds had an 89% chance of hitting #756 by now, basically by guessing how many plate appearances Bonds was likely to get and how likely he is to hit a home run in each plate apparance -- although that builds in an explicit and somewhat ad hoc allowance for injuries, so I'm not sure how accurate it is. But when I hear "compute" I expect the work to be going on in a single silicon-based entity, not a distributed mess of carbon-based ones.

Incidentally, it was this prediction by Davenport that inspired my predictions about the Phillies' ten thousandth loss, which came on July 15, a few days earlier than I expected it.

At the freakonomics blog, you can pick the pitcher you think will give up Bonds' 756th home run. If you guess right you get a signed copy of Freakonomics. Most of the plausible pitchers (i. e. anybody on the pitching staffs of the teams the Giants are playing in the near future) are already taken, though.


John Armstrong said...

Market "computing" has been around for a while, and I don't really see a problem with calling it such.

Consider your brain, while doing addition in your head. Can you point to this neuron or that neuron performing any particular step of the algorithm? No. And yet it gets done, and we have no problem calling the result a "computation". In the same way, it's pretty much impossible to tell how any one trader in a market affects the result, but at a high level the market as a whole does come up with some pretty good results.

Michael Cassidy said...

if you go back 100-150 years a 'computer' was in fact a person; an occupation

why don't we compute the odds of bonds having taken steroids??