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I would like to see someone give a relatively in depth but popular treatment of the experimental research on bubbles (which I am sure there is a lot of). I don’t know much about this subject myself, but I have read a lot of people postulate bubbles and causes of bubbles in explaining the current crisis, but none of it sounds like it has been informed by research on how bubbles form.

As I have pointed out before, intellectual property does not exist for the same reasons that other property rights exist. Normal property rights exist because many resources (land, labor, computers, oil etc.) are scarce; using them reduces their usability for other people (burning gasoline in your car prevents others from doing the same). Property rights over such resources forces people to consider the opportunity cost of using them which gives property right holders incentives to use their resources economic-efficiently.

However, information (ideas, writings etc.) is not scarce; ideas have no opportunity cost. If I use the idea of an internal combustion engine to make a car, that does not reduce other people’s ability to use the idea of an internal combustion engine. The reason that intellectual property rights are useful is that they encourage the production of such information, but at the cost of causing information resources to be used inefficiently.

However, granting temporary monopolies (patents and copyrights) to information producers, is not necessarily the optimal solution; better institutations may exist. Finding ways to encourage useful information production at lower costs to information use efficiency, would be good for everyone.

Tregol Publishing is a service that makes a limited attempt to do just that.

Tregol is a service for authors to sell their works (as ebooks) but release them to the public domain (so that more people use the work) after they have received reasonable compensation. Authors who publish using Tregol specify a sale price and a World Price and/or a selling duration for their work. When the total income from book sales reaches the World Price or the selling duration elapses, the work becomes public domain.

This allows publicly minded authors to easily create a lot of public good while being compensated for the significant resources (mainly their time) they used to create their works. More discussion in Tregol’s FAQ.

I think it might be a good idea to attach a discussion forum to every prediction market contract. I think it might allow traders to make money off of private information faster and with less risk than they can now and might increase the amount of information generated by some markets.

If each prediction market had a dedicated forum attached to it, market participants who have information not currently incorporated into the contract price could make fast and relatively low risk profits by first buying all the contracts they want, revealing their information, and then selling their shares at a profit after the contract price adjusts. This would allow people who bring new information to cash in on their information quickly and with minimal risk, and would have the added benefit of making such information or analysis public.

Attaching forums would be very easy; a link on the contract information page would be sufficient. Moderation would not be problem because traders would have to have accounts with the prediction market exchange, so real punishments could be given to those who post fraudulently.

Discussion forums would also give people who are interested in the meaning of the contract price to ask questions about the logic behind it, though I don’t know if traders would answer.