Placing bets on the future state of the climate makes sense, but in a research mode, not just in public displays of “calling out” particular opponents. Several commentators here on Prometheus have directed our attention to discussions of “betting on climate,” that is, putting one’s money where one’s mouth is when making claims about the future state of the climate. James Annan, a scientist at the Frontier Research Center for Global Change in Japan, has been trying unsuccessfully to get prominent climate skeptics on the record in the form of a bet. Mark Bahner has responded by trying unsuccessfully to get James Annan on the record with some sort of bet.

This recent flurry of calling people out (reminds me of elementary schoolyard brawls – “I’m faster than you!” “No you’re not!” “Prove it!” “Meet you after school on the playground!”) no doubt has a high element of drama. Ronal Bailey takes credit for starting the betting flurry when he apparently misquoted MIT’s Richard Lindzen discussing what odds he would take on a bet on the future state of the climate. Underlying all this, as Bailey observes, is the now legendary story of the Erlich/Simon wager which in spite of assertions to the contrary is widely viewed as a vindication of Simon’s perspectives over Ehrlich’s – of cornucopian correctness and catastrophist error. This is where the drama comes from, as bettors who call people out by name probably see themselves immortalized in future history with a publicly-visible betting victory like Julian Simon experienced.

I think that while such chest thumping displays are certainly entertaining, they tell us little about the broader state of uncertainty among experts or the public. But there is something important here that should not be overlooked. Betting, or more accurately a betting market, can tell us a lot about the state of uncertainty across a large body of experts. In 2001 I wrote an essay on “prediction markets,” here is an excerpt:


“Nobel Prize winner Nils Bohr once remarked, “Prediction is difficult, especially of the future.” Recognizing the difficulties of prediction, what if there was a way to integrate all available information about the future into a single forecast that would instantaneously incorporate and make available new information? Sound too good to be true? Research in economics and recent developments in the private sector point to a novel way to think about forecasting in the earth and atmospheric sciences.

The basic premise of the approach lies in the efficient market theory from the field of economics and most closely associated with the work of Eugene Fama at the University of Chicago in the 1960s. The efficient market theory holds that the current price of a commodity in an exchange market reflects all available information. When you hear the phrase “you can’t beat the market” it is referring to the perspective that the “market” (usually the stock market) is efficient; i.e., if information were available that would allow someone to gain a trading advantage, this information would be reflected instantaneously in the price of the commodity through the actions of buyers and sellers in the marketplace. Whatever advantage the trader thought may have existed is absorbed into the market…

What if a “prediction market” were created that would allow trading based on specific predicted outcomes such as the weather? Could such a market be created that operated efficiently and had sufficient participation to integrate all available information about the future? Here is a research hypothesis: An efficient “prediction market” generally will outperform all competing prediction methodologies in the earth and atmospheric sciences…

Several policy issues come to mind. First, there is an implication for the research community. It would appear to make sense to test the hypothesis about whether “prediction markets” can outperform other approaches to forecasting phenomena related to the earth and atmospheric sciences. Perhaps an equivalent to the Iowa Electronic Market could stimulate such research related to weather forecasting, climate forecasting, and, in principle, any area where predictions are made. Second, if the marketplace can provide skillful forecasts, then perhaps a mechanism might be created for this information to be provided systematically to consumers of forecasts through the public or private sectors, or through a partnership.”

There is a brilliant, straightforward (and fundable!) research proposal waiting to be written that develops the idea of prediction markets in the context of climate (and something that with a serious PI I’d be interested in collaborating on). The model to emulate is the Iowa Electronic Exchange, which is funded in part by the U.S. NSF as a research project, to explore how well prediction markets perform in the context of elections and certain measures of economic performance.

I can imagine a whole bunch of interesting datasets that might be collected through a climate prediction market. For example, it would be useful to create a market that is only populated by IPCC authors, a market populated by people with the same expertise as the IPCC authors but not part of the IPCC, different markets for different disciplinary areas of expertise, a market open to the public, and markets based on various metrics of interest to decision makers (beyond global average temperature) such as rainfall in particular locations or the number of hurricanes, etc. etc. Such markets would allow for a robust empirical examination of a wide range of obvious and not-so-obvious questions. (James Annan has set up here a market open to the public focused on global average temperature.)

On the climate issue it is often difficult to separate out the political theater from the serious attempts at research. Prediction markets offer a great opportunity to dramatically advance understandings of expert perspectives on the future state of the climate, as well as the diversity of views within the expert community. But to gain such understanding will require going beyond the schoolyard brawl mentality to real, rigorous research. Who thinks this is going to happen? Wanna bet? I’ll meet you on the playground at noon.