"If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality." --Bishop Desmond Tutu

Friday, October 17, 2008

Gaming the system or doing a rain dance?

My post-graduate education is in Anthropology so bear with me a bit while I set this up.

I remember a long discussion I had with a grad student friend about ritual and the "rain dance." The common perception among Americans is that natives do the rain dance to bring on rain. It's an attempt on the part of the ritual participants to bend the universe and nature to man's will and make it rain. This is a very western view of cause and effect.

But that's really a critical misunderstanding of the purpose of the "rain dance," or any other ritual for that matter. It's not a simple matter of material cause and effect, but something much more interesting. The "rain dance" is a form of kinesthetic (physical) memory. It's a way of remembering what to do when it does start to rain. In cultures that lack written language, ritual often serves as a form of collective memory for the group. Actors in the ritual may perform pantomime actions which mimic the physical activites of planting, or they may do other, more symbolic gestures which are part of the groups collective understanding.

So instead of some fantastical dance to bring on rain, it's really a mechanism to recall the memories of what needs to be done when the rain comes. Cool, huh?

So it's surprising that in this election, people are doing all kinds of interesting things that mimic the Western ideas about "rain dances" and the misunderstanding of cause and effect. Attempting to influence nature by manipulating the indicators of reality. One such event is happening now on the InTrade site.

For those who don't know, InTrade is a quasi-stock trading site where people buy and sell based on real-world situations like elections.

According to reports from InTrade, someone is infusing hundreds of thousands of real dollars into propping up the "stock" of John McCain. Why would someone do this?

“The trading that caused the unusual price movements and discrepancies was principally due to a single ‘institutional’ member on Intrade,” said the company’s chief executive, John Delaney, in a statement released Thursday. “We have been in contact with the firm on a number of occasions. I have spoken to those involved personally.”

After an extensive investigation into the suspicious trading patterns, Intrade found no wrongdoing or violation of its exchange rules, the company said.

Citing privacy policies, Delaney would not elaborate on who the investor was or whether or not that investor was affiliated in any way with a political campaign.

According to Delaney, this investor, who boosted the McCain prediction significantly over the market value and above the levels of competing predictive-market Web sites, was using the Intrade market to protect other positions and hedge other investments.

Given that InTrade has been remarkable accurate at predicting outcomes of elections, does this investor believe that by propping up or artificially inflating the McCain stock that this will somehow cause McCain to win? Is he or she doing a kind of election year rain-dance in the hopes of a McCain monsoon at the polls? That's a lot of money to bet on magical thinking.

Overall, if the trader’s motive was to influence the Intrade market, he was remarkably successful. He singlehandedly kept the probability of Obama winning the election on Intrade about 10 percent lower than Betfair and IEM for more than a month.

It’s unknown how many tens or hundreds of thousands of dollars the trader lost in process.

“If the investor did this as investment, not to manipulate Intrade, he is one of the most foolish investors in the world,” Rothschild said.

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