Fix a Horse Race…

GK (2019): Can you base world economy on horse races? Here is an old unpublished draft from 2008 that I did not complete, which was  inspired by the  economic crisis at that time. (It also felt a little over the top, but my standards since then have relaxed somewhat.)

Another opportunity to be reminded with this old post came in a recent conference at Pittsburgh where I had an interesting conversation over lunch with Bill Benter whose company uses statistical methods to get ahead of Horse race gambling.  

The way it was

Horse races and the gambling associated with them have been a part of human culture since ancient times.  But it was not until 2012 that they become so central in financial and economic markets.

The first hyper-racing revolution

The first step toward the revolution was the introduction of virtual horses. It  was very simple: Given the horses “Blue Cloud” and “Green Arrow”  it became possible to define new virtual horses  “Grue Clow” and  “Bleen Arroud”, by various properties.  Grue Clow could be Blue Cloud on even days and Green Arrow on odd days, or it could be one of the two according to the outcomes in some other race.

Gambling and investing – It became more and more possible to not only  gamble on horses or virtual horses but also to invest in horses and virtual horses and collect revenues from other people gambling on them.

Pension funds and loans – As the revenues from horse racing investments were slightly higher than other forms of investments, pension funds and other institutional investments entered massively into this emerging market. New financial tools based on packaging  gambling of various sorts were introduced.

Zoology units in business schools were introduced and large banks started hiring zoologists as well. A prominent business-school zoologist declared: “Naively, apes are considered the closest animals to humans and from some aspects they indeed are. But there are other deeper aspects – pride, honour and dignity, for which horses and humans are much closer.” He promised surprising discoveries in this direction in a paper in the February issue of PNAS. (But it did not appear.)

The second hyper-racing revolution

The change was very quick. In 2020 the head commissioner of the racing industry declared: “Our market predicts the outcome of horse races so well that we do not need to have horse races at all!”.  Banks entered the racing industry and bid to host virtual races.  Virtual horses and gaming financial products have made money itself obsolete. (Zoology programs in business schools were terminated.)

The horizons are infinite

(GK (2018): I guess my imagination ran out at this stage.)

The name of this post

“Fixed a horse race” – It is quite common to find in mathematical papers statements of the form “fix a group G” or “fix a vector space V.” When Frank Anscombe and Robert Aumann  wrote their seminal 1963 paper about the foundations of probability theory  they used two technical terms “lotteries” and “horse races”. The phrase “fix a horse race” was repeated quite often in the paper and the referee asked the authors to change it because of the common meaning of fixing a race. The authors agreed, and  Aumann has regarded this as the “regret of his life.”

Disclaimer: As evident from our post “Chess can be a game of luck” this blog discourages gambling. (We also  discourage smoking as well as inappropriate reaction toward smoking.)

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