A Christmas Wish for righting an old Festivus Grievance

Dr Eric Crampton
Insights Newsletter
10 December, 2021

Festivus comes but once a year – December 23rd. Observants of the holiday popularised in a decades-old episode of Seinfeld raise the aluminium pole of celebration and air their grievances.

This being the last full Insights edition before the holiday break, I have a Christmas wish.

A wish for National’s new Finance critic, Simon Bridges.

It would help to right a long-nurtured Festivus grievance.

In the leadup to Festivus six years ago, perhaps inadvertently, and certainly on bad advice, then-Minister Bridges killed New Zealand’s prediction market, iPredict.

Now that National no longer has a budget for polling, he might now regret it.

Anyway, I digress.

I loved iPredict. I miss it every single day.

Punters like me could trade iPredict contracts on future unemployment rates, whether bills might pass, who would win the next election, and whether any party might have another leadership spill.

But more importantly, prices on iPredict contracts provided excellent forecasts. Their prices were probabilities.

For seven years, iPredict ran on the smell of an oily rag. But National-government anti money laundering rules were just too costly.

Even major banks have run into a few minor compliance issues. Westpac may have some Festivus grievances to air with the guy who designed the scheme.

So, in 2015, iPredict asked for an exemption.

There was no real money laundering risk in an exchange whose total deposits wouldn’t amount to a deposit on a decent house these days. Money laundering at SkyCity would have been far easier, but iPredict wasn’t building anybody a convention centre.

Bridges, on advice of officials, and probably without even realising the implications of a pen-stroke, declined.

Facing compliance costs multiples of its annual budget, iPredict folded.

Enough of Festivus grievances.

High on my, and hopefully on any potential future Minister of Finance’s, Christmas wish list: the resurrection of iPredict.

Finance Ministers depend on good advice. And core agencies’ forecasts and advice have gotten a bit iffy.

Competing advice from people with skin in the game, channelled through a prediction market to create price signals, can be especially valuable.

Will house prices collapse, or skyrocket? Will up-zoning legislation lead to much more building? It’s hard to go short on house prices – other than at a place like iPredict.

Ministries sometimes propose simply crazy things like cash-for-clunkers schemes. The betting markets could help show whether those kinds of schemes are likely to reduce net emissions. At worst, they’d let me take free money from naïve optimists betting from their offices at the Ministries.

Bringing back iPredict would be a true Festivus miracle.

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