General Secretary Lu called his most trusted advisor Zhou into his office.
"Close the door," said the General Secretary.
Zhou closed the door with quivering arms.
"Don't worry. You're doing great. In fact, that's why I called you in today. I'm starting a new anti-corruption campaign," said the General Secretary.
Zhou drew a sharp intake of breath.
"What? No. This isn't political cover for disappearing my political rivals. I really do want to run an anti-corruption campaign," said the General Secretary.
Zhou exhaled slowly. The color began to return to Zhou's face.
"The problem is I can't trust my advisors. The corrupt ones lie to me. The honorable ones lie to me. Raw facts never make it up the chain of command. It's like everyone in the government is afraid of me," said the General Secretary.
Zhou kept his face slack and his mouth shut.
"That is why, effective immediately, I shall evaluate the performance of all sub-provincial ruling officials according to prediction markets. Can you make that happen?" said the General Secretary.
Jining was a small town in Shandong with a population of only 1.5 million people. The most expensive nightclub in Jining was called K2. K2 was located on the fifty-first floor of the Xinyuan Hotel.
Administrator Qian had the VIP room all to himself. Instead of sitting on the couches, he stood, gazing down from the window at the lights of Jining. He held a cocktail glass in his hand full of the finest rice wine laced with his favorite blend of imported drugs. It was nice to get away from all the selfish political egomaniacs and just get some alone time to think for himself. Administrator Qian was like a cloistered monk. He listened to the gentle thump thump of the muted music reverberating from the main dance floor.
"What to do. What to do," said Administrator Qian to nobody in particular.
"What to do about what?" said his assistant.
"The rotten authorities in Beijing. They think a bunch of nerds on the darkweb somehow knows more about this Jining then I do living here and administrating it," said Administrator Qian.
"You're talking about the Prediction Market Anti-Corruption Initiative," said his secretary.
"Anti-corruption my ass. It's a witch hunt. I'm not corrupt. I'm not even rich. I can barely afford payments on my mortgages, my cars and my aircraft," said Administrator Qian.
"You're a simple public servant. You just want to do your duty to the nation without outside interference," said his mistress.
Administrator Qian nodded solemnly. He finished his glass. It was refilled.
"The princes at the CCP who grew up on private space stations don't understand what it's like to be a 老百姓," said Administrator Qian.
"You're a man of the people," said his other mistress.
"The occult magic of prediction markets will never compare to human judgment," said Administrator Qian.
"I play prediction markets for fun," said one of his bodyguards, "If your goal is to move the price then you don't actually have to change real-world outcomes. I bet not many people care about the municipal futures of a small village like Jining. All you have to do is buy up lots of shares of a prediction right before the CCP evaluates your performance and you can make the price whatever you want it to be."
"What he said," said Administrator Qian.
"It shall be done. You are a genius, sir," said his executive assistant.
Administrator Qian was a genius. It was nice to just get away from it all and think for a while. His work done for the day, Qian returned to the party.
Dufu was addicted to gambling.
"Hey boss, I was taking a look at the prediction markets and they're all out-of-whack," said Dufu.
Mafia don Wang didn't even turn around, "So?"
"The prediction markets predict we'll be performing few crimes in Jining. Robberies. Bank heists. The usual," said Dufu.
"So?" said Wang.
"So we can augment our profits by predicting crimes before we commit them," said Dufu.
"Prediction markets are great at predicting when crimes will happen," said Jining police officer Yang.
"Great! Fire a couple of our informants and throw money at the prediction markets instead," said police chief Lin.
"No. You don't understand. Prediction markets are causal," said Yang.
"Then fire half my police force and put their salaries into the prediction markets as a crime reduction subsidy," said Lin.
"Am I fired?" said Yang.
"You're promoted," said Lin.
"You're recording this. You're a plant from Beijing," said Wang. He snapped his fingers. Two bear-sized goons seized Dufu by his upper arms.
"I swear I'm not. Search me. This is a totally legal business opportunity," said Dufu.
Wang twitched his head. The goons released Dufu.
"If we predict we'll commit a crime and then we commit a crime then we earn money. If we predict we won't commit a crime and then we don't commit a crime then we earn money. Crime itself is a low-margin business. I talked to Xi from accounting and she says we earn higher net profit by not committing crimes and just playing the markets than by committing crimes," said Dufu.
"What a utopia we live in," said Wang.
General Secretary Lu turned on his computer. He logged into the street safety system and looked out of a security camera in Jining. The streets were clean for the first time in many years. The anti-corruption initiative was working.
老百姓 (lǎobǎixìng) literally translates to "old hundred surnames". It means "ordinary person". If you are 老百姓 that means you earn an ordinary amount of money and that your family has lived in China for thousands of years. ↩︎
So the administrators are putting a lot of money on low expected crime, but the police can afford to put a lot more money on predicting high levels of crime, such that overall, the criminals make more money by falsifying the police pseudo-predictions rather than falsifying the administrator pseudo-predictions, despite the inherent advantage criminals have for falsifying the administrative predictions? (Planning a crime creates hidden information which only the criminals possess and can profit from; namely the date and target of the crime. Planning not to commit a crime is much harder to profit from, since someone else could still do crimes.)
Yes. The administrator predictions concern only general trends, so the date and target are not part of their bets. The police have more money than the administrators because the police can fund the market by firing lots of police officers whereas the administrator must fund the market out of his own pocketbook. The administrator earns more money than a single police officer, but not more money than (what was) half the police force.
https://manifold.markets/Yev/will-the-implied-probability-of-thi averaged the price over time to guard against short-term manipulation, seems to have worked well enough.
Why did the crime prediction go up? You'd think the official would want crime in his province to look low.
The high crime prediction was a continuity error. Fixed. Thanks.
Dufu now correctly suggests that they can make money predicting their crimes, but he still describes the out-of-whackness as a high crime prediction.
That was another error. Fixed. Thank you.
You fixed it with a typo, "few of crimes".
Fixed the fix. Thanks.
typo: "we'll be performing few of crimes in Jining" => "a few crimes"/"a few of the crimes"/"few of the crimes"
Depending on if the prior expectation was "no crimes"/"crimes by others"/"a lot of crimes by this group" -- I wasn't actually too sure based on the context.
Thanks for the story!
So many typos. All fixed. Thanks.
You're welcome, and thanks for writing these stories!
One typo fix introduced another typo, though:
said Wang. He snapped his fingers. Two bear-sized goons seized Wang
she says the money we earn higher net profit by not committing crimes
Dufu was addiction to gambling
Dufu was addiction to gambling
Dufu was addiction to gambling.
My intuition is that if market participants go too many levels deep in terms of mind games that you’re exactly correct. It just kinda ends up in the right place when you average it all out, maybe there’s a slight risk premium but that’s usually it