For an economy to grow, it’s necessary that capital reaches its highest perceived use as quickly as possible. From this seemingly trite statement of the obvious we can conclude that information bottled up saps economic vitality.
If we don’t know things, our capital allocations are logically going to be different relative to what they would be if we do know things. Basic stuff, or so it seems. Except that what’s basic isn’t accepted wisdom.
Whether it’s a consumer, a company insider, or a prominent politician, it’s said that markets are rendered “unfair” by buying and selling done by those possessing an information edge. Which is too bad.
Those in possession of the proverbial “edge” make markets quite a bit fairer precisely because their trades inform market prices. For those lacking an edge, how unfortunate if purchases of stocks, bonds and businesses themselves are made without knowledge that could profoundly alter the prices and future value of stocks, bonds and businesses purchased.
It’s just a comment that prices are knowledge. We need them to reflect reality.
All of which is obvious, or should be obvious when it comes to markets themselves. Only for the importance of prices as knowledge to grow skyward when it comes to war.
For background, last week federal authorities charged a Special Forces U.S. soldier for allegedly using inside information to win $400,000 on Polymarket after placing a correct bet on when Venezuelan president Nicolas Maduro would be captured. If we ignore how many bet wrong about Maduro’s capture, including possibly U.S. military members with access to the same knowledge as Gannon Ken Van Dyke’s (the soldier charged), trading on possible war outcomes in general is evidently too much for all too many.
The idea that profits can be had through correct calls about what will happen in situations involving the military has some up in arms. “Blood money” and all that. Which is a mistaken way of looking at things.
Properly priced possibilities (including captures, war, etc.) will, based on stock and bond market reactions to the possibilities, perhaps save U.S. troops from being deployed in tragic ways that include a body count. If it’s important for economic growth that prices reflect reality, it’s crucially important for military members that prediction markets are not only deep and vibrant, but that they reflect all known information.
A statement from Polymarket (where Van Dyke’s trade was made) indicated that “Insider trading has no place on Polymarket,” but the statement arguably steps on the importance of the site as a way of shedding sunlight on the possible effects of politicians putting troops in harm’s way. Governments quite simply have guns and bombs. Since they do, isn’t it essential that all markets (including prediction markets) relentlessly price what they’re doing, or what they're expected to do?
To which some will state a seemingly self-evident counterargument, that those with knowledge of future troop activity shouldn’t be able to risk the troops themselves by revealing that activity through market prices. That’s one way of looking at it, but what if the market prices elicit a market reaction that saves just those troops from death?
The economy is improved, and investors are spared blind capital allocations by non-public information reaching the marketplace, at which point it can credibly be said that lives can and will be saved by non-public government information similarly reaching the marketplace. While understanding the importance of secrecy when it comes to troop deployments, it’s precisely because war is so uncertain and life-threatening that crucial information inform troop deployments, or not.
