Courtesy of Marginal Revolution’s Tyler Cowen, I read about the bet between Matthew Simmons (a Peak Oil pundit) and John Tierney (a NY Times columnist). It looked like another case of interesting public bets demonstrating that there was a contentious issue going unresolved in the public debate, so I proposed a claim for the FX market modeled on my previous claimNLud on a 1995 bet between Kevin Kelley and self-proclaimed Neo-Luddite Kirkpatrick Sale. I persevered, even in the face of James Annan, claiming that it was all a publicity stunt, and that Simmon’s bet shouldn’t be taken seriously, and even pointing out the financial markets where similar claims could be traded. Today I read EconBrowser’s take on it all (thanks to Tyler for the pointer) and decided to withdraw the claim.
EconBrowser points out (as James tried to tell us) that Simmons is making a cheap public bet when he could be making an extremely lucrative investment ($130,000 return for a little more than the $5000 he put in the bet, or $1.3 Million in 5 years if he believed it enough to invest $50,000) if he believed what he was saying. If he made the investment (at much better odds than his cheap public bet) he would be telling the market that oil is getting rarer in way that the market would react to. As it is, I’m sure those who trade in oil futures either laughed at Tierney’s article or ignored it entirely. A friendly bar bet (even at $5000) doesn’t impress the traders the way a change in the price or number outstanding of call options would. So I’m going to withdraw the claim. I was already convinced that it wouldn’t trade at interesting prices; apparently everyone else knew it, too.