Seven hundred $100 bills are lying on the sidewalk. Pick them up!!

I have wonderful news for everyone.  The prize money for two Hypermind NGDP markets has soared to $70,000, which includes $35,000 in prize money for the 2017:Q1 to 2018:Q1 contract (currently trading at about 39, or 3.9% NGDP growth), and another $35,000 for the 2018:Q1 to 2019:Q1 contract.

Update:  This announcement triggered a lot of interest in the contract. Hypermind sent me a better link to the two markets.

Remember that this is free money.  You do not have to invest any of your own money to participate.  You can win money, but you cannot lose.  Our hope is that this prize money will lead to more trading in the NGDP markets, more liquidity.

Once again, NGDP growth expectations are the single most important market price, the single most important measure of the performance of the macroeconomy.  It’s a scandal that the economics profession has ignored this issue, but the Mercatus Center and Hypermind have cooperated so that we will have a real time measure of the public’s NGDP growth expectations.  (Here is the Mercatus announcement.)

Participating in this market can result in free money, thousands of dollars worth of free money for the more talented/lucky (pick one) participants. But the more important reason for participating is that this will tend to shine a spotlight on expected growth in aggregate demand.  Progressives should want that to happen.

And there’s something for conservatives too.  I hope that the financial press will eventually start reporting current NGDP futures prices.  This will gradually put more pressure on the Fed to pay attention to market forecasts, and move from a discretionary policy approach to a more rules-based approach.  Thus NGDP targeting has something for both progressives and conservatives, which is why it’s an increasingly popular idea among economists on both the left and the right.

PS.  I’m also a believer in the “watched pot never boils” theory, so I believe this market makes it less likely that a recession will occur before 2019. (Making this the longest expansion ever.) Recessions only occur when NGDP expectations fall sharply, and I believe the Fed will not want to see NGDP expectations fall sharply. Please file away this prediction, and remind me of it if I am wrong.

PPS.  David Beckworth has a very interesting podcast with Larry Summers.

In this Econlog post I comment.

 

 


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10 Responses to “Seven hundred $100 bills are lying on the sidewalk. Pick them up!!”

  1. Gravatar of Kevin Erdmann Kevin Erdmann
    19. September 2017 at 10:01

    I just went and put in a bid.

    “I’m also a believer in the “watched pot never boils” theory, so I believe this market makes it less likely that a recession will occur before 2019.”

    Is that like how TIPS markets helped prevent a crisis in 2008?

    :-/

  2. Gravatar of Major.freedom Major.freedom
    19. September 2017 at 10:08

    “Once again, NGDP growth expectations are the single most important market price, the single most important measure of the performance of the macroeconomy.”

    Neither NGDP, nor NGDP growth expectations, nor the “par value” of that which is being called a “futures contract”, are a market price. There is no mutual, two way exchange of private property, a necessity for the existence of market prices.

    This system is a lottery only. It is akin to “Someone donated $10,000 to be given to the person who comes closest to guessing the number of gum balls in this jar.”

    The jar has a market price, the gum balls have a market price, and assuming the $10,000 was earned and not stolen or misappropriated, that which was sold for the $10,000 have market prices. Technically hampered market prices, but prices nonetheless.

    Von Mises explained this, when he considered the debate on whether “market socialism” is possible, that is, he addressed the (what we now know to be a) myth that market prices are possible in a world where the state owns all means of production, as long as the state incorporates the Hayekian framework of “information”. But Mises showed that individual property is fundamental to information, not the other way around. The subjective valuations of individuals when they own property is what determines the exchange ratios, prices, of giving up ownership of that property.

    With Hypermind, there is no giving up or exchange of property by the individual participants. No market prices involved here.

    “But the more important reason for participating is that this will tend to shine a spotlight on expected growth in aggregate demand.”

    Well, expected total demand for only that which is included in GDP. It will not be aggregate demand. GDP ignores the bulk of the exchanges in a modern economy.

    “Recessions only occur when NGDP expectations fall sharply”

    This is a misdiagnosis. NGDP expectations fall or rise for the same reason recessions and booms occur, it doesn’t cause one or the other. They are the product of the same thing. Recessions are not addressed by changes in after the fact symptoms such as NGDP. NGDP declines are first precipitated by declines in investment that have no relation at all to NGDP expectations, but to failure to coordinate with other producers in a division of labor, which was caused by the inflation advocated on this blog to supposedly stop recessions. Inflation cannot solve this problem. If it did recessions would have ended during the tyrannical dictatorship of currency debaser Emporer Diocletian in ancient Rome.

  3. Gravatar of Christian List Christian List
    19. September 2017 at 11:17

    It sounds like Summers would be the Master of Disaster. He would overshoot the inflation target procyclically and therefore make the system more unstable. Then after the crash he would push fore a massive fiscal stimulus (instead of just doing really expansive monetary policy). Then he would overshoot the inflation target again procyclically. And so on. OMG. I cannot believe what I just read.

    The world is not fair. We need a world where guys like Summers are unimportant nobodies with a little blog and guys like Sumner (with an N) are chairman of the FED (or the ECB).

    At least Larry Summers is no Weidmann but still.

  4. Gravatar of ssumner ssumner
    19. September 2017 at 12:24

    Kevin, Good point, but:

    1. NGDP futures are better than TIPS

    2. I wasn’t blogging yet. :)

    Christian, I agree with you on the procyclicality of inflation, but I think you are too dismissive of Summers. The interview shows he has a first class mind on many topics; I just think he hasn’t done his homework on NGDPLT.

  5. Gravatar of Emile Servan-Schreiber Emile Servan-Schreiber
    19. September 2017 at 13:12

    Scott, the best link to follow the Hypermind NGDP forecasts in real time is this one: https://hypermind.com/dash/dash/dash.html?list=NGDP

  6. Gravatar of H_WASSHOI H_WASSHOI
    19. September 2017 at 14:12

    I am now the 3th!

  7. Gravatar of H_WASSHOI H_WASSHOI
    19. September 2017 at 14:19

    Is there any incentive for existing participants to call newer participants?

  8. Gravatar of Christian List Christian List
    19. September 2017 at 16:24


    I think you are too dismissive of Summers.

    Yes, you are correct. But he is (supposed to be) the “good” guy and when even the “good” guys say something so “wrong” I’m especially frustrated. I don’t care when a “bad” guys makes mistakes like that, because I don’t expect better. But from Summers I expect better.

    That’s also the reason why I get way more frustrated when Obama says something stupid. When Trump says something wrong, I can always calm myself down by thinking: Okay that’s Trump, it’s not really surprising. This does not shatter my world.

    But when someone like Obama does it, it really puts me off and I have to figure out: Why in the world him? How can he say something like this? What happened? Is he wrong or is it me?

  9. Gravatar of Brian Brian
    19. September 2017 at 18:05

    Why not rename the contracts? The names given help to perpetuate the false impression that a market economy is very responsive to one of the branches of government as if there aren’t limits to political power.

  10. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    20. September 2017 at 13:17

    If Hypermind wants people to pick up the free money, they’re going to have to explain how to do that. I see nothing of the kind at their website.

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