First published in 1982. Routledge is an imprint of Taylor & Francis, an informa company.

Engineers’ love of technology often gets in the way of their being useful. Consider Post-it Notes or, better yet, plain paper notepads. These probably seemed like trivial ideas, but they turned out to be terribly useful. Why? Because the marvel that is the human brain has a horrible short-term memory, which means that dumb-as-dirt memory aids can make people substantially smarter.

Consider two agents who want to be Bayesians with a common prior, but who cannot due to computational limitations. If these agents agree that their estimates are consistent with certain easy-to-compute consistency constraints, then they can agree to disagree about any random variable only if they also agree to disagree, to a similar degree and in a stronger sense, about an average error. Yet average error is a state-independent random variable, and one agent's estimate of it is also agreed to (...) be state-independent. Thus suggests that disagreements are not fundamentally due to differing information about the state of the world. (shrink)

Prediction markets are increasingly being considered as methods for gathering, summarizing and aggregating diffuse information by governments and businesses alike. Critics worry that these markets are susceptible to price manipulation by agents who wish to distort decision making. We study the effect of manipulators on an experimental market, and find that manipulators are unable to distort price accuracy. Subjects without manipulation incentives compensate for the bias in offers from manipulators by setting a different threshold at which they are willing to (...) accept trades. (shrink)

A growing interest in and concern about the adequacy and fairness of modern peer-review practices in publication and funding are apparent across a wide range of scientific disciplines. Although questions about reliability, accountability, reviewer bias, and competence have been raised, there has been very little direct research on these variables.The present investigation was an attempt to study the peer-review process directly, in the natural setting of actual journal referee evaluations of submitted manuscripts. As test materials we selected 12 already published (...) research articles by investigators from prestigious and highly productive American psychology departments, one article from each of 12 highly regarded and widely read American psychology journals with high rejection rates (80%) and nonblind refereeing practices.With fictitious names and institutions substituted for the original ones (e.g., Tri-Valley Center for Human Potential), the altered manuscripts were formally resubmitted to the journals that had originally refereed and published them 18 to 32 months earlier. Of the sample of 38 editors and reviewers, only three (8%) detected the resubmissions. This result allowed nine of the 12 articles to continue through the review process to receive an actual evaluation: eight of the nine were rejected. Sixteen of the 18 referees (89%) recommended against publication and the editors concurred. The grounds for rejection were in many cases described as “serious methodological flaws.” A number of possible interpretations of these data are reviewed and evaluated. (shrink)

A growing interest in and concern about the adequacy and fairness of modern peer-review practices in publication and funding are apparent across a wide range of scientific disciplines. Although questions about reliability, accountability, reviewer bias, and competence have been raised, there has been very little direct research on these variables.

The pace of scientific progress may be hindered by the tendency of our academic institutions to reward being popular rather than being right. A market-based alternative, where scientists can more formally 'stake their reputation', is presented here. It offers clear incentives to be careful and honest while contributing to a visible, self-consistent consensus on controversial scientific questions. In addition, it allows patrons to choose questions to be researched without choosing people or methods. The bulk of this paper is spent in (...) examining potential problems with the proposed approach. After this examination, the idea still seems to be plausible and worthy of further study. (shrink)

Department of Economics, George Mason University, MSN 1D3, Carow Hall, Fairfax VA 22030, USA E-mail: [email protected] (http://hanson.gmu.edu).

Given common priors, no agent can publicly estimate a non-zero sign for the difference between his estimate and another agent’s future estimate. Thus rational agents cannot publicly anticipate the direction in which other agents will disagree with them.  2002 Elsevier Science B.V. All rights reserved.

This first edition of this book was a broad study, drawing on a wide range of published research and historical evidence, of the enormous stock market boom that started around 1982 and picked up incredible speed after 1995. Although it took as its specific starting point this ongoing boom, it placed it in the context of stock market booms generally, and it also made concrete suggestions regarding policy changes that should be initiated in response to this and other such booms. (...) The book argued that the boom represents a speculative bubble, not grounded in sensible economic fundamentals. Part one of the book considered structural factors behind the boom. A list of twelve precipitating factors that appear to be its ultimate causes was given. Amplification mechanisms, naturally-occurring Ponzi processes, that enlarge the effects of these precipitating factors, were described. Part Two discussed cultural factors, the effects of the news media, and of "new era" economic thinking. Part Three discussed psychological factors, psychological anchors for the market and herd behavior. Part Four discussed attempts to rationalize exuberance: efficient markets theory and theories that investors are learning. Part Five presented policy options and actions that should be taken. The second edition, 2005, added an analysis of the real estate bubble as similar to the stock market bubble that preceded it, and warned that "Significant further rises in these markets could lead, eventually, to even more significant declines. The bad outcome could be that eventual declines would result in a substantial increase in the rate of personal bankruptcies, which could lead to a secondary string of bankruptcies of financial institutions as well. Another long-run consequence could be a decline in consumer and business confidence, and another, possibly worldwide, recession." Thus, the second edition of this book was among the first to warn of the global financial crisis that began with the subprime mortgage debacle in 2007. (shrink)

We study experimental markets where privately informed traders exchange simple assets, and where uninformed third parties are asked to forecast the values of these assets, guided only by market prices. Although prices only partially aggregate information, they significantly improve the forecasts of third parties. In a second treatment, a portion of traders are given preferences over the forecasts made by observers. Although we find evidence that these traders attempt to manipulate prices in order to influence the beliefs of observers, we (...) find no evidence that observers make less accurate forecasts as a result. (shrink)

This ground-breaking text offers a fresh perspective on the governance of science from the standpoint of social and political theory. Science has often been seen as the only institution that embodies the elusive democratic ideal of the 'open society'. Yet, science remains an elite activity that commands much more public trust than understanding, even though science has become increasingly entangled with larger political and economic issues.