The bookmaker is taking bets on whether Australia will enter a recession during 2009.
You can bet here, and see the latest prices, which suggest Centrebet expects a recession. If you disagree, by all means punt. At the price they are offering you stand to make a fortune off them.
Justin Wolfers, an expert in prediction markets, reckons Swan is being a bit harsh on Centrebet.
"In recent months, there have been millions of dollars bet in options markets, as traders seek a big payday in the event that the economy heads south — and this hasn’t raised an eyebrow...
The contrast between the Treasurer’s response to financial trades and bookies’ bets provides a nice example of how people respond differently, depending on how a bet is framed. One is modern finance, while the other is a repugnant market. Both, of course, are simply state-contingent contracts."
One of Wolfers' commenters asks:
"What's the difference between a bet and a call option? Whether the guy making it wears a tie and whether the bookie sits in a corner office?"
It reminds me of Tim Harford's BBC radio documentary on repugnant markets, which begins with him making a phone call to the Ladbrokes betting agency:
"EMPLOYEE: How can I help you?
HARFORD: Yeah, I wanted to place a bet that I, Tim Harford, was going to die in the next year. Could you give me odds on that?
EMPLOYEE: Right.
HARFORD: Can I take a bet on my own death?
EMPLOYEE: Erm, I’m not too sure. Just hold the line a moment please. Thank you. (Music)
HARFORD: Should we let our feelings of repugnance get in the way of the market?
EMPLOYEE: Hello, Mr Harford?
HARFORD: Hello.
EMPLOYEE: Hello, sorry to keep you waiting there. Okay. No, basically we don’t bet on deaths because it’s a negative bet, you see.
HARFORD: There’s a lesson in that. If you want to take a bet with a stranger that you’re going to die, don’t call a bookmaker – call a life insurance company."
The contrast between the Treasurer’s response to financial trades and bookies’ bets provides a nice example of how people respond differently, depending on how a bet is framed. One is modern finance, while the other is a repugnant market. Both, of course, are simply state-contingent contracts."
One of Wolfers' commenters asks:
"What's the difference between a bet and a call option? Whether the guy making it wears a tie and whether the bookie sits in a corner office?"
It reminds me of Tim Harford's BBC radio documentary on repugnant markets, which begins with him making a phone call to the Ladbrokes betting agency:
"EMPLOYEE: How can I help you?
HARFORD: Yeah, I wanted to place a bet that I, Tim Harford, was going to die in the next year. Could you give me odds on that?
EMPLOYEE: Right.
HARFORD: Can I take a bet on my own death?
EMPLOYEE: Erm, I’m not too sure. Just hold the line a moment please. Thank you. (Music)
HARFORD: Should we let our feelings of repugnance get in the way of the market?
EMPLOYEE: Hello, Mr Harford?
HARFORD: Hello.
EMPLOYEE: Hello, sorry to keep you waiting there. Okay. No, basically we don’t bet on deaths because it’s a negative bet, you see.
HARFORD: There’s a lesson in that. If you want to take a bet with a stranger that you’re going to die, don’t call a bookmaker – call a life insurance company."