{"id":438,"date":"2011-09-06T21:45:47","date_gmt":"2011-09-07T02:45:47","guid":{"rendered":"http:\/\/www.edwardrcarr.com\/opentheechochamber\/?p=438"},"modified":"2011-09-06T21:45:47","modified_gmt":"2011-09-07T02:45:47","slug":"quick-thought-forget-predictive-markets-im-talking-commodities-markets","status":"publish","type":"post","link":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/2011\/09\/06\/quick-thought-forget-predictive-markets-im-talking-commodities-markets\/","title":{"rendered":"Quick thought: forget predictive markets . . . I'm talking commodities markets"},"content":{"rendered":"

OK, a last thought on the development initiatives and markets thread: let’s leave the predictive markets thing<\/a> aside for the moment, and get to what I think is a more serious question for development initiatives – do we use all the information we might to evaluate the likely impact of our programs? \u00a0I think a lot of folks misread the intent of my initial post<\/a> – I was NOT<\/em> suggesting we bet on mortality rates and other direct measures of project effectiveness. \u00a0That is something I could see as an academic exercise, but is way too morbid for my tastes, even in that setting.
\nBut everyone who lunged in that direction seemed to miss the point that any major development initiative will, if it succeeds, have radiating impacts through different markets. \u00a0That is, a successful food security initiative will change harvest sizes of different crops, thereby influencing commodities markets. \u00a0A successful public health intervention might increase the size of the workforce, or its efficiency. \u00a0And so on. \u00a0My simple thought was that any fund investor worth his\/her salt should be examining these initiatives and their expected outcomes to decide 1) if the initiative worked, what markets might be affected, how and when and 2) do they think the initiative will actually work.
\nIf there is no movement around these initiatives, it seems to me that these two factors might be important – at the first step in this decision-making, investors might decide that in the event of a successful intervention, the markets affected might not be accessible or profitable, or the timeframe of any movement in the market might be so long as to make immediate response unnecessary. \u00a0Thus, we would see no market response to the announcement of an intervention. \u00a0At that point, it doesn’t matter if the intervention will work or not – that assessment never comes into the picture.
\nHowever, in at least some cases, I have to think that there are initiatives out there (in a world of rising food prices, I am a bit fixated on food security at the moment) that would affect significant markets, and not only at a national scale (where markets might be illiquid or otherwise inaccessible). \u00a0Take the case of cocoa and Cote d’Ivoire this past winter: the civil conflict in CIV cut off a significant amount of global supply, and futures markets got skittish over the further constriction of trade, driving cocoa prices upward. \u00a0This is a niche crop, heavily produced by only a few countries, but the price movement could have meant big dollars for a fund that correctly anticipated this trend. \u00a0Surely there are (or will be) food security initiatives that could similarly affect the overall supplies of and access to particular (perhaps niche) crops for entire regions, or even shift global availability\/perception enough to shift commodities prices in much larger, more transparent markets in the short term. Don’t fixate on national markets for these initiatives – what about really big development movers that could affect global supplies of grain in an era where all the slack has been taken out of various global grain markets? \u00a0You can’t tell me that everyone at these trading desks is simply ignoring the food security world . . . surely they are at least assessing through step 1) above. \u00a0So if there is no market response to these initiatives, either the timeframe of movement is too distant to warrant interest, or the traders simply don’t think these initiatives will succeed enough to significantly influence the markets in which they trade. \u00a0Perhaps the price of oil and its impact on transport is much, much more important than increasing harvest size when it comes to shaping food commodities prices . . . in which case, it would probably be good for those designing food security initiatives to know this at the outset and address it in project design (for example by thinking about transportation issues as integral to the initiative).
\nOf course, there is option 3): traders have no idea what sorts of initiatives are out there, and are operating in ignorance of these potential large drivers. \u00a0This is entirely possible, but a bit hard to believe . . .<\/p>\n","protected":false},"excerpt":{"rendered":"

OK, a last thought on the development initiatives and markets thread: let’s leave the predictive markets thing aside for the moment, and get to what I think is a more serious question for development initiatives – do we use all the information we might to evaluate the likely impact of our programs? \u00a0I think a […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"bgseo_title":"","bgseo_description":"","bgseo_robots_index":"","bgseo_robots_follow":"","footnotes":""},"categories":[5,3,4,35],"tags":[348,346,21,604,70,23,605,255,606],"class_list":["post-438","post","type-post","status-publish","format-standard","hentry","category-development","category-environment","category-policy","category-research","tag-aid","tag-cocoa","tag-development","tag-development-initiatives","tag-economics","tag-globalization","tag-hedge-funds","tag-markets","tag-prediction-markets"],"_links":{"self":[{"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/posts\/438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/comments?post=438"}],"version-history":[{"count":0,"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/posts\/438\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/media?parent=438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/categories?post=438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.edwardrcarr.com\/opentheechochamber2\/wp-json\/wp\/v2\/tags?post=438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}