What was he thinking! If it offends your mother, your family, your constituents, or your professional colleagues, don’t do it!

PERSONAL CONDUCT - WHAT’S THE HARM?

When senior officials or professionals behave contrary to society’s mores or expectations, they undermine the reputations of their office or profession as well as themselves.

Look no further than the top news story of the week, and this week it’s all about New York Governor, Eliot Spitzer. His professional reputation is in shreds, a reputation built as as N.Y. Attorney General and as a crusader against corporate wrong doing. In the parlance of a regulatory client, his behaviour is DDU (disgraceful, disgusting, unprofessional). Based on reports, the Governor used the services of a prostitution ring, repeatedly. What was he thinking? What damage has he done to the reputation of the institutions he leads?

There are character requirements for public office and professions. Some of these are embedded in law and others are implicit in society’s expectations. The intangibles - trust and confidence - make a difference to whether people will accept leadership, use services or take advice. Plus shocking news stories divert public attention from the business at hand.

The impact is real and the likelihood of human misbehaviour, it seems, is pretty high.

“Why Prediction Markets Beat Political Polls” is a headline on the cover of the March 2008 issue of Scientific American. The headline is a bit misleading because why or how prediction markets work is not all that clear. However, the fact that they outperform polls, based on the evidence of the Iowa Electronic Markets (IEM), is indisputable: The IEM example covering U.S. Federal elections between 1988 and 2004 demonstrates that markets beat polls 3 times out of 4. This is as true on the day of the election as it is 100 days in advance.

The basic distinction between polling and a prediction market, using the example of an election poll, is that the poll takes a representative sample to find out how the group is going to vote. Prediction markets allow a diverse group of people to predict (or bet) who’s going to win.

With risk-based regulation, there are times when the consequences of a wrong decision are high enough that a best guess isn’t good enough. Prediction markets, or information markets, as they are sometimes called, present a technique of tapping into the “wisdom of the crowds” to get a better reading. New types of markets can be developed to assist in regulatory decision making. Already, prediction markets have proven themselves in diverse areas such as disease forecasting, Hollywood box office success, and economic and financial forecasts.

More information

Information Markets: A New Way of Making Decisions. This document captures the proceedings of a 2004 regulatory conference about information markets. The conference was hosted by the “Reg-Markets Center,” officially the AEI Center for Regulatory and Market Studies (formerly known as the AEI-Brookings Joint Center).

Our review of Wisdom of the Crowds by James Suroweicki.

A recent article in The New Yorker by Carl Elliott, a professor at the Centre for Bioethics at the University of Minnesota, asks questions about the ethics of recruiting healthy and cash-hungry “guinea pigs” to support the drug testing economy. In recent years, pharmaceutical companies have moved drug trials to the private sector where more than seventy percent are now conducted. There’s a lot of money on the table (thousands of dollars per subject) for recruitment and the potential to attract health professionals to participate in an area of questionable ethics. Specifically, Elliot discusses the situation of Frank Abuzzahab, a de-licensed physician in the U.S who now operates as a psychopharmacology researcher. He lost his licence through disciplinary action: he was deemed to be responsible for the injuries or deaths of forty-six patients under his care who he recruited for drug trials.

Health professionals are in a position of authority when dealing with clients, or even the public. Their codes of ethics place the interests of the client ahead of their own.

What’s your view on the ethics of this situation? Is it appropriate for doctors, nurses or other health professionals to do some moonlighting on the side like this or not?

In important matters of uncertainty involving predictions we need to hear from a diverse group of people that have different perspectives, and perhaps a stake in the decision that causes them to think before offering their views.

Collectively, the diverse group is smarter than individuals. This is the core message of The Wisdom of the Crowds by James Surowiecki.

Surowiecki provides a framework with examples of when and how the knowledge of the crowd can impact decisions positively.

This idea applies well to regulation. Why? Because regulators are generally a step or two removed from the uncertainties they need to know about. First-hand knowledge about these risks reside with the regulated parties.

As well, the sources of uncertainty in most jurisdictions are dispersed and mostly invisible until they are brought to the attention of the regulator. The collective knowledge of constituents (regulatees and individuals who are affected by what regulatees do) is far greater than the regulator. Effective new methods for capturing this knowledge will improve regulatory oversight.

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