Dear Economist,
I am starting to suspect that my husband is having an affair – how can I find out?
Yours sincerely,
Mrs F., Oxford
Dear Mrs F.,
I recommend that you use an “information market”. These markets pay out if certain events occur, for example, if Tony Blair wins the next election. They have an excellent record, outperforming opinion polls when it comes to forecasting election results. Such markets work well because they allow different people, each of whom may hold some important piece of information, to register their view anonymously. Confident forecasters can make their views carry extra weight by betting more.
Companies such as Hewlett Packard have operated internal information markets to make sales and production forecasts – they work better than the bureaucratic method because they uncover hidden information in a situation where people may be afraid to speak frankly. You are in a similar predicament. Whatever friends tell you, you will find it hard to know whether it is the truth. But they may be more willing to let their wallets do the talking.
Practically speaking, you need to bet with people that your husband will not be proved to be having an affair by the end of 2010. Every month, use eBay to auction pairs of promissory notes: one that will pay £100 if your husband is caught, and one that will pay £100 if he is not. Advertise. If people are willing to offer only £5 for the “pay when guilty” note, the market believes your husband is blameless. If the “pay when unproven” promise sells for a mere fiver, you can conclude that somebody – maybe everybody – believes your hubby is a love-rat.
Of course, your husband may submit fake bids in an attempt to rig the market. But do not worry. Such rigging is virtually impossible in a liquid market, and it will cost that slimeball dearly to try.