Bet on Inflation
By David Henderson
Two days ago, I bet a former student of mine, Thomas Strenge, on the inflation rate for the next year. He’s betting that the CPI-U between December 2010 and December 2011 (reported January 14, 2011 and January whatever, 2012) will be greater than or equal to 7.0 percent. I’m betting not. Amount of bet: $100.
There’s been a lot of discussion about betting on this blog by Bryan and on marginalrevolution.com by Tyler Cowen. Why do I do it? Mainly because it’s fun. But secondarily as a teaching tool. When my students make careless statements in class about future events or magnitudes, statements whose veracity I strongly doubt, I bet them small amounts ($20 or less) as a way of getting them to pay more careful attention. I don’t know if it works, by the way. I’m not necessarily putting Thomas in this category because I think that 7% is at least a plausible bet. But I still think there’s about a 65% probability that I’ll win.