Saturday, December 13, 2008

Stock market game may predict eco disasters

New Scientist: Stock markets could forecast the availability of water more accurately than the best computer models used by environmental scientists. That's the idea behind the launch of an online market which invites "traders" to gamble on future water levels in dams in Australia.

The Australian Knowledge Exchange works by giving traders A$100,000 (US$65,000) play money and 1000 stocks in each of five reservoirs in New South Wales. The stocks pay out each month according to the level of the dam. If the dam is full, they are worth $100. Traders can profit by buying stocks for less than their final value, or by selling them for more. The online market is the brainchild of a team from the government agency CSIRO Sustainable Ecosystems in Canberra, Australia, and the University of Karlsruhe, Germany.

If the market proves to be a better predictor of water levels than existing computer models, says CSIRO's Stuart Whitten, it could help manage other environmental issues such as animal extinctions and bushfires. Their ultimate goal is ambitious: for online markets to influence the government's environmental policy.

"This approach has huge potential in the environmental sector where there is a lot of uncertainty," says Josh Donlan of Cornell University in Ithaca, New York, and Advanced Conservation Strategies, a Utah-based NGO.

The dam wall and offtake tower of Canning Dam in Perth, Western Australia, with the dam at 34.4% of its total capacity, shot by Mark, Wikimedia Commons, under the terms of the GNU Free Documentation License, Version 1.2

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