- Prediction markets are like stock markets, but for beliefs about future events.
- They are accurate and canonical, meaning they are at least as accurate as any other source of information and speak with a single unified voice.
- They are proven to be at least as accurate as experts like Nate Silver, and have been found to beat other methods like election polling.
- Real-life cases may fall short of the ideal due to transaction costs, easier ways to make money, lack of trust, and other factors.
- They offer a way to get accurate and canonical answers to questions such as whether a vaccine will work, or if a politician’s pet project will succeed.
- They are based on the idea of aggregating the collective wisdom of many people, and have been shown to be more accurate than individual experts.
- Common objections to prediction markets include insider trading, encouraging harmful or illegal activities, and giving rich people more power.
- However, these objections can be addressed by making insider trading illegal, avoiding markets in very specific harmful or illegal activities, and recognizing that it is difficult or impossible to successfully manipulate a prediction market.
- Money in prediction markets comes from people betting on different sides of a proposition.
- People may play prediction markets for fun, to make a profit, or to hedge against risk.
- Prediction markets can be used to answer subjective or hard-to-measure questions, but resolution criteria must be carefully defined.
- Prediction markets are not well-suited for questions with no clear future answer, or for predicting outcomes in the far future.
- They can be used to make decisions, pledge to change prediction markets, draw attention to important issues, replicate scientific studies, and educate people about probability and overconfidence.
- They have many limitations, such as difficulty predicting far future events and complex biases in predicting conditionals.
- Prediction markets are mostly illegal in the US, but there are three strategies to work around this: operating outside the US, making special deals with US regulators, and operating using play-money only.
- Ordinary people can help promote prediction markets by creating a Manifold Markets account, betting on topics, and creating markets for any interesting topics that don’t have one yet.
- Experts in unrelated fields can try playing on Manifold and Metaculus, and hotshot financial traders can bet on real money prediction markets.
- Journalists and bloggers should consider including or citing prediction markets in their articles.
- Policy-makers should consider partnering with Metaculus or Good Judgment Project to learn.
Click HERE for original. Published December 19, 2022