Professor Tyler Cowen of Marginal Revolution wrote (with in mind, probably, his old blog post about internal prediction markets):
The costs of building coalitions are also a neglected element in the theory of organizations. Even in the private sector, once we consider cohesion and morale, businesses have many fewer degrees of freedom than we might think. That is why merit pay and prediction markets are not as common as an economist might expect. Too often those institutions put people at odds with each other.
My Answer:
#1. Economists are poor innovators and lame marketers. Their “expectations” are necessarily always out of the ball park. (Note: I view Robin Hanson as an inventor, but maybe not as an innovator. And, anyway, Robin Hanson is “unusual”. He is an institution designer; the others economists are data analysts.)
#2. The field of prediction markets lacks a bunch of good Guy Kawasaki-type professionals (i.e., clever marketers).
#3. You shouldn’t expect the Planet Earth’s whole population to spend nights and days frantically and frenetically trading contracts on prediction markets. Only a small portion of the world’s people will play this game, and only a few topics will be of interest to this small group of prediction market traders. In the global forecasting industry (polls, predictive models, Delphi method, etc.), the market-generated prediction providers will always be tiny (if not microscopic). Think of the Hawaii islands in the Pacific Ocean.
