John Delaney states rightfully that the prediction markets are a mechanism that aggregates information dispersed among the population. Then, he goes on at full throttle and states that prediction markets can help “-avoiding future [financial] crisis.”-
Jesus, Mary, Joseph, that’-s quite an extraordinary statement.
John Delaney writes that crucial information is buried deep in the accounting books. That’-s true, but that’-s up to the financial analysts to decipher this problematic —-our event derivative traders can then just pick up on what those experts conclude. The financial experts were unable to prevent the current financial cataclysm. Adding more event derivative traders and more prediction markets won’-t solve any problem.
Prediction markets are only a reflection of the current knowledge of the best experts in town. At best, they are the best umpire you can get between, on one hand, the mass media or the politicians and, on the other hand, the best experts. But when nobody knows anything (or when nobody listens to Nouriel Roubini), the prediction markets are of no help.
What the prediction market industry needs right now is not an ill-informed, bragging rant.
What the prediction market industry needs is a way to discriminate between accuracy and utility.
What we need is more of Robin Hanson.