ABC News, in 2008:
Business leaders rely on metrics and data to inform decisions around new products and opportunities, but traditional forecasting methods suffer from bias and lack of first-hand information. That’s why business forecasting is an ideal target for the application of crowd wisdom. While bets are made anonymously, some prediction market software applications have built-in reward systems for accurate forecasters. And the accuracy of prediction markets over traditional forecasting methods is proven again and again. […] Prediction markets will then aggregate this knowledge to produce actionable, people-powered forecasts. The result is an ultra-rich information source that will lay the foundation for smarter, better-informed company decisions. […]
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Top tier sports, national elections, and Hollywood releases are all arenas in which all the information one might analyze is already pretty much public. There are many methods for predicting these outcomes, and I wouldn’t argue that prediction markets have a huge advantage in these arenas. The markets where I expect PMs to have an advantage are where there are experts who, given an incentive, could share (or discover) information that’s not already public, and where you don’t already have an enormous crowd trying to figure out the answer. Certainly it’s fun to bet on your team or party, or to develop expertise on how the public will react to particular movies, but it’s not clear to me that we get better predictions in those areas.
This is also one of my criticisms of the Servan-Schreiber paper. While I believe there are probably markets in which the availability of serious money to be won could attract people who’d be willing to spend research in order to get a better answer, NFL sports isn’t an arena where spending thousands of dollars will help you uncover facts that aren’t already in the mainstream media.
When we talk about CEO markets, or product release dates, or market penetration numbers, we’re talking about [prediction] markets in which the information isn’t already out there, and some people will spend time and effort to ferret out relevant facts for reputation (we see this often on Foresight Exchange) or money.
– Paul Hewitt comments on Robin Hanson’-s blog. Many exchanges with Robin Hanson. Read it all.
– Paul Hewitt:
[…] My point is that the case for prediction markets has not been made, at all. There is a tiny bit of proof that they are as good as alternative methods, and in a very few cases, very slightly better. Also, you need to be aware that even the slightly better prediction markets had the benefit of the alternative forecasting institution available to it. That is, the official forecasters at HP were also participants in the ever-so-slightly better prediction markets. […]
–->- I personally stay away from any discussion about conditional prediction markets (and futarchy). I prefer focusing on the ’-simple’- prediction markets.
It is a long text, so I will post again about it, in the near future. (Happy Xmas, by the way.)
ADDENDUM: Saturday, January 16, 2010: Debate between Robin Hanson and Mencius Moldbug