Sep

27

Suppose we wanted to know the likely price of cotton in 3 months. Would it be better to look at the decisions of thousands of people like Jeff who at the margin are constantly adjusting the price to the myriad uncertainties and paths, or to take a poll of farmers about it. A terrible error in this line is the idea that we're in grave trouble from the overhanding interest rate increase from the federal deficit. Should we poll all the conservatives on this point or take account of the predictions of people like Zachar and DeRosa as embodied in the market. Which is more accurate. It is interesting that Berg suggests using a random walk model to determine uncertainty attached to such noble forecasts.

Richard Owen writes:

The voter prediction markets are probably a reasonably clean example of superiority as they relate to a specific timebound events in which nobody has an interest other than to calculate as to the most likely contract conclusion; nobody is assessed professionally on the outcome; bettors are not levered and unlevered; people do not have to recycle capital forcibly into prediction markets; etc.

Other markets probably have much more complexity and thus greater potential for becoming disjointed.

Can a PAC or similar vehicle not raise money to douse the prediction market spreads?

But to answer the primary question, money where is rapidly adjusting mouth is probably a good litmus test.


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