Where do you get your news from? How often do they tell you what’s going to happen? How often are they successful?
For decades, the mainstream media has dominated the news consumption of many people. Nowadays, a lot of people get their news from social media.
In MSM and on social media, analysis and forecasting is tainted with preferences and hopes. Experts, influencers, and most of your Facebook friends tend to promote expectations that match what would happen if they could pick the outcome.
This is not a new problem. I remember hearing on NPR nearly two decades ago that a respected predictor of political or economic outcomes explicitly stated in so many words that he was basing his prediction on analysis, not his hopes. After the outcome went the other way, he publicly admitted that he did indeed predict on the basis of hope rather than analysis. Yes, he admitted to lying based on his prediction.
More commonly, the deception is more opaque. Bias polls and wishful thinking permeate much of our media consumption.
This is not an adequate solution for the predictions that we often rely on.
Of course, sometimes even the best polls and analysis will be wrong – no one demands perfection. As Yogi Berra noted, “Predictions are difficult, especially about the future.”
However, in a free market, whenever a solution turns out to be inadequate, someone will create an alternative, and sometimes the alternative will prove to be superior.
In this case, the alternative solution I want to explore is prediction markets, sometimes referred to as information markets or virtual markets. Mises.org has covered this before, but I find that the prediction markets remain largely outside of public awareness.
As defined by Investopedia, “The prediction market is a collection of people speculating on a variety of events – trade averages, election results, commodity prices, quarterly sales results or even things such as gross film receipts. “
Many of these markets exist and have existed, and they often blur the lines between gambling and formal financial markets. This fuzzy line sometimes puts them on the wrong side of the law. Intrade was the first information market I heard of, and it closed in 2013 following repeated clashes with the US Federal Commodity Futures Trading Commission and other financial difficulties.
Intrade may have been the first prediction market to enter my consciousness, but it wasn’t the first to look for a better way to predict the future. The Tippie School of Business at the University of Iowa established the Iowa Electronics Marketplace in 1988; IEM successfully predicted the presidential election that year. Since then, his forecasts have generally compared favorably to the polls.
Using elections as an example, polls ask people how they plan to vote; prediction markets ask people to put money behind how they think the election will go. As we commonly see in the markets, monetary motivation tends to foster positive outcomes. Of course, people still tend to bet on their favorite candidates. If they think he will lose, they usually don’t bet at all. And some people try to influence the market with massive bets on their candidate against all odds. Sometimes that rocks the market, and sometimes it doesn’t. In any case, those who make such bets tend to lose a lot of money.
Elections are a popular topic for prediction markets, but they cover many other topics as well. The economic factor motivates people to find information that they might not otherwise have found. Sometimes this phenomenon is inexplicable, such as when the Intrade market on Saddam Hussein’s capture started to change two days before US forces captured him.
The invention and development of blockchain technology holds promise for prediction markets. Smart contracts are a possibility that easily springs to mind, but the beauty of the free market is that no individual can think of all the possibilities, and this article is not here to speculate or list all of them.
There are several prediction markets that are or will use blockchain technology, including Gnosis, Augur, and Polymarket. Polymarket, in particular, is a rising star: it recently raised $ 4 million, and its initial strong growth is supported by a frictionless user interface and continued innovation and development of the platform.
Prediction markets may not be the best, only, or the final solution to the open market’s demand for quality information and accurate forecasting, but little in the open market is. You might think it’s a passing failure with no future, but I wouldn’t bet on it if I were you.
#political #polls #prediction #markets #Dateway