[crazygringo]

I don't understand the distinction you are making.

Obviously they are based on current knowledge. Nobody has any actual crystal ball.

But the outcomes are with regard to future events. So the correct term is predictions.

And they don't "just summarize the current knowledge". The whole point is that they better reflect the knowledge of people who presumably know better because they are willing to put their money where their mouth is, and ignore the vast majority of nonsense. That's not summarization. That's judgment. That's the whole point.

[ghaff]

My sense is that, for prediction markets to work, there needs to be some real knowledge/analysis/judgement spread across at least a material subset of participants. Simply aggregating random guesses is likely no better than any given random guess.

Put another way there needs to be SOME signal buried in all the noise.

[crazygringo]

And there is. That's why they work. Prediction markets are not simply aggregating random guesses. Were you somehow under the impression that they were?

[rdiddly]

The article does not conclude that "they work." Also, work at what?

[ghaff]

Not at all. Just saying that there needs to be knowledge/expertise/experience/etc. of some sort embedded beyond just a lot of people making random guesses and I’m not sure that wisdom of crowds always captures that.

[crazygringo]

But there is, that's the whole point. The more correct and better information you have, the more incentivized you are monetarily to place a wager that will pay off. And the more incentivized you are to place a much larger wager.

Meanwhile, people just making random guesses are more likely to be placing small wagers that are also just canceling each other out.

So the knowledge, expertise, experience that you are talking about is absolutely embedded into this. That is the whole point.