People used to predict a great future for prediction markets. In 2008, 22 economists, including the Nobel laureates Kenneth Arrow, Paul Milgrom, Thomas Schelling, Robert Shiller and Vernon Smith, wrote a two-page manifesto in the journal Science calling them a “potent research tool” that must be freed from “unnecessary government restrictions.”
They cited “mounting evidence” that such markets could produce more accurate forecasts than conventional methods:
“Prediction market prices can be used to increase the accuracy of poll-based forecasts of election outcomes, official corporate experts’ forecasts of printer sales, and statistical weather forecasts used by the National Weather Service.” ...
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